Preliminary Election Results Show New Rules Coming to SF

| Kaitlin Sheber

On November 5th of last week, voters took to the polls to cast their ballots in an election with several measures that will affect businesses and City Commissions. With preliminary election results available, below is an overview of some of the key results.

Proposition 33: Local Government Residential Rent Control – Failed

Prop 33 sought the statewide repeal of the Costa-Hawkins Rental Housing Act of 1995 (“Costa-Hawkins”), which restricts the ability for local jurisdictions to impose rent control. Proponents for the proposition argued that repeal of Costa-Hawkins would allow jurisdictions to expand rent control, while opponents argued it would freeze construction of new housing and effectively reverse dozens of new state housing laws. Preliminary election results show 60.8% of voters voted no on Prop 33, keeping Costa-Hawkins in place and delivering a resounding rejection of stricter rent control.

Measure D: City Commissions and Mayoral Authority – Failed

Measure D proposed to limit the total number of commissions in the City of San Francisco to 65, while also giving the Mayor sole authority to appoint and remove City department heads. The Measure would also have given the police chief the sole authority to adopt rules governing the conduct of police officers. Preliminary election results show that 56.39% of voters voted no on Measure D, maintaining the current number of commissions in the City.

Measure E: Creating a Task Force to Recommend Changing, Eliminating, or Combining City Commissions – Passed

Also aimed at commission reform within the City, it appears that Measure E won out over Measure D, with preliminary election results showing 52.05% voter approval. Measure E asked voters to decide whether the City should create a task force to make recommendations by February 1, 2026 on ways the City could change, eliminate, or consolidate commissions to improve the administration of City government.

Measure L: Additional Business Tax on Transportation Network Companies and Autonomous Vehicle Businesses to Fund Public Transportation – Passed

With preliminary election results showing 56.88% voter approval, it looks like voters have passed Measure L, which places a permanent additional tax on transportation network companies and autonomous vehicle businesses to support Muni transportation services and fare discount programs, titled the “Ride-Hail Platform Gross Receipts Tax.” The Measure will impose the tax specifically on businesses that provide passenger service for compensation and receive more than $500,000 in gross receipts. The tax rates range between 1% and 4.5% of gross receipts. The Controller estimates annual revenue from the measure at approximately $25 million.

Measure M: Changes to Business Taxes – Passed

Measure M proposed to modify several existing taxes in the City, including the Gross Receipts Tax, Homelessness Gross Receipts Tax, Overpaid Executive Gross Receipts Tax, Business Registration Fee, and the Administrative Office Tax on Payroll Expenses. In general, the Measure is expected to cut taxes for many small businesses and shift more tax burden onto medium, large, and wealthier businesses through a variety of changes. Preliminary election results show that Measure M was approved by 69.73% of voters so far.

 

Authored by Reuben, Junius & Rose, LLP Attorney, Kaitlin Sheber.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. Reuben, Junius & Rose, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

Prop. 21 – Another Attempted Costa-Hawkins Takedown

| Michael Corbett
Costa-Hawkins

This November, California voters will be asked for the second time in as many years to overturn statewide restrictions on rent control in the Costa-Hawkins Rental Housing Act (“Costa Hawkins”). The following provides a summary of Proposition 21, named by its proponents as the Rent Affordability Act (“Prop. 21”), and its potential implications for residential landlords and tenants in California.

Prop. 10 and Costa-Hawkins

Its predecessor, Proposition 10, was rejected by nearly 60% of voters in 2018. It would have repealed Costa-Hawkins and allowed local governments to adopt rent control on any type of rental housing.  Costa-Hawkins, passed in 1995, allows local governments to enact and use rent control, except on (a) housing that was first occupied after February 1, 1995, and (b) certain classes of housing units, such as condominiums, townhouses, and single-family homes.  Landlords protected by Costa-Hawkins are currently allowed to increase rent to market rates when a tenant vacates a unit.

Prop. 21

If approved by voters, Prop. 21 would allow local governments to adopt rent control on housing units, except for (a) housing first occupied within the last fifteen (15) years and (b) units owned by natural persons who own no more than two (2) housing units with separate titles, such as single-family homes, condominiums, and certain duplexes, or subdivided interests, such as community apartment projects and stock cooperatives.  Prop. 21 would continue to allow local limits on annual rent increases to be more restrictive than the current statewide limit.  For vacancies where the previous tenant voluntarily vacated, abandoned or was lawfully evicted from a dwelling unit, Prop. 21 would impose, over the first three (3) years of a new tenancy, a combined rent increase cap of fifteen percent (15%) from the rental rate in effect for the immediately preceding tenancy.  This three-year rent increase cap would be in addition to any rent increases otherwise authorized by local law.

Tenant Protection Act of 2019

Prop. 21 follows the January 2020 roll-out of the Tenant Protection Act of 2019, which enacted a statewide rent control cap on annual rent increases of five percent (5%) plus the percentage change in the Consumer Price Index or ten percent (10%), whichever is lower.  The Tenant Protection Act of 2019, while considered to provide among the strongest state-implemented rent increase caps and renter protections in the country, does not affect vacancy decontrol, meaning landlords are currently able to set initial rents for new tenancies.  If passed, Prop. 21 would effectively foreclose the ability of landlords now protected by Costa-Hawkins to set initial rents at market rates if it would result in more than a fifteen percent (15%) increase from the prior tenant’s rental rate.

Support of Prop. 21

Proponents of Prop. 21 contend that the measure would provide more financial security for renters, reduce homelessness, and help alleviate a statewide housing affordability crisis.  The Prop. 21 campaign is sponsored by the Aids Healthcare Foundation, and notable supporters include Senator Bernie Sanders, House Representative Maxine Waters, the California Democratic Party, and the ACLU of southern California.

Opposition to Prop. 21

Opponents of Prop. 21 posit the proposed statutory changes would hurt renters by discouraging private sector builders from bringing more affordable housing units to market and diminish property values, resulting in less revenue for communities.  Californians for Responsible Housing is leading the campaign in opposition to this initiative, with other opponents including Governor Gavin Newsom, the Howard Jarvis Taxpayer Association, California NAACP State Conference, and Congress of California Seniors.

Votes Needed to Pass

For Prop. 21 to pass and become state law, greater than fifty percent (50%) of the votes cast for this proposition must vote “yes”.

 

Authored by Reuben, Junius & Rose, LLP Attorney Michael Corbett.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.