What are your positions on housing related ballot measures in California?
Question of the week: What are your positions on housing related ballot measures in California?
Answer: Ballots will be mailed soon to Californians for the November elections. On the ballots there are two propositions that directly impact property owners and cost of housing in the state.
Proposition 5 if passed will, for local bonds and taxes for affordable housing and public infrastructure, change the current constitutional requirement that two-thirds of voters approving to fifty-five percent needed for approval. If passed this will result in more local governments using the lower threshold to pass qualifying bonds and tax measures, pushing the cost of these projects from all tax payers to property owners.
I will be voting “no” on this proposition for many reasons.
First and foremost, since the beginning of this century our local, county and state governments have passed bonds, measures, and budgeted expenditures amounting to tens of billions of dollars meant to make housing more affordable with a primary focus on reducing homelessness. Where has this money gone? There has been no accountability of the funds collected and spent to show any results toward the intended goals.
Second, voted indebtedness and direct assessments on our property tax bill (Long Beach) amounts to over twenty-five percent of our bill. This is with the current two-thirds requirement to increase property taxes. Every time a new ballot measure comes up for infrastructure or bonds it sold as, “it will only increase your tax bill by $X per thousand dollars of assessed value.” It seems small until you do the math on how many hundreds of thousands of dollars you are assessed. It adds up.
Third, supporters of this proposition say it will shift spending priorities from the state to local governments. It does not shift priorities; it makes it easier for local governments to shift responsibility from themselves to voters while giving them access for more funds that can be used for non-infrastructure projects in their budgets that may not be a priority for local voters.
Finally, be wary when government gets involved in “affordable housing” fiscal policies. If it is easier to increase property taxes they will go up as some measures will get 55.1% of the vote. Property owners who have tenants will pass those tax increases along to their tenants over time—increasing to cost of housing. For those with non-residential tenants, those tenants will pass costs of their higher leases to customers and consumers.
Where is the accountability for the billions spent on affordable housing in the state? How is raising taxes supportive of lower housing costs?
Proposition 33 repeals the Costa-Hawkins Rental Housing Act of 1995. Costa-Hawkins exempts certain residential units from rent control ordinances and allows landlords to increase rents to market values on rent controlled units when they become vacant.
This proposition takes away any limits to rent control ordinances for cities and counties. For instance, if passed, the Long Beach city council could pass and ordinance limiting rent increases to 3% per year for occupants and allow only a 5% increase for new tenants when the unit becomes vacant; regardless of how long the prior tenant occupied the rent-controlled unit, nor the funds needed to improve the unit after the vacancy.
Rent control is a primary goal of many elected officials throughout the state, as many feel that it improves housing affordability. Rent control, under current regulations due to Costa-Hawkins, is beneficial only to current tenants. When controlled units are vacated landlords lease those units at market rents, which are scarce due to the lack of mobility from tenants in rent-controlled units. Over time, due to the scarcity, rents tend to rise faster in rent-controlled areas than non-rent controlled.
Passage of Prop 33 will lead to a decline in the value of residential units as stricter rent control measures are passed. This will lead to a decline in property taxes, which will likely be filled with local measures on ballots to raise property tax rates (see Prop 5 above).
Investors have been increasingly wary of California residential income property ownership over the past several years. Actions by local and county governments during the pandemic that enabled tenants to live rent free in their units for a year or more, pushing for rent control ordinances, mandates for affordable housing construction as part of developments, have reduced the profitability of residential income, Prop 33 will make the state even less attractive.
Passage will reduce construction of new units, creating more scarcity of all housing, pushing housing prices and rents higher. The exact opposite of what the supporters of Proposition 33 desire.
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Heading in the right direction. That is the inflation news this week as the Personal Consumer Expenditures price index increased only 0.1% in August. The PCE is the preferred inflation index for the Federal Reserve and the low monthly increase; and a year over year decline in the index from 2.5% to 2.2% inches inflation closer its two-percent target rate. The “core” rate (food and energy stripped out) also had a mild 0.1% increase, but the year over year rate increased from 2.5% to 2.7%. With energy prices dropping this month due to lower crude prices the core rate is expected to be lower this month. The overall news in mortgage rate friendly.
Rates for Friday September 27, 2024: Benign economic news keeps rates stable from last Friday.
FIXED RATE MORTGAGES AT COST OF 1.25 POINTS LOCKED FOR 45 DAYS FOR PURCHASE TRANSACTIONS:
30-year conforming 5.625% Flat
30-year high-balance conforming 6.125% Flat
Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down with 740 FICO score for purchase mortgages.
My favorite season is upon us. I love the fall, the cooler weather, the softer sunlight, baseball playoffs, football seasons underway…enjoy the season!
