Tech billionaires battle CA wealth tax

Tech billionaires have upped their political ante in recent years. The latest cause d’action is the specter of a statewide vote on a billionaires tax in November.

That proposal would impose a one-time, 5 percent tax on California residents with a net worth of more than $1 billion. This figures to affect about 200 people, and is estimated to raise $100 billion. The petition began circulating in late December, and will need to secure nearly 875,000 signatures to qualify for the November election.

Observers have disagreed on whether this tax would have a meaningful impact on the real estate market in California. Billionaires operate at the top echelons of the market, so an exodus that leads to them selling their property would certainly hit the very tip of the residential market but wouldn’t have a direct downstream effect on housing.

However, the tax could scare business owners from moving their companies to the state, which could weaken demand downstream. And, as one realtor told the San Francisco Chronicle last week, entrepreneurs may choose to launch a new business outside of California for fear that the state could impose another wealth tax in the future. There is also the concern that a particularly peeved CEO could take their business out of California because of the tax.

Of course, the state’s billionaires, generally, are not in favor. Neither is Gov. Gavin Newsom. Sen. Bernie Sanders of Vermont is, though, and politicians have clashed over the issue. Newsom believes statewide wealth taxes create a disadvantage for the world’s fourth-largest economy, and is working to spike the initiative before it qualifies for the ballot.

Bloomberg and Politico report that Building a Better California, the nonprofit political organization backed by former and current executives at companies like Google, DoorDash, and Stripe, is planning to help circulate a series of alternative petitions that, if qualified and passed, would invalidate the billionaires tax. The largest supporter is former Google president and co-founder Sergey Brin, who appears to have already fled the state for Nevada.

However, Building a Better California will be worth watching because of its other pursuits beyond the billionaire’s tax. The group spent $6 million in backing a ballot initiative that seeks to make it easier for middle-income earners to enter the housing market. It also put $5 million behind a group pushing for housing-centric changes to the California Environmental Quality Act.

January condo sales in San Francisco dip to eight-year lows

Condo sales in San Francisco during the month of January dropped to 94, marking the second slowest January since at least 2018, according to a report from Compass earlier this week. The average price per square foot for those sales hit $997, the lowest January mark over that same time period.

Average time on the market for condo listings in the city also eclipsed 100 for the first time in at least a year.

These numbers counter the red-hot narrative around San Francisco’s residential market over the last year, which has seen rents soar and millionaires experience a mansion shortage. However, Compass’ Krysen Heathwood, who oversees condo sales in the Western U.S., said in a statement that February is shaping up to be a strong month.

Condos have hardly been developed in California since the Great Recession. Between 2011 and 2021 (the latest data available) only 3 percent of the multifamily housing built in the state were for-sale units. The state’s condo defect laws take much of the blame here, which leave developers vulnerable to costly defect lawsuits for a decade after the condominium is completed.

Freedom West 2.0 inches forward

The $2.3 billion mixed-use proposal in San Francisco’s Western Addition neighborhood crept forward last week after the city’s planning commission advanced the project into environmental review.

The public now has the chance to comment on the draft environmental impact report, arguably the most onerous part of project approval in California. The project, led by local developer MacFarlane Partners, had stalled as the developers worked to raise capital. Now it could break ground on the three-phase development as early as next year. Freedom West 2.0, at full build-out, will include 15 buildings, 2,291 apartments, 668,600 square feet of retail, 14,800 square feet of cultural, institutional, or educational-zoned area, and a 150-key hotel.

CEO Victor MacFarlane told The Real Deal last year that this project would be his firm’s swan song.