Feeling the Increase in Crime?

By Matt Williams, Principal, Williams Real Estate Advisors

With the California prison population being reduced by 18,000 inmates since March 2020 and the reduction in police budgets, crime is on the rise and rental property owners must be prepared. Most of the released inmates have committed non-violent crimes, but non-violent offenses just happen to impact rental property owners and their tenants.

These impacts include property and drug crimes such as theft, burglary, robbery, larceny, vandalism, drug possession, drug trafficking, etc. Even though many are happy to see that inmates get a second chance to be a productive part of our society, not all released inmates are sticking to the “straight and narrow” but rather going back to their old criminal ways.  To compound the problem, a reduction in police budgets and staffing are making it tougher for our police to respond to the increased crime. For example, the Los Angeles Police Department’s active duty police force will drop to a 12-year low based on the budget cuts approved by the Los Angeles City Council on July 1, 2020. This in turn is creating a perfect storm for a rise in crime that impacts both owners and tenants. In this article, I address how owners need to be prepared to address this situation.

The Howard Jarvis Taxpayers Association PAC has endorsed these candidates for the November 3, 2020, Statewide General Election:

Ballot Measures

Statewide Measures

No on 14
Why we’re against it
In 2004, voters approved $3 billion for a publicly funded stem-cell agency, the California Institute for Regenerative Medicine, to support research into new treatments and possible cures. The money has been spent, and the backers of Proposition 14 want voters to approve $5.5 billion more. But CIRM has been widely criticized for inefficiency and insider dealing. Moreover, the federal government and private enterprise are now funding stem-cell research. Proposition 14 fails to address issues of accountability and oversight in the spending of previously approved public funds. These new bonds will cost taxpayers $2.3 billion just in interest payments, drawing $260 million out of the budget every year for three decades. Proposition 14 is not necessary and it’s especially unwise at this time, when there are so many demands on taxpayers. VOTE NO ON PROPOSITION 14.

No on 15
Why we’re against it
This is the treacherous “split roll” property tax, a direct attack on Proposition 13. Proposition 15 would repeal part of Prop. 13 and require reassessment to market value of business properties. It would raise taxes on supermarkets, shopping malls, office buildings, factories, movie theaters, hotels, restaurants, sports stadiums, warehouses, self-storage facilities, major retailers and other businesses where Californians work or shop. Even the smallest businesses that lease space will face higher rents, or will have to pay the higher property taxes as part of their “triple net” lease agreement. Those higher costs are passed on to consumers. Proposition 15 would raise prices, increase the cost of living and put countless jobs at risk as companies cut back or leave the state. The proponents of this measure are seeking to weaken Proposition 13, and we can guess why. They could come after homeowners next. Protect Prop. 13. VOTE NO on PROPOSITION 15.

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No on 18
Why we’re against it
Proposition 18 would change the voting age in California to allow 17-year-olds to vote in primaries and special elections if they will turn 18 by the date of the next general election. While some states allow this, California is different than other states because under Prop. 13 and Prop. 218, tax increases must go on the ballot for voter approval. These proposed tax increases are frequently on primary and special election ballots. Proposition 18 would allow high school students to vote on tax increases. This is unwise. The voting age in California should not be changed. VOTE NO ON PROPOSITION 18.

No on 19
Why we’re against it
Proposition 19 takes away important taxpayer protections that have been enshrined in the State Constitution since 1986. That’s when 76% of voters approved Proposition 58 to allow parents to transfer a home and limited other property to their children without an increase in property taxes. Proposition 19 eliminates Proposition 58 and a similar measure, Proposition 193, which gives the same protection to transfers between grandparents and grandchildren if the children’s parents are deceased. Proposition 19 would require property transferred within families to be reassessed to market value as of the date of transfer, resulting in a huge property tax increase for long-held family homes. The only exception is if the children move into the home within a year and make it their principal residence. This is a billion-dollar tax increase on California families. Proposition 19 contains other provisions, which HJTA has supported in the past, to expand the opportunities for older homeowners to transfer the base-year value of their home (under Prop. 13) to a replacement home. This was on the ballot in November 2018 as Proposition 5, but voters rejected it. Now, with a massive tax increase added, the price is too high. HJTA opposes this measure. VOTE NO ON PROPOSITION 19.

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No on 21
Why we’re against it
Proposition 21 would change state law to allow radical rent control laws to be passed in cities that are already suffering from an inadequate supply of housing. In 2016, California’s nonpartisan Legislative Analyst’s Office issued a report that found that expanding rent control “likely would discourage new construction” by limiting the profitability of new rental housing. Under current law—the 1995 Costa-Hawkins Rental Housing Act—housing providers have the right to raise the rent on a vacant unit to market value after a tenant moves out. The same law also bans rent control on units constructed after February 1995 and on single-family homes and condos. Proposition 21 would repeal this law and allow unelected rent boards (or elected rent boards) to impose radical rent control and regulations, even on single-family homes. VOTE NO ON PROPOSITION 21.

Yes on 22
Why we’re for it
In 2019, the Legislature passed, and the governor signed Assembly Bill 5, a law aimed at destroying the “gig economy” and forcing companies to stop using independent contractors as part of their business. Supporters said companies must put all workers on the regular payroll as employees, with control over their hours and wages. The Legislature carved out exceptions for many industries, but the ride-share and restaurant delivery industry wasn’t granted an exception. Proposition 22 was put on the ballot by Uber, Lyft and DoorDash. It would create an exemption from AB 5 for the companies’ drivers, while providing them with basic benefits and protections. Without this exemption, the companies would likely stop offering their services in California, depriving state residents of convenient and affordable transportation and delivery services. VOTE YES ON PROPOSITION 22.

No on 24
Why we’re against it
In 2018, the Legislature passed, and the governor signed the California Consumer Privacy Act, which gave state residents more rights and control over how their data is shared when they go online. The CCPA took effect this year, and businesses have worked to learn the new legal requirements and comply with them. Proposition 24 is a new privacy law to replace the CCPA. It changes the rules before we even know if they’re working well. Worse, it creates a new state agency to write and enforce regulations that have the effect of new laws, but that no elected official will vote on. This new agency will cost taxpayers $10 million a year, but it will cost California businesses far more. Companies will be effectively forced to hire lawyers to review every technological change or upgrade in order to show the new agency that they are in compliance. This will be a great advantage to the largest companies, because many small start-up companies will not be able to afford the legal bills to file the compliance documents, or the cost of defending themselves from complaints, even meritless complaints. The regulatory burden will strangle technological innovation in California and protect tech giants while hurting small businesses. VOTE NO ON PROPOSITION 24.

No on 25
Why we’re against it
Proposition 25 is a referendum on a state law, Senate Bill 10, that eliminated cash bail and replaced it with a system based on judging risk, specifically the risk that an arrested person poses to public safety and the risk that the person will fail to show up for a court appearance. Because opponents of the law qualified a referendum, SB 10 did not take effect. A “yes” vote is in favor of the law going into effect; a “no” vote means you do not want the law to take effect. Proposition 25 would result in immense new costs to counties. The new system of risk-based release instead of cash bail would cost taxpayers somewhere in the mid-hundreds of millions of dollars, according to the Legislative Analyst. It’s not clear where this money will come from. This is a huge new cost at a time when counties are already struggling to meet their financial obligations. VOTE NO ON PROPOSITION 25.

Local Measures

Los Angeles Unified School District
No on Measure RR
Why we’re against it
Measure RR is a massive increase in debt for LAUSD, $7 billion in borrowed money (bonds) for school construction. It will add new charges to property tax bills, and there is no exemption for seniors or low-income families. Measure RR will cost the owner of a home assessed at $500,000 an estimated $108 per year, adding up to more than $3,800 by the time these bonds are paid off. In addition, Measure RR would authorize the district to seek a waiver of its debt limit so it can borrow more than the law allows. The borrowed money from Measure RR can only be used for buildings, not for instruction. Since 1997, LAUSD has spent $26 billion on school construction projects, yet they’re still promising to remove asbestos and lead paint. Why haven’t they fixed this yet? LAUSD wastes your money and then wants to raise your taxes. VOTE NO ON MEASURE RR.

The Howard Jarvis Taxpayers Association (HJTA) is the largest taxpayers association in California with a membership of over 200,000. Founded by the late Howard Jarvis, the author of Proposition 13, HJTA’s name is synonymous with tax relief and the uncompromising defense of the California property owner.

To learn more at about the Howard Jarvis Taxpayers Association and how your vote impacts the upcoming election, visit https://www.hjta.org/election-information/

Prediction For 2030: Can We Stop The Government Take Over Of Rental Housing?

(This is Part 3 and the Final Article in a Series)

By Roger Valdez

After years of working on housing policy, I have found myself frequently referring to Virgil’s Aeneid, the story of the journey of Aeneas from Troy to Italy where he would be the founder of Rome. Like many epics – the Pentateuch, the Mahabharata, or Gilgamesh – the plot is riveting, but so are the images that become cultural touchstones. The Trojan Horse is one of these. Barbara Tuchman dedicated an entire chapter of her book, March of Folly, to the horse as an emblem of humanity’s addiction “to pursuing policy contrary to self-interest.” The government takeover of housing would be just such a policy. But how do we stop the wheeling of this Trojan Horse into the center of our economy?

I’m not going to argue against the notion that housing should be de-commodified and controlled by the state other than to say that even in such a world, without an absolute, stable, and perpetual equilibrium between supply of housing units and demand for them, high prices would simply be replaced with rationing and long waits for “free” housing. This seems to be enough. Except that, as I’ve pointed out before, the desire to seize private housing isn’t about housing at all, but political power.

Union Backed Prop. 15 Will Destroy Small Businesses

By Edward Ring
September 9, 2020

California’s state and local governments, and the public sector unions that exercise nearly absolute control over the politicians who supposedly oversee them, have always had an insatiable desire for higher taxes. The economic impact of the COVID-19 pandemic has added even more urgency to their insatiable quest for more money from taxpayers, but through the years their basic game plan and goals have been remarkably consistent.

For example, the so-called “Split Roll” property tax increase which has finally made it onto the November 2020 state ballot in the form of Prop. 15, is something that has been proposed for years by California’s government unions and their supporters. This new tax is designed to undermine the historic 1978 Prop. 13, which limits property reassessments to when there is a change in ownership, and from that baseline keeps increases to maximum of two percent per year. Prop. 13 also freezes the property tax rate at one percent, although countless local “fees” have elevated the actual amount owners have to pay.

Top-5 Tips to Build a COVID-Proof Real Estate Portfolio

By: Steve Haskell, Vice President of Kay Properties and Investments, LLC 

So, you have decided to invest in income-producing real estate to diversify your investment portfolio so that all your assets are not concentrated in the stock market? Now how do you plan a real estate portfolio to both help you build wealth and withstand a crisis?  We have learned a great deal from analyzing the market through past crises including “9/11,” the crisis of 2008-2009, and the current COVID-19 pandemic. There are no guarantees and certainly no real estate is immune from any crisis, but these Top-5 tips will greatly enhance the likelihood of having your real estate portfolio hold up even through a severe economic shock like the coronavirus crisis.

Prop 15, the Split-Roll, Is a Job Killer

By Jack Humphreville, L.A. Watchdog for CityWatch

Proposition 15 is an attempt by the state’s public sector unions (along with Facebook founder Mark Zuckerberg) to establish the Split-Roll. Under this amended system, commercial and industrial properties will be assessed at their current market value as opposed to the current practice that is based on the purchase price plus an inflation factor not to exceed 2%.  The Split-Roll is expected to generate $12 billion statewide in additional revenue for local governments and school districts.

Legal Corner
by Stephen C. Duringer, Esq., The Duringer Law Group, PLC

Question          I am about to enter into a five-year term lease for an industrial unit in Southern California.  The unit has been vacant several months and I do not want to lose this deal, seems like good tenants are kind of few and far between lately.  We have agreed on just about all of the deal points except a couple.   At the last minute, the tenant requested the lease be prepared with a subsidiary of his company rather than the parent company, saying it is for ‘tax reasons.’  Additionally, he wants to make the use provision extremely broad rather than specific allowing him to do just about anything in the premises without having to get my permission.   He knows I need to lease the space, but I am not sure I want to give in on these points, what are my options?

If Evictions Destroy Many Tenants’ Credit, Who Will You Rent To?

The entire country is currently very sick of commercials with sad face emojis and pouting voices all themed around saying “during these unprecedented times.” It’s all well and good to have a support system but if one more advertisement promises that now is a great time to buy a car because this one brand understands the world is changing but hey, look at this cool car, well, there will be more than one smashed phone screen.

This is all incredibly irritating because no, now is not a good time to buy a car, which explains why some companies sneakily unlisted their ad campaigns. It’s one thing to remind people that hey, you can get your pizza delivered, and another to suggest restructuring their entire insurance policies or booking plane tickets for the fun of it. Even without mentioning a pandemic, it’s important to know that a recession, if not here already, is coming. In fact, most landlords and rental housing pros already know it’s here.

The Round-Up of California’s Wasted Taxpayer Money

By Jon Coupal, Howard Jarvis Taxpayers Association

Anyone who has ever managed a household knows that it is not only how much money you make that matters. It is also how much you spend.  California’s budget is vastly more complicated, and less transparent, than family finances. So, it is even more important for taxpayers to watch closely as elected officials spend our money.  The Howard Jarvis Taxpayers Association has found that, in many instances, California’s budget is a catalog of careless, excessive, and wasteful spending, or, as some might have it, business as usual.

For example, the Department of Motor Vehicles had years to prepare for the launch of the national “Real ID,” but failed to do so. The agency was rewarded with an additional $242 Million in new spending to try it again.  State Auditor Elaine Howle found misuse of state resources in county fair funds, documenting $318,000 in misspent funds, including more than $30,000 for “excessive and unauthorized travel expenses,” lavish dinners and alcohol.  In another audit, State Auditor Howle discovered that the California State University system hid $1.5 Billion in an outside account to spend on operating costs, while raising tuition almost yearly and asking the Legislature for more funding. CSU has nearly doubled tuition from 2008 to 2018.

Will a Wealth Tax Make California’s Wealthy Flee?

By Edward Ring
August 25, 2020

If you’re rich, there aren’t too many places on earth better than California to live. Sure, there are the perennial earthquakes and wildfires, but those are more than made up for by the Mediterranean climate and the scenic splendor; the Pacific Shore, the High Sierra. And apart from these natural disasters, nothing is wrong with California that money can’t cure.

If you’re a billionaire, then California’s punitive cost-of-living and its failed public schools are of no concern. The moneyed liberal patricians of California, from Tom Steyer to Jack Dorsey, have options. Who cares if your mega-mansion costs $12 million instead of $1.2 million, if you’re a billionaire? Who cares if the local public school is a war zone, if you can easily afford to send your children to the finest private school money can buy?