MReport December 2020

TheMReport — News and strategies for the evolving mortgage marketplace.

Issue link:

Contents of this Issue


Page 44 of 68

M R EP O RT | 43 SERVICING THE LATEST O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T Golden State's Affordability Challenges Proposed property tax bill struck down as residential properties remain scarce. A referendum to change how California enacts property taxes, which some argued would address California's housing afford - ability issues, was defeated by the state's voters. Proposition 15 outlined a split-roll property tax system in California, with commercial proper - ties being reassessed to market price every three years while residential property would continue to be taxed under the rules of the 1978 Proposition 13, which restricts increases on assessments to no more than 2%. Owners with less than $3 million in total commercial property would be exempt from the initiative, which was scheduled to go into effect in 2020. Supporters of Proposition 15 argued that increasing property taxes on commercial real estate would encourage the conversion of these properties into residential developments, thus alleviating the state's chronic housing affordability problems. Research by the Urban Institute determined that many commercial parcels in four major markets—Berkeley, Chula Vista, Fresno, and Los Angeles—were eli - gible to be converted from commer- cial or industrial use into homes. The Urban Institute study, lead-authored by Sarah Strochak, a research analyst in the Urban Institute's Housing Finance Policy Center, concluded that "long- term incentives for owners and developers to build/convert to residential uses are much stronger than for municipalities to rezone under medium and high price appreciation scenarios." Furthermore, supporters of Proposition 15 argued that higher commercial property taxes could be used to help fund public services, raising between $10.3 bil - lion to $12.6 billion annually. The trade journal EdSource predicted that 40% of those funds would be used to finance operations at K-12 schools and California's commu - nity colleges. California Gov. Gavin Newsom and President-elect Joe Biden supported Proposition 15 and the Chan Zuckerberg Initiative, the philanthropic organiza - tion funded by Facebook CEO Mark Zuckerberg and his wife, Dr. Priscilla Chan, donated $7.1 million to the campaign that promoted the referendum. However, commercial prop - erty owners were opposed to Proposition 15, arguing that it would force businesses to leave California while companies that remained would be forced to pay higher leases and other real estate- related costs, including insurance and maintenance fees. The San Francisco Examiner reported op - ponents to the measure raised $30 million to sway voters. "It would punish everybody that owns real estate and every tenant that has to occupy real estate," said John Kilroy, CEO of Kilroy Realty Corp. in Los Angeles, at a trade conference in September. "It would be one of the most insidious taxes, particu - larly at a time of great economic uncertainty and recession."

Articles in this issue

Archives of this issue

view archives of TheMReport - MReport December 2020