There were 2 local measures on the November 2018 ballot that were approved by voters that will impact local real estate going forward.
The first was Measure P, which passed with 72% of voters saying yes. Measure P increases the Berkeley city transfer tax on property sales at prices over $1.5M, from 1.5% of the sale price, to 2.5%. Property sales at prices of $1.5M or less will still be taxed at the old rate of 1.5%. The measure says that the funds raised are intended to be used for “general municipal purposes such as navigation centers, mental health support, rehousing and other services for the homeless, including homeless seniors and youth.” It also establishes a Homeless Services Panel of Experts to recommend services.
Berkeley now has the highest transfer taxes in the state except for properties that sell for more than $10M in San Francisco or Richmond. San Francisco properties that sell for less than $10M have a lower transfer tax than in Berkeley. In Richmond, properties selling for less than $3M have a lower transfer tax, and properties in the $3M-$10M range match Berkeley’s 2.5% tax.
As a result of Measure P, I think we’ll be seeing a real discontinuity in the market at $1.5M. The difference between a sale at $1,500,000 and a sale at $1,500,001 is an extra $15,000 in transfer taxes! I expect that a lot of buyers who might have made an offer in the low $1.5M range will decide instead to not go over $1.5M. Since the city transfer tax is typically split 50/50 between the buyer and seller, both parties have an incentive to keep a sale price under that figure. Buyers will be trying to find creative ways to sweeten their offer in a multiple-offer situation without crossing that threshold. For properties valued well above $1.5M, the buyers will just have to factor in the higher costs (and the sellers the lower proceeds).
The other local real estate measure that passed was Measure Q. Measure Q was written to address how Berkeley rent control would proceed if the statewide proposition to repeal the 1995 Costa Hawkins Rental Housing Act passed. The statewide proposition did not pass, so Costa Hawkins is still in effect and most of Measure Q ended up being not relevant. (You likely saw this when you voted in November, but if you’d like a refresher, Costa Hawkins most notably prevents rent control from being imposed on single family homes and condominiums, allows rents to be reset to market rates when a unit is rented to new tenants, and prevents rent control from being imposed on units constructed after February 1995.)
However, one part of measure Q, intended to encourage construction of new accessory dwelling units (ADUs), will go into effect. For properties with one legal and permitted ADU, if the owner resides on the property, the rental unit will be exempt from rent and eviction controls. The exemption will apply to tenancies that started November 7, 2018 or later.