Election Results: Key San Francisco and California Ballot Measures Impacting Real Estate

In late October, we reported on a number of California, San Francisco, and regional propositions, including measures impacting real estate and other taxes, rent control, affordable housing, permits, and governance. At the state level, results were mixed and in some cases still too close to call, with voters clearly rejecting expansion of local residential rent control (Proposition 21), appearing likely to reject proposed changes to commercial property tax assessment (Proposition 15), but appearing likely to approve revisions to residential property tax reassessment. Greater certainty is expected in the coming days and weeks, and no later than December 4th, when county elections officials must report final results to the California Secretary of State. In San Francisco, voters approved all of the measures that we reported on, including major new and increased business taxes.

Summary of California Results:

Proposition 15

Would assess property taxes on certain commercial and industrial properties based on fair market value rather than purchase price, removing certain limitations originally established under Proposition 13. TOO CLOSE TO CALL.

Proposition 19

Would expand the exemption for property tax reassessment of replacement residences for homeowners over age 55, victims of wildfires, and severely disabled individuals, while also limiting the exemption from reassessment for transfers of residences between parents and children. TOO CLOSE TO CALL.

Proposition 21

Would have expanded local rights to enact rent control by allowing local governments to: (1) enact rent control on all housing units except (a) housing first occupied within the last 15 years, and (b) homes owned by natural persons who own no more than two single-family housing units; and (2) prohibit landlords from raising rental prices by more than 15 percent cumulatively during the first three years following a vacancy. REJECTED.

Summary of San Francisco Results:

Proposition A (Health, Parks and Street Bond)

Authorizes issuance of general obligation bonds of up to $487.5 million for capital projects across three primary categories: mental health, substance abuse, and homelessness; parks, open space, and recreation facilities; and street maintenance and repair. PASSED.

Proposition B (Department of Public Works)

Makes substantial changes to the Department of Public Works (DPW), creating a new Public Works Commission to oversee the Department and a new Department of Sanitation and Streets to perform a number of functions currently within the jurisdiction of DPW. PASSED.

Proposition F (Business Tax Overhaul)

Amends the San Francisco Charter and City Ordinances to eliminate the payroll expense tax, increase the Gross Receipts Tax rates, and increase the number of small businesses that are exempt from the Gross Receipts Tax. PASSED.

Proposition H (Save our Small Businesses Initiative)

Makes numerous changes to the San Francisco codes governing storefront commercial uses and small businesses: streamlining the City permitting process for principally permitted storefront uses in the City’s Neighborhood Commercial zoning districts, allowing eating and drinking uses in those districts to offer workspaces, removing certain neighborhood notice requirements for new principally permitted businesses, facilitating the use of outdoor spaces by eating and drinking establishments and other businesses, and eliminating the conditional use requirement for certain commercial uses. PASSED.

Proposition I (Real Estate Transfer Tax)

Increases the real property transfer tax on transfers of property valued between $10 million and less than $25 million from 2.75 percent to 5.5 percent, and the rate on transfers valued at $25 million or more from 3 percent to 6 percent. PASSED.

Proposition J (Parcel Tax for SF Unified School District)

Imposes an annual tax of $288 on each parcel in the City to generate $50 million in annual revenue to support the San Francisco Unified School District for salaries and educational improvements. PASSED.

Proposition K (Affordable Rental Units)

Authorizes the City of San Francisco to own, develop, construct, acquire, or rehabilitate up to 10,000 affordable rental units, fulfilling the requirement of the California Constitution that the City seek voter approval for public low-income rental housing. PASSED.

Proposition L (Business Tax Based on Executive/Employee Pay Comparison)

Creates an additional tax on San Francisco businesses whose highest-paid managerial employee has a salary exceeding the business’s median employee compensation by a ratio of 100 or more to 1. Larger businesses subject to the Administrative Office Tax will pay an additional tax between 0.4 percent to 2.4 percent of their San Francisco payroll expense, and smaller businesses subject to the Gross Receipts Tax will pay an additional tax between 0.1 percent to 0.6 percent of their San Francisco gross receipts. PASSED.

Summary of Regional Results:

Measure RR (Caltrain Tax)

Authorizes a 0.125 percent sales tax increase in San Francisco, San Mateo, and Santa Clara counties to provide $100 million of annual funding for the Caltrain rail system. PASSED.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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