California voters reject Prop 21 rent control expansion

Separate ballot measure addressing commercial property taxes looks like it will fail; another addressing residential property reassessment looks like it will pass

California voters rejected Proposition 21, which would have greatly expanded rent control statewide.
California voters rejected Proposition 21, which would have greatly expanded rent control statewide.

California voters on Tuesday rejected a hotly-contested ballot measure that would have greatly expanded rent control.

Final tallies for two other ballot initiatives were not in as of Wednesday morning, but voters appear to have rejected a commercial property tax measure but approved a residential property value reassessment measure, according to state election results.

The three real estate-related measures — Proposition 15, 19 and 21 — had the potential to upend the real estate industry in California. Supporters and opponents poured a total of more than $300 million into campaigns on both sides of the issue in the months and weeks leading up to the election.

As of Wednesday morning, 72 percent of precincts had reported, according to state election results.

Voters soundly rejected Proposition 21, which would have allowed local jurisdictions to expand rent control measures. The vote was 59.8 percent against, compared to 40.2 percent in favor.

Had it passed, cities and counties would have been allowed to impose rent control on residential properties built 15 ago or before. The existing Costa-Hawkins Rental Housing Act of 1995 allows rent control only on properties built in 1978 or before.

The nonprofit AIDS Healthcare Foundation gathered enough signatures to put Prop 21 on the ballot, and poured millions of dollars into trying to convince voters to approve it. But the lopsided result was similar to what happened in 2018. That year, the AIDS Healthcare Foundation unsuccessfully pushed for Prop 10, which would have repealed Costa-Hawkins entirely.

Prop 21 went further than AB 1482, the sweeping rent reform measure that Gov. Gavin Newsom signed into law last year and took effect Jan. 1. AB 1482 barred landlords from raising rents more than 5 percent plus inflation on properties built before 2004. It also implemented more tenant protections.

“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,” according to the National Multifamily Housing Council, a landlord group. “These challenges will only be solved by collaboration, not by politically-charged statewide ballot initiatives.”

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Large multifamily property owners contributed millions of dollars to the campaign against the measure, including Essex Property Trust and Equity Residential.

Voters were leaning toward rejecting Prop 15, a split roll tax measure on commercial properties. So far, that tally was 51.7 percent against, and 48.3 percent in favor, according to the state election website.

Prop 15 would “unfreeze” commercial property taxes statewide, leading to higher bills. Under existing law, commercial and residential property values are reassessed only when a property changes hands, and taxed at 1 percent of that value.

Prop 15 would have required commercial properties be taxed based on market value. Had it passed, the state legislature would have been responsible for deciding how frequently those assessments would take place with a limit of no less than three years between assessments. Residential properties would not have been affected.

There were other cutouts for agricultural properties, and lower value properties. A USC study projected that passing Prop 15 would have generated $12 billion in tax revenue for the state, which the measure required would mostly go toward funding education.

Lastly, there is Proposition 19. Voters were leaning toward passing it: currently the “yes” camp has 51.5 percent of the vote to the 48.5 percent for the “no” camp. It would mean giving older Californians a break on their property taxes.

Anyone older than 55, severely disabled or the victim of a wildfire would be able to buy a new home and keep paying the same taxes as they did on their old home.

The California Association of Realtors and other major residential agent groups supported the measure, while there was almost no opposition. Some argue it will encourage older people to sell their homes and stimulate the residential markets.