The News

Ballot Roundup

Read on to learn what the 2020
election results mean for local
property owners.

Both 2020 and the 2020 election season have been long, grueling, and seemingly endless, but as of this writing, after a week of uncertain election results, it looks like we can finally call the results of all of our elections: local, state, and federal. In looking at the local and statewide 2020 election results, it certainly was a mixed bag for SFAA members.

While SFAA’s main priority for 2020 was successful—defeating Prop 21—other measures that will impact SFAA members were passed at both the state and local level, and some SFAA-endorsed candidates were elected while others were narrowly defeated. Overall, the “progressive” wing of the local Democratic Party retained its super-majority at the Board of Supervisors, and we can expect to see a slew of legislation targeting landlords in the coming days, weeks, and months. Indeed, on Election Day itself, a member of the Board of Supervisors introduced legislation attempting to impose a rental registry and landlord registration process. Below, we will go over some of the more impactful Election Day results for SFAA members.

LOCAL
Between ballot measures, hyper-local races, and federal and state offices, San Francisco’s ballots are notoriously long, and the November 2020 ballot was no different. San Franciscans decided on 13 local ballot measures, elected 6 members to the Board of Supervisors, and 4 candidates each to the school board and community college board. Overall, 443,00 ballots were cast as San Francisco’s turnout rate hit 85%, an estimated 20 percentage points higher than the statewide turnout rate of approximately 66%.

Locally, there was a slate of taxes on the ballot, and SFAA joined other pro-business groups in waging a “No New Taxes” fight and in battling Proposition I, a doubling of the transfer tax for certain properties. Unfortunately, voters approved every tax measure on the local ballot.

Proposition A is a $487.5 million general obligation bond called the Health and Homelessness, Parks, and Streets Bond. The measure arrived on the ballot with the unanimous support of the full Board of Supervisors and Mayor London Breed, and was passed overwhelmingly, with over 70 percent of the vote. Money raised by the general obligation bond will fund a range of services, focusing on acquiring facilities to house and provide services to the homeless, in addition to park, open space, recreational facility, and street improvements. Half of the yearly bond amount can be passed through to residential tenants.

Voters also handily passed Proposition B to create the Department of Sanitation and Streets. Prop. B surely benefitted from voters wanting to do something about the current condition and cleanliness of San Francisco streets, as well as the FBI’s charges against former Department of Public Works’ head, Mohammed Nuru. Prop. B won by almost 22 points and will create a new department and oversight commission that is mostly redundant with the current Department of Public Works’s role. While many voters were enticed to support Prop. B based on its title, political observers also largely saw Prop. B as an attempt by the current Board of Supervisors to limit Mayor Breed’s power. Time will tell if this new department and structure will be more effective in cleaning and maintaining San Francisco’s streets, but it certainly doesn’t feel like a good economic time for city government to be expanding and creating new, mostly redundant departments.

Proposition C removed citizenship requirements for members of city bodies like the School Board and City College Board and was passed with 54% of the vote. Advocates of the measure highlighted giving representation to non-citizen parents of SFUSD students, and voters agreed. It will be interesting to see how Proposition C impacts future elections for city bodies. Currently, elections for the School Board, Community College Board, or BART Board of Directors are largely seen as a stepping stone to future political office, such as the Board of Supervisors.

Proposition D asked voters whether the city should create a Sheriff’s Department Office of Inspector General and a Sheriff’s Department Oversight Board, and voters resoundingly said “Yes.” The measure passed with almost a supermajority, with just about 67% of voters approving the measure. While SFAA recommended a No vote, preferring to allow our new Sheriff to work and institute changes in the department, the measure was surely boosted by the social justice movement of the summer and by relatively recent news stories documenting disfunction in San Francisco’s jail, which is overseen by the Sheriff’s department.

Proposition E also passed with a supermajority of more than 71% of voters approving the measure. Curiously, for decades, San Francisco’s city charter has stated that the city should always have 1,971 full-duty sworn police officers. Proposition E erases that requirement, instead requiring the Police Department and the Police Commission to evaluate and make recommendations for the appropriate staffing level for the Police Department. This should allow the Department to right-size itself, and also ties into social justice efforts to reduce the amount and types of offenses that Police are called to assist with.

Proposition F, the Small Business and Economic Recovery Act, is an overhaul of the business tax system in San Francisco and was part of the slate of taxes that voters approved. Proposition F is the result of a long-term plan to revise the way San Francisco taxes businesses, but after the pandemic hit was amended to offer tax relief, particularly to small businesses. The measure reduces the business registration fee for businesses with gross receipts of less than $1 million by about 50%. The measure also repeals the payroll expense tax beginning in the tax year 2021, and incrementally increases the gross receipts tax for certain types of businesses until 2024 or 2025. Although the 50% exemption for rent-controlled properties will still apply, and while some members may have their business registration fees reduced, this measure will increase the gross receipts tax rate fairly substantially over the next four years. The SFAA PAC participated in an effort to defeat Prop. F, Prop. I, and the other new taxes on the ballot, but unfortunately voters approved all of the taxes, despite the current recession. SFAA members will have to stay tuned and review the various registration fee reductions and tax rate increases to see how Prop. F will impact their building, gross receipts tax rate, and business registration fee. For most members, Prop. F’s passage will mean a substantial increase in taxes, implemented incrementally over the next few years.

Proposition G would have allowed 16-year-olds to vote in local elections. The measure was denied by the voters, by less than one percentage point.

Proposition H was written in consultation with the small business community and was designed to give much-needed flexibility and a streamlined approval process for small businesses during this difficult time. The measure will simplify restrictions for businesses in neighborhood commercial districts, as well as simplify permitting processes for certain types of businesses.

In recent months, many members have started to realize that the “neighborhood amenities” and neighborhood businesses they may have taken for granted are extremely important to help maintain local demand for housing. When the pandemic hit and bars, restaurants, and small businesses were forced to close, many renters began to reconsider their living situation. With the ability to work remotely, and with everything closed citywide, we’ve seen an exodus of renters, and it’s been difficult for many of our members to fill those vacancies. Prop. H’s passage is hugely impactful for small business in San Francisco, and if it will help maintain our commercial corridors and sustain our small businesses, the measure will be extremely beneficial both for businesses that are struggling due to the pandemic and also for landlords who benefit from the demand and desirability that bustling, vibrant neighborhoods, small businesses, and commercial corridors bring.

Proposition I passed handily with 57% of the vote, to the detriment of many SFAA members and to future renters and businesses in the city who may not have understood the economic impact that Prop. I is predicted to have. While the measure does not increase the tax rate for properties under $10 million, it doubles the transfer tax rate for properties sold over $10 million and would also apply to the sale of most of the buildable land left in San Francisco. The “Yes on I” side sent out glossy mail pieces with 555 California (owned in part by Donald Trump) and an offer to tax billionaires, which voters couldn’t pass up. In reality though, per the city’s own economic analysis, the tax will actually increase the cost of housing and the cost of running a business in San Francisco, while also decreasing the real income of San Franciscans. The city will likely feel the effects of Prop. I via higher housing and commercial rent prices in the future.

Proposition J is a parcel tax for SFUSD and comes after a recently passed parcel tax for teacher salaries. The measure passed and will change the currently expiring parcel tax from $320 to $288 per parcel. Proposition K would authorize the city to own, develop, construct, rehabilitate, or acquire up to 10,000 housing units for affordable housing, but it provides no mechanism for doing so. The measure passed resoundingly.

Proposition L is another tax, this time on a CEO’s salary if the salary is greater than 100 times larger than that of the company’s lowest-paid employee. The measure won overwhelmingly with 65% of the vote.

As an exception to its “No New Taxes” slate, the SFAA political action committee recommended a YES vote on Measure RR, which passed. Measure RR is a regional measure and authorizes a sales tax of one percent (0.125%) with funding dedicated to operating and capital purposes for the Caltrain rail service. The measure was necessary to keep Caltrain who can commute south on Caltrain throughout the region.

Six of the eleven seats on the San Francisco County Board of Supervisors were up for election in 2020. Supervisors Peskin, Preston, Ronen, and Safai all coasted to re-election, with only Preston being seriously challenged by SFAA-endorsed candidate Vallie Brown. Peskin and Safai were endorsed by the SFAA in their successful bids for re-election, and we will be able to continue our working relationships with their offices.

In District 1, SFAA-endorsed candidate Marjan Philhour was tragically and narrowly defeated by just 123 votes out of close to 30,000 total votes. Philhour ran a strong, positive, and proactive campaign, and took pledges early to denounce outside spending in her race. Unfortunately, outside money was spent by third parties both for and against Philhour in the days before the race, with thousands and thousands of dollars being spent to misconstrue Marjan and her priorities. Along with the dark money against Marjan, a last-minute strategy to run the race’s progressive frontrunner with a failed Republican in a 1-2 ranked-choice voting strategy proved to be too much to overcome.

In District 7, progressive candidate Myrna Melgar narrowly beat out SFAA-endorsed Joel Engardio when all the ranked-choice votes were redistributed. Melgar is an ally of the Mayor with progressive credentials and a pro-housing perspective. She’s served on the city’s Building Inspection Commission and will be in an interesting position on the Board of Supervisors, with allies in both the progressive and moderate factions of the local government.

In District 9, Hillary Ronen ran unopposed, and in District 11, Supervisor Ahsha Safai handily ran to re-election over former Supervisor John Avalos. Safai also enjoyed support from allies across San Francisco’s political spectrum.`

Statewide
While there were several candidates and measures on the 2020 local ballot which will undoubtedly have an impact on the day-to-day lives of SFAA members, for many, the 2020 statewide election was a one-issue ballot: Proposition 21 represented an existential threat to California’s rental housing industry. The measure, which would have effectively repealed Costa Hawkins and paved the way for cities to impose vacancy control, was debated furiously in the months before the election, and advertisements from both the No and the Yes campaign dominated the airwaves up to two months prior.

Prop. 21 came just two years after its predecessor, 2018’s Prop. 10, and less than one year after the California legislature became one of the first states in the country to pass statewide rent control. Both of these factors helped lead to the measure’s defeat, in addition to concerns about the measure’s impact on housing production, housing affordability, and controls on single-family homeowners. Polling just weeks before Election Day showed the two sides in a dead heat, and SFAA and CAA had to go back to the well to redouble our fundraising efforts for the measure. The strategy proved to be successful, with the measure failing by almost identical numbers to Prop. 10 in 2018. In the end, Prop. 21 was defeated by a margin of nearly twenty points: with 59.9% of Californians voting No and 40.1% supporting the measure.

It’s too early to tell if we will see a “Prop. 21 2.0” on a future ballot, but the committee working on “No on 21” is hopeful that with a resounding result two elections in a row, Michael Weinstein and the AIDS Healthcare Foundation may not be back in 2022. That being said, it’s still important for SFAA members to understand that these issues are not going away, and that the time is long past for them to get politically active. As the cost of living has risen in recent years (notwithstanding this year’s pandemic), housing providers should be aware that they are operating in an increasingly politicized environment. The rental housing industry expects to continue to be the target of both elected officials and impassioned tenants’ rights activists, and the industry and its members must be prepared to protect themselves. Californian landlords and housing providers today simply must view political and legal fund donations as a necessary cost of doing business, just like paying property taxes and maintaining the property. If the industry is unable to sustain continued attacks at the ballot box and in the state legislature, being a landlord in California will become a much more difficult and costly proposition.

In addition to Prop. 21, many SFAA members were concerned about Proposition 15, which would reassess commercial and industrial properties based on fair market value. As ofIn the writing of this article, Proposition 15days after the election, the measure was too close to call, although the No side is slightly ahead.but Prop 15 was narrowly defeated.. While Prop 15 exempted reassessing residential space, it would reassess have reassessed commercial space in mixed use buildings. Additionally Prop 15 was widely viewed as the first step to repealing Prop 13, with residential reassessments coming next on a future ballot.

So, while by and large the statewide election went very well for SFAA members, a number of taxes were approved locally and the makeup of the Board of Supervisors remains nearly identical to the current makeup of the Board, which has passed a number of anti-landlord measures over the last several months and years. In 2021 and beyond, its clear that the rental housing industry as a whole will need to become more politically active and involved in local and statewide races.

Charley Goss is the government and community affairs coordinator for the San Francisco Apartment Association. He can be reached at 415-255-2288, ex. 114.