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4 California Real Estate Trends to Look Out For in 2017


There are new rules and trends that will certainly have an impact california real estate this year. Andrew McIntyre of Law360 addresses these challenges facing the California real estate market in the new year. Here’s what to keep an eye out for.

  • Marijuana
  • Affordable Housing
  • Development and the California Environmental Quality Act (CEQA)
  • Property Taxes

Despite the inevitable state and federal regulations, many real estate companies are in the process of setting up marijuana dispensaries.

“Landlords will continue to remain nervous about knowingly allowing such businesses in to their spaces,” said Simon Adams of Reed Smith. “Even with lease covenants to indemnify the landlord for damages the potential conflict between the state laws and federal prosecution laws will create some reservation if the new presidential administration were to start to prosecute and confiscate buildings from owners.”

California continues to struggle with affordable housing and a change was made in 2016 to address the issue with little support in the state legislature. However, The issue will be raised again in 2017 through State Bill 35.

The Sacramento Bee reports, “California’s Department of Housing and Community Development has issued a new assessment of the state’s housing challenges, reporting that California families face a harder time finding a place to live than at any point in our history and that homeownership rates in California are at their lowest since the 1940s. And more than 1.5 million households in California pay more than half of their income toward rent, leading to an enormity of overcrowded and unhealthy rental homes and income instability.”

According to JD Supra Business Advisor, “The California Environmental Quality Act (CEQA) has long been considered a focus for reform over the years, seen by developers as a major detriment to projects, adding years to a schedule.”

The Californian explains the significance of this act, “CEQA requires that the County deny a project where there is feasible mitigation that would avoid or substantially lessen significant environmental impacts. If an impact cannot be mitigated, CEQA requires that the County disclose that fact. Additionally, CEQA requires that the County prepare, circulate for review, and respond to comments on a legally adequate Environmental Impact Report (EIR). These steps are crucial to ensuring informed public participation in the approval process and accountable decision-making.”

The CEQA makes it difficult for developers in California real estate and since the new administration in the White House will likely be focused on developing new buildings even in places that will have negative environmental impacts, the CEQA will certainly be in the line of fire this year.

Since the passage of Proposition 13 in 1978, Property taxes have been kept low. However, there are efforts to consider a ‘split-roll’ proposal which will allow property taxes to rise only on commercial properties, while maintaining assessed values on residence to a 2% annual ceiling.

“The economy of California continues to do well … which will continue meaning that there will be no appetite for legislators to look for funding and address potential changes to adjust this taxation,” said Adams.” Many home owners are predicted to be paying less for housing as interest rates rise.”

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