In a Law360.com article published on January 2nd titled “California Real Estate Legislation and Regs to Watch in 2017,” Andrew McIntyre of Law360 addresses the challenges facing the California real estate market in the new year. Simon Adams of Reed Smith is quoted extensively in the article.

Here are some of the items on the 2017 legislative agenda:

  • Marijuana
  • Affordable Housing
  • Development and the California Environmental Quality Act (CEQA)
  • Property Taxes

Simon Adams  commented on the passage of Proposition 64, allowing the use of recreational marijuana. Several real estate companies are in the process of setting up dispensaries, but they still face concerns of state and federal regulations. “Landlords will continue to remain nervous about knowingly allowing such businesses in to their spaces.,” said Simon. “Even with lease covenants to indemnify the landlord for damages the potential conflict between the state laws and federal prosecution laws will create some reservation if the new presidential administration were to start to prosecute and confiscate buildings from owners.”

As with past years, California struggles with affordable housing. A push was made in 2016 to address the issue with little support in the state legislature. The issue will be again raised in 2017 through State Bill 35.

The California Environmental Quality Act (CEQA) has long been considered a focus for reform over the years, seen by developers as a major detriment to projects, adding years to a schedule. “CEQA will come under significant attack in 2017,” says Simon Adams. “The new administration in the White House is certain to be developer-friendly, seeing replacement of buildings on brown field sites as a way to create jobs, and the historic delays caused to such developments by CEQA are going to be a focus for many that object to the chilling effect it has had on progressing all forms of improvements,” he added.

Property taxes have been kept low since the passage of Proposition 13 in 1978. Now, there are efforts to consider a ‘split-roll’ proposal, allowing property taxes to rise only on commercial properties, while maintaining assessed values on residence to a 2% annual ceiling. Adams, though, doesn’t expect to see change on Prop. 13 in 2017, in part due to current economic conditions in the state. “The economy of California continues to do well … which will continue meaning that there will be no appetite for legislators to look for funding and address potential changes to adjust this taxation. Many home owners are predicted to be paying less for housing as interest rates rise,” Adams said.

The full text of the Law360 article can be found here.