How California’s Billionaire Tax Affects Bay Area Housing

California’s proposed billionaire tax isn’t on the ballot yet, but fears about its impact are already mounting.

Some billionaires are already leaving California to escape the potential tax, though its overall impact isn’t expected to be catastrophic for the Bay Area or the state, the San Francisco Chronicle reported.

If the tax qualifies for the November ballot and is approved by a majority of California voters, the state would impose a one-time 5 percent tax on more than 200 billionaires residing in California based on their net worth as of Dec. 31.

Gov. Gavin Newsom is among the opponents of the measure, saying California’s wealthiest taxpayers would flee the Golden State. Others believe the tax could lead entrepreneurs to shy away from the Bay Area, in turn lowering job growth and chilling housing demand in the region.

If the tax passes, some startup founders could launch companies elsewhere out of fear that California could levy another wealth tax in the future. “Everyone assumes they’re going to be a billionaire,” Sotheby’s International Realty’s John Young told the Chronicle. But most homebuyers likely won’t experience much impact from the tax, as billionaires have little reason to relocate their companies outside of California, Redfin economists told the Chronicle.

The potential — though unlikely — departure of many tech companies wouldn’t do much to drive down home prices, as housing supply in the Bay Area faces geographic and regulatory constraints that keep the market highly competitive, according to the Chronicle. The presence of top-tier universities and other large non-tech companies are also expected to uphold a high baseline demand for Bay Area homes.

Buyers hoping for affordable housing after billionaires’ flight will likely be disappointed, some unnamed industry insiders told the Chronicle. “It’d have to be a mass exodus,” Adam Touni, a Silicon Valley real estate broker with Compass, said. “And moving’s not easy.”

Billionaire residents hypothetically leaving the state in droves would affect California’s revenue in the long term, as the top 1 percent of earners in the state have accounted for more than 40 percent of taxes paid by Californians, according to the California Legislative Analyst’s Office. If that revenue took a sizable hit, the state would lack funding for many social services, including affordable housing.

— Chris Malone Méndez