California Elections Recap: Voters Reject Propositions 15 & 21

California voters turned out in record numbers on Tuesday to decide a U.S. Presidential election, the outcome of which is not likely to be known for days. There were also twelve statewide propositions decided including two key ballot measures with significant potential negative impacts on the commercial real estate industry, Proposition 15 and Proposition 21.

Proposition 21, the rent control measure, was soundly defeated with preliminary results showing voters rejected the measure by a 59.8% to 40.2% margin, with 72% reporting. It was a tighter race on Proposition 15, the split-roll tax, with preliminary results Wednesday morning showing 51.7% of voters rejecting the measure.

Rent control: Proposition 21 would have allowed local governments to establish rent control on residential properties over 15 years old. The measure was similar to Prop. 10, a more expansive rent control measure that California voters overwhelmingly rejected two years ago.

California Apartment Association’s Tom Bannon said, “Yet again California voters clearly understood the negative impacts Prop. 21 would have had on the availability of affordable housing in our state by clearly rejecting this radical ballot measure.”

Bannon pointed out there was a broad coalition opposing Prop. 21 – from California Governor Gavin Newsom to the California Republican Party, as well as labor, social justice, senior, veterans and housing groups. “[They] made an effective case that this initiative would have worsened the state’s housing crisis. It is now time to move from ballot box battles and enact policies through the Legislature that allow the state to build more affordable housing that will once again make California an affordable place to live for our families,” said Bannon.

The National Multifamily Housing Council issued a statement on Prop. 21, saying, “For the second time in as many election cycles, the people of California have spoken loud and clear and defeated short-sighted rent control ballot measures. Proposition 21’s rejection is a victory for hardworking Californians who deserve real housing solutions that increase supply and bring costs down and a signal that voters recognize that rent control is not a sound solution for housing affordability.”

Split-roll tax: Prop. 15 will work to loosen limits on property taxes from a system in place since Proposition 13 passed in 1978. Prop. 15 will permit most commercial and industrial properties to be taxed on current market value rather than the original purchase price and properties will be reassessed every three years. The measure is expected to raise an additional $12.5 billion a year to fund schools and local government services. Opponents say passing Prop. 15 would result in the largest property tax increase in California history.

Colliers International’s El Warner said, “Prop 15 is vitally important for real estate owners, especially retail owners. If passed, the likely outcome is a significant increase in property taxes for commercial assets that ultimately would get passed down to retailers. With the current pandemic, coupled with the continued movement to online sales, this potential increase in operating expenses would create a major issue to survive the negative impact on occupancy costs in the short- and medium-term. The potential increase in tenant’s costs could likely be passed down to consumers as retailers have to raise prices to offset occupancy costs. The rejection of Prop. 15 by voters would give owners and retailers the benefit of less expenses in the short-term and help them return to a post-pandemic stabilization.”

Coreland’s Vicky Hammond added, “I am feeling confident that California voters understand how detrimental the passing of Prop 15 would be to all of our local businesses that are fighting to stay afloat. Proponents wanted voters to believe that this is a “billionaires tax,” which it is absolutely not. This tax would have directly impacted consumers, small businesses and all scales of real estate owners.”

For comments, questions or concerns, please contact Dennis Kaiser