Letters to the Editor: There is no solution to homelessness that doesn't involve denting property values
The housing crisis is fundamentally driven by sky-high real estate prices, and there is no solution whatsoever that does not involve denting owners' precious property values. Repealing Proposition 13 in favor of a heavy tax on the present value of land, preferably with improvements exempted, is the single most efficient means to such an end. If we are not willing to tank California's real estate market, then we are not willing to solve the problem.
Michael Raley, Los Angeles
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San Francisco Chronicle
5 days ago
- San Francisco Chronicle
This key data shows S.F.'s growth remains sluggish — and far worse than rest of the Bay Area
San Francisco's assessment roll — the combined assessed value of land, structures and business property that is subject to property tax — grew an anemic 1.8%, to an estimated $353.5 billion, this year, due in part to falling values for office buildings, hotels and some multifamily housing and a deluge of appeals from property owners seeking to lower their tax bills. San Francisco's growth rate was by far the lowest for any Bay Area county. It was down from a sluggish 2.2% last year and the lowest growth rate since 2011, according to the city's preliminary analysis. Other counties with relatively large commercial sectors generally saw lower growth rates than last year. Santa Clara County's roll grew 4.15%, the lowest since 2012. Alameda County's roll grew about 3.7% compared to almost 5% last year. Counties that are more rural or residential fared better. Solano had the highest growth rate, thanks in part to new housing developments. That's a turnaround from the years leading up to the pandemic, when counties with booming commercial development saw robust roll growth. San Francisco's roll grew more than 10% in 2017 and 2018, the highest in the state according to its assessor's reports. Each year in early July, California assessors release their 'rolls,' or the assessed value of all taxable property in their county as of Jan. 1 that year. These assessments determine property taxes for the fiscal year that begins July 1. So tax bills for 2025-26, which will go out in the fall, will show the property's assessed (not market) value as of Jan. 1, 2025. Owners pay property tax — about 1.15% on average — on their assessed value each year. The assessment roll represents the combined assessed value of all real property (land and structures) and tangible business property (such as computer equipment, office furnishings and machinery) in each county. Because property taxes go largely to schools, community colleges, cities and counties, local governments pay close attention to their rolls. In San Francisco, the controller's office estimates that property taxes will be $3.1 billion this year, which represents 34.7% of general fund revenues and 19.5% of the total city budget. After this year's 'very, very modest growth,' San Francisco is forecasting that property taxes 'will be stagnant to declining in the next couple of years, which is huge,' said Michelle Allersma, director of the Controller's Office Budget and Analysis Division. 'Flat property tax revenues feel like a hit,' because they are not keeping up with expenditures. At the same time, 'we are bracing ourselves for changes to federal and state revenue,' Allersma said. The roll also sheds light on the state of local economies, especially as it pertains to real estate. Under Proposition 13, real property is generally assessed at market value when it is built or changes hands. This is called the base-year value. In between transfers, this value can only go up by inflation rate capped at 2% a year, plus the value of new construction, such as additions or major remodels. This is called the assessed or enrolled value. Properties that have been held for many years, or decades, are typically worth far more than their assessed value. When a long-held property changes hands, there is usually a sharp increase in its assessment and thus its property tax (unless it gets an exemption from reassessment). Even when real estate prices are falling, county assessment rolls generally go up every year thanks to new construction, properties turning over at higher prices and the important 2% inflation factor. Following the 2008-09 housing bust, however, many Bay Area counties saw their rolls decline, as hundreds of thousands of homeowners had their assessments temporarily reduced and the annual inflation factor fell below 2% several times and even went negative one year. When a property's market value drops below its assessed value, under Proposition 8 its owner can get the assessed value temporarily reduced to the market value. As prices recover, the assessed value will go up along with the market value until it reaches the point it would have been without the temporary reduction. After that, it's limited to 2% again. In 2012-13, about 3.7 million or one-third of all properties statewide — mostly homes — had temporary tax cuts. Although home prices have long since recovered, there are still homes with Prop. 8 reductions, some of which were granted to buyers who purchased shortly before a brief dip in prices between mid-2022 and mid-2023. The bigger issue today is a sharp slowdown in home sales, which reduces the number of homes turning over at higher prices, and problems in the commercial sector, especially office buildings, retail space and some newer multifamily housing. In recent years, some Bay Area office buildings are selling at a fraction of their previous sales prices and in some cases their assessed values. That reduces the market value of similar buildings and encourages their owners to seek temporary property tax reductions. When property owners (commercial or residential) think their market value is less than their assessed value, they can ask their county assessor for an informal review, and sometimes the assessor will agree to a reduction. Owners who miss their county's deadline or disagree with the results of a review can file a formal appeal between July 2 through and Sept. 15 in San Francisco, Santa Clara and Alameda counties and between July 2 and Dec. 1 in other Bay Area counties. The San Francisco Assessment Appeals Board received 9,281 applications in 2024-25, up from 8,036 the previous year. By comparison, it received fewer than 2,900 in each of the three preceding years. Most are for homes, which account for the large majority of parcels in the city, but commercial property owners are generally asking for much larger reductions. The San Francisco Assessor proactively reduced assessment for some hotels and new-construction condos, but 'they are not doing them for office, retail or other residential properties. They are letting them go through the appeals process,' Allersma said. Appeals are supposed to be decided within two years, but because owners of big, complicated properties often agree to extend the deadline, it could be years before appeals filed in recent years are decided and reflected in the rolls. For instance, the former Wells Fargo building at 550 California, which sold for $108 million in 2005, sold in 2023 for just $40.8 million. It was reassessed at $88 million after the sale, but it has 'open appeals and the base value may change once those are resolved in the coming years,' the assessor's office said via email. Unlike homes, which are usually assessed at the sales price, assessors consider other many factors on commercial properties, such as vacancy rates and income potential. Property owners who win their appeals could get tax refunds for several years. Cities and counties often reserve for potential refunds in their budgets. San Francisco Assessor Joaquín Torres declined comment but his office said via email that 'assessment appeals are one factor that is slowing roll growth both due to reductions in value as well as the unprecedented rise in workload they've created for our office, slowing the rate that we're able to process regular assessments such as new construction or changes in ownership, which typically add assessed value.' San Francisco is not the only county being hit by the office market downturn, brought on by remote work and other factors. Here's what's happening in other Bay Area counties. Note that assessors typically report their rolls after exemptions Santa Clara County In Santa Clara County, which also saw a pre-pandemic building boom, sales of commercial property increased 6% over the past year, but sales prices 'have been consistently lower than assessed value, removing value from the roll,' Assessor Larry Stone said in a press release shortly before he retired on July 6. Commercial reductions reduced the roll by over $4.5 billion, which nevertheless grew by almost $29 billion thanks largely to housing turnover and the 2% inflation factor. While the number and value of residential properties with Prop. 8 reductions declined this year, commercial-property reductions rose 31% in number and 181% in value. Google alone has several properties with temporary Prop. 8 reductions totaling more than $1 billion. Santa Clara County also has $145 billion of assessed value under appeal and 98% of that is commercial property. On the bright side, demand for Silicon Valley data centers has remained strong and multi-family housing 'is fairly strong with the exception of some properties in Mountain View and San Jose,' Assistant Assessor Neysa Fligor said. San Mateo County San Mateo enjoyed slightly higher growth — 4.8% — than its neighbors to the north and south, but it was still slower than last year. 'Sustained demand for residential real estate and ongoing commercial development, particularly in the life sciences and multi-family housing sectors,' buoyed the county's growth, Assessor Mark Church said in a press release. He added, in an interview, that the number of proposed commercial projects has slowed, compared to what it was 2 years ago, mainly because of financing difficulties. 'Developers who had attained their permits and entitlements are proceeding, while those that have not are holding off until the economy improves,' Church said. High interest rates are also slowing residential sales. Many long-term homeowners with 3% mortgages, low Prop. 13 assessments and/or big capital gains that would be taxable upon sale are reluctant to move. 'People who are selling are more recent purchasers,' so the difference between their assessed values and sales price is not so high, Church said. 'We believe that is contributing to the slower growth rate.' Alameda County Alameda County's roll grew 3.66% this year compared to almost 5% the year before. But growth rates 'ranged dramatically from city to city,' Assessor Phong La said. Oakland had the second-lowest growth rate, 0.85% mostly a result of large Prop. 8 reductions for downtown office space and some new luxury multifamily projects. 'We also see office reductions in Emeryville, Berkeley and Pleasanton but not as much as Oakland.' For example, a percentage of Oakland's historic Rotunda building was sold in January 2022, near the peak of the market, and enrolled at about $63 million. 'After reviewing their information for the 2025-26 lien year, we agreed to reduce the assessment to $25 million,' La said. His office also reduced the assessment on a large apartment building at 3073 Broadway in Oakland that was completed in 2019/2020 from $255 million last year to $150 million this year. Emeryville's roll actually declined by almost 0.4%, in part because of a big cut in the Bay Street shopping center's assessment, which was sold in 2021, reportedly for $90.5 million. Before the sale, it was assessed at $336 million. After the sale, the buyers initially did not provide information the assessor requested, and it was lowered to $260 million. After several years of appeals and negotiations, it was reduced to $95 million retroactive to 2021-22, although improvements in the past year brought it to $113 million, La said. Solano County Solano County had the highest roll growth, at 5.5%, which was also higher than last year's growth rate, thanks mainly to the inflation factor plus new housing developments around Fairfield and Vacaville. 'We are not exposed as much as surrounding counties to the ongoing weakness in the office and retail markets. Solano is heavy in warehousing, which has been strong,' Assessor Glenn Zook said. The tech investors scooping up land between Suisun City and Rio Vista to build a new city known as California Forever did not contribute as much to this year's roll growth as they have in the past few years. 'The pace of their acquisitions slowed considerably when they revealed their intentions,' Zook said. In fact the group, which owns more than 60,000 acres, has filed appeals on 219 parcels, seeking to reduce their assessments by more than 80%, Zook said. About two-thirds of their property is under the Williamson Act, which lets private landowners restrict use for farming or open space in exchange for lower property taxes. The appeals are on property that are not under the Williamson Act, but the owners say the property is worth less than they paid because they are not currently able to develop it as intended, Zook added. 'Until this project is approved and construction begins, California Forever's properties are grazing land with agricultural zoning, and should be taxed as such,' a spokesperson for the group said via email. Sonoma County Sonoma County's roll grew 5.44%, a higher percentage than last year, but this was partly because the assessor is catching up with a backlog of reassessments on homes that were destroyed or damaged in three major fires since 2017 but subsequently replaced. 'If you lost your entire structure we would have removed the structure (from the assessment) pretty quickly,' said Rhiannon Yeager, the county's chief deputy assessor. 'As you rebuild, we would restore value.' Because so many homes were lost, it took years for the county to catch up with those reassessments. 'It's really affecting our taxpayers who are getting multiple years of bills,' Yeager said. On top of that, 'we have a lot of new subdivisions that have gone in,' mostly in Rohnert Park plus some in Santa Rosa and Petaluma,' she added. Sonoma is seeing lower sales, and sales prices, prices for office buildings, but has not been impacted as much as other counties. Contra Costa County Contra Costa's assessment roll grew 4.18%, essentially the same as last year. The county's stable to rising home prices in higher-cost cities offset weakness in lower-priced cities, condominiums and office buildings. 'Corporations can't get their employees to report to the office,' Assessor Gus Kramer said. Some — such as Chevron — have moved their headquarters out of state. Kramer said he has been reducing assessments 'left and right' on office buildings, mainly in San Ramon, Walnut Creek, Pleasant Hill and Concord, and on some shopping centers and strip malls. Since he took office in 1995, residential has grown from 67% to 81% of the county's roll value, Kramer said. Industrial property fell to just 8%, from 20%; commercial property dropped to 10% from 12%; and agricultural property stayed around 1%. Marin County Marin's roll grew 4.28%, virtually the same as last year and its long-term average growth rate. 'The assessed value continues to increase despite low volume of real estate transactions and fewer major construction projects in Marin County,' Assessor Shelly Scott said in a press release. Marin's real estate values experienced small increases compared to a year ago, but demand for permanent office space has declined, which has led to vacancy rates that exceed historical averages, she added via mail. Napa County Napa's roll grew 4.11% versus about 4.6% last year. 'High interest rates and lack of inventory continue to impact the residential market including multi-family properties,' Assessor John Tuteur said via email. 'Headwinds facing the wine industry such as oversupply and shrinking demand impacted vineyard and winery properties only marginally in calendar year 2024.' He declined to forecast what lies ahead for wine properties assessments.
Yahoo
14-07-2025
- Yahoo
Letters to the Editor: There is no solution to homelessness that doesn't involve denting property values
To the editor: I would have liked to see Mitchell Landsberg and Gale Holland write more about Proposition 13 as a factor in our city's housing crisis ('The real story of how L.A. became the epicenter of America's homeless crisis,' July 10). It receives but a paragraph's attention, and is faulted only for starving local governments of funds to deal with homelessness. In fact, the gravest consequence of Proposition 13 has been to subsidize property owners, allowing them to so dearly cling to their holdings as to distort the market in their favor. By holding assessed value for tax purposes close to the price at the time of purchase, Proposition 13 disincentivizes longtime owners to sell, thereby perpetually constraining inventory on the public's dime. The housing crisis is fundamentally driven by sky-high real estate prices, and there is no solution whatsoever that does not involve denting owners' precious property values. Repealing Proposition 13 in favor of a heavy tax on the present value of land, preferably with improvements exempted, is the single most efficient means to such an end. If we are not willing to tank California's real estate market, then we are not willing to solve the problem. Michael Raley, Los Angeles This story originally appeared in Los Angeles Times.
Los Angeles Times
14-07-2025
- Los Angeles Times
Letters to the Editor: There is no solution to homelessness that doesn't involve denting property values
To the editor: I would have liked to see Mitchell Landsberg and Gale Holland write more about Proposition 13 as a factor in our city's housing crisis ('The real story of how L.A. became the epicenter of America's homeless crisis,' July 10). It receives but a paragraph's attention, and is faulted only for starving local governments of funds to deal with homelessness. In fact, the gravest consequence of Proposition 13 has been to subsidize property owners, allowing them to so dearly cling to their holdings as to distort the market in their favor. By holding assessed value for tax purposes close to the price at the time of purchase, Proposition 13 disincentivizes longtime owners to sell, thereby perpetually constraining inventory on the public's dime. The housing crisis is fundamentally driven by sky-high real estate prices, and there is no solution whatsoever that does not involve denting owners' precious property values. Repealing Proposition 13 in favor of a heavy tax on the present value of land, preferably with improvements exempted, is the single most efficient means to such an end. If we are not willing to tank California's real estate market, then we are not willing to solve the problem. Michael Raley, Los Angeles
