RESE ARCH REPORT
Housing and Land-Use Implications of
Split-Roll Property Tax Reform in
California
Solomon Greene Laurie Goodman Sarah Strochak Daniel Teles
Patrick Spauster
October 2020
H O U S I N G F I N A N C E P O L I C Y C E N T E R
ABOUT THE URBAN INST ITUTE
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Copyright © October 2020. Urban Institute. Permission is granted for reproduction of this file, with attribution to the
Urban Institute. Cover image by Tim Meko.
Contents
Acknowledgments iv
1. Introduction 1
2. Background 4
3. Methods 10
4. Findings 18
5. Implications 33
Appendix A. Model Description 36
Appendix B. Identifying At-Risk and Opportunity Parcels 39
Notes 40
References 42
About the Authors 45
Statement of Independence 47
IV
A C K N O W LEDGM E N T S
Acknowledgments
This report was funded by the Silicon Valley Community Foundation and the Stupski Foundation. We
are grateful to them and to all our funders, who make it possible for Urban to advance its mission.
The views expressed are those of the authors and should not be attributed to the Urban Institute,
its trustees, or its funders. Funders do not determine research findings or the insights and
recommendations of Urban experts. Further information on the Urban Institute’s funding principles is
available at urban.org/fundingprinciples.
The following individuals generously agreed to participate in interviews to help us understand how
key stakeholders in California perceive the potential impacts of Proposition 15 on housing supply and to
provide helpful feedback on our model and research approach: Amie Fishman, Chris Hoene, Sarah
Karlinsky, Denise Pinkston, Fred Silva, and Will Wright. In addition, the following individuals joined us
for group workshops to preview and provide feedback on our findings and discuss the implications for
state and local policy in California: Elliott Balch, Keith Bergthold, Matt Glesne, Chris Hoene, Monique
King-Viehland, Shawn Landres, Joe Schilling, and Will Wright. Yonah Freemark, Tracy Gordon, and
Kayla Kitson reviewed earlier drafts of this report and provided helpful comments and suggestions. We
are grateful for all their insights and contributions. We also emphasize that their engagement does not
constitute an endorsement of the analysis or findings in the report. All errors are the authors’.
1. Introduction
In November 2020, California voters will vote on Proposition 15, also known as the California Schools
and Local Communities Funding Act of 2020. Proposition 15 is a statewide ballot measure which, if
adopted, would change the way local governments assess property values for calculating and collecting
property taxes. Since the passage of Proposition 13 in 1978, tax rates and tax increases in California
have been subject to strict limits, and property assessments have been tied to property purchase prices
instead of current market value. Under Proposition 13, commercial, industrial, and residential
properties are treated identically. If passed, Proposition 15 would require California jurisdictions to
reassess most commercial and industrial properties at current market value at least every three years,
while residential property would continue to be taxed under the rules of Proposition 13. Proposition 15
is often referred to as the “split-roll” ballot measure because it would split the assessment rolls for
commercial and industrial properties from residential properties.
Proponents of Proposition 15 argue that it would create a fairer tax system, narrow state and local
budget shortfalls, and raise sorely needed revenue for schools and services. The California Legislative
Analyst’s Office estimates that the split-roll assessment scheme under Proposition 15 will produce a
gross property tax revenue increase of between $7.5 billion and $12 billion annually.
1
Proponents argue
that this revenue could improve the state’s public services (e.g., education and infrastructure), which
evidence suggests require an infusion of resources to meet the growing needs of California’s residents
and businesses (Gordon, Auxier, and Rueben 2020; Rueben, Auxier, and Gordon 2020).
2
In addition,
proponents argue that Proposition 15 would close loopholes for businesses and corporations under
Proposition 13, create a more balanced revenue system, and mitigate local fiscal challenges (Auxier,
Gordon, and Rueben 2020).
3
Opponents argue that Proposition 15 will make California less attractive to new businesses,
increase costs for existing businesses, stunt job growth, and hurt California’s economy (BRG 2020).
4
Faced with higher property taxes, commercial property owners may also pass the increased costs onto
their tenants, and small businesses may be unable to absorb these rent increases (California Chamber of
Commerce 2020).
5
More recently, some analysts have forecast that the COVID-19 pandemic and
recession, in addition to shifts in the state’s economy, will depress commercial property values in the
years ahead, and they suggest that proponents’ estimates of revenue gains are overblown.
6
The debate over Proposition 15 must be considered against the backdrop of an unprecedented
housing shortage in California and rising housing costs that are hitting low-income Californians the
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hardest (Kimberlin 2019).
7
Both proponents and opponents of Proposition 15 cite the state’s housing
affordability crisis as supporting their position, but they reach different conclusions about the effects
that split-roll reforms are likely to have. Proponents argue that increased property tax revenue from
Proposition 15 could support housing development, either directly through housing subsidies or
indirectly by supporting infrastructure and services.
8
They also suggest that taxing vacant or
underutilized commercial and industrial properties based on current market value will encourage
owners to convert the land to residential use to take advantage of lower effective tax rates over time
(Coffill et al. 2020).
9
Conversely, opponents argue that split roll will encourage local governments to
rezone residential land for commercial or industrial use to capture more property tax revenue because
under Proposition 15, commercial and industrial properties would be reassessed with greater
frequency and could generate more tax revenue over time (BRG 2020; Frates and Shires 2012).
10
In this report, we examine the proposed split-roll property tax reforms in the context of California’s
housing crisis, defined by a shortage of housing development and a lack of access to affordable housing.
We develop a model to test the claim often cited by opponents of Proposition 15 that converting to a
split-roll assessment regime will increase incentives to local governments to rezone residential
properties for commercial and industrial use to capture additional tax revenue. We combine property
records, land-use and zoning data, and tax property assessment rolls for four California cities to
estimate the financial incentives for municipalities to rezone from residential use to commercial or
industrial use. We also look at the incentives for private owners of vacant or underutilized commercial
and industrial properties to convert those properties to residential use, where already permitted, to
reduce tax liability over time. We then compare the relative strength of public and private incentives
and discuss how they might influence future land-use and residential development if the split-roll
proposal is passed.
Contrary to the claims of opponents of Proposition 15, we find that split-roll tax reforms are
unlikely to substantially alter municipal zoning incentives or suppress housing supply in California.
Across the cities we studied, few parcels are eligible for conversion from residential use to industrial or
commercial use under existing land-use and zoning codes. For parcels that are plausibly at risk of
conversion, the incentives for municipalities to rezone are weak because municipalities keep only a
small portion of the incremental taxes raised on properties within their borders. On the other hand, split
roll would create strong incentives for private owners of vacant and underutilized commercial and
industrial properties to convert these properties to residential use, where allowed, to avoid increased
tax liability. On balance, we find that split-roll tax reforms are more likely to increase California’s
H O U S I NG AN D L AND - U S E I M PL I CA T I ON S O F SPL I T R OL L
3
housing supply than constrain it. But we also find that split roll is not likely to solve California’s housing
shortage or affordability challenges without additional policies and reforms.
In the next chapter, we provide more background on Proposition 13 and the proposed split-roll
reforms under Proposition 15 and discuss what the research literature tells us about how variations in
property tax regimes influence land-use regulation and development decisions. In chapter 3, we
describe our research questions, empirical methods, and data. In chapter 4, we share our findings across
four case study cities and with various assumptions about market growth and property appreciation
rates. Chapter 5 concludes with the implications of our analysis for property tax and housing policies in
California.
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2. Background
Proposition 13 and Split Roll
In 1978, Californians passed Proposition 13, which overhauled the state’s property tax system.
Proposition 13 limits the property tax rate to 1 percent of a property’s assessed value, and it limits
increases in assessed value to the lower of inflation or 2 percent per year, with the initial assessment set
as either the property’s value in 1975 or the most recent purchase price (Sexton, Sheffrin, and
O’Sullivan 1999).
11
In its first year, Proposition 13 led to a 60 percent drop in local property tax revenues because of
the rate limit (McCubbins and McCubbins 2010; Taylor 2016). Since then, the law has further
constrained local revenue by limiting increases in property assessments (Sexton. Sheffrin, and
O’Sullivan 1999; Taylor 2016). As property values in California have increased, the relative tax burden
has declined for longtime property owners and has increased for new homebuyers and commercial
owners (O’Sullivan et al. 1995; Taylor 2016). By providing an implicit tax break to homeowners living in
the same house for a long time, Proposition 13 also reduces residential mobility, which may lead to
several negative social effects, such as suboptimal housing consumption and inefficient labor market
outcomes (Ferriera 2009; Imrohoroğlu, Matoba, and Tüzel 2018; Sexton 2008; Wasi and White 2005).
Proposition 13 also created a system for determining how property tax revenue is allocated.
Property taxes are collected at the county level and then apportioned among the county government,
school districts, municipalities, and other local entities (Elledge 2006; Sexton, Sheffrin, and O’Sullivan
1999).
12
The apportionment process and formulas are complicated, vary by locality based in part on the
services they provide, and have changed multiple times since the passage of Proposition 13 through
voter referenda, court decisions, and new legislation (Schwartz 1997; Sexton, Sheffrin, and O’Sullivan
1999).
13
Statewide, about 17 percent of property tax revenue goes to cities, with 34 percent going to
schools and 27 percent going to counties.
14
Yet, municipal allocations vary greatly as counties and cities
have different responsibilities and provide different levels of service throughout the state. In 2019,
municipalities in California received between 1 and 35 percent of the property tax revenue generated
within their boundaries.
15
In response to the constraints of Proposition 13, local governments became more reliant on state
aid and other revenue sources, such as hotel, sales, and utility taxes and user charges and fees (Sexton,
H O U S I NG AN D L AND - U S E I M PL I CA T I ON S O F SPL I T R OL L
5
Sheffrin, and O’Sullivan 1999; Taylor 2016).
16
Between 1978 and 2015, inflation-adjusted property tax
revenue doubled, while hotel, sales, and utility taxes increased more than 600 percent (Taylor 2016). In
2017, only 14 percent of state and local revenue in California came from property taxes, significantly
lower than the nationwide average rate of 17 percent (Auxier, Gordon, and Rueben 2020).
If adopted, Proposition 15 would amend California’s constitution to change the way commercial
and industrial properties are taxed under Proposition 13. Proposition 15 would require most
commercial and industrial properties to be taxed based on current market value, while residential and
agricultural properties would continue to be taxed under the rules of Proposition 13.
17
If Proposition 15
were to pass, the first market-rate assessments are not set to take place until fiscal year 2023, and the
measure exempts properties owned by individuals or businesses with less than $3 million in total
California property holding (Auxier, Gordon, and Rueben 2020).
The proposed measure also creates a distribution formula by which new revenue from the revised
tax on commercial and industrial properties would first be distributed to the state to offset losses from
increased tax deductions and to counties to cover the costs of implementing the measure. Of the
remaining funds, approximately 60 percent of the revenue statewide would be distributed to local
governments and special districts, and 40 percent would be distributed to school districts and
community colleges.
18
Variation in Property Tax Assessment
and Classification Systems
Property tax systems vary across states. States generally assess properties at regular intervals to
determine their taxable values and establish their owners’ tax liabilities based on property tax rates and
exemptions. Some states limit the amount that property taxes can increase every year, either by limiting
tax rate increases or total property tax collections or by limiting yields. Forty-six states and the District
of Columbia have adopted some form of property tax limitation, but the types vary widely.
19
Proposition 15 proposes to change property taxes in California from a uniform system to a
classified system. Classification allows states to tax different types of properties based on use or
ownership (e.g., residential or commercial) at different effective tax rates (box 1). A property tax
classification system with only two classes is sometimes referred to as a split roll (Auxier, Gordon, and
Rueben 2020; Lee and Wheaton 2010). State tax systems vary in how they classify properties and how
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they tax those classes. Twenty-five states and the District of Columbia have enacted some form of
property tax classification system (Lee and Wheaton 2010).
BOX 1
Definitions
classification. States and localities often tax different properties at different effective rates
based on their use (e.g., residential, commercial, industrial, agricultural). This is often referred to
as property classification.
a
classification assessment schedules. Property tax systems can also assess different classes of
property at different frequencies. For example, a state might assess residential property only
upon sale of the property and assess commercial property every two years.
classification rates. In some property tax systems, classification is used to determine the rate (or
share of the market value) at which properties are taxed.
b
classification ratios. In other property tax systems, different classes of property are assessed at
different proportions of the true market value, but properties of all classifications are charged at
the same rate.
c
effective tax rate. The actual rate of tax liability as a share of market value. For example, if a
home worth $100,000 pays a $2,000 tax bill, the effective tax rate is 2 percent.
split roll. A property tax system with only two classifications (e.g., residential versus commercial)
is often called a split-roll property tax.
d
a
Richard C. Auxier, Tracy Gordon, and Kim Rueben, “California’s State and Local Revenue System” (Washington, DC: Urban
Institute, 2020).
b
Nai Jia Lee and William Wheaton, “Property Taxes under ‘Classification’: Why Do Firms Pay More?” SSRN Electronic Journal
(2010).
c
Lee and Wheaton, “Property Taxes.”
d
Auxier, Gordon, and Rueben, “California’s State and Local Revenue System.”
State Tax Limits and Zoning Incentives
“Fiscal zoning” refers to the tendency of local governments make land-use planning and development
decisions that increase revenues and reduce demand for public services (Chapple 2018; Fischel 2000).
In general, state property tax limitations like Proposition 13 can exacerbate fiscal zoning because
property taxes are capped and, in states like California, because they are allocated using a formula. This
H O U S I NG AN D L AND - U S E I M PL I CA T I ON S O F SPL I T R OL L
7
can increase pressure on local governments to make land-use decisions strategically to balance
municipal budgets (Elmer, Thorne-Lyman, and Belzer 2006; Thomas 2006).
The limitations imposed under Proposition 13 have led municipalities in California to pursue
alternative revenue sources (Hill 2018). Limiting property taxes may force cities to compete to attract
businesses that can generate sales tax revenues, a process sometimes referred to as “chasing the sales
tax” (Hill 2018; Schwartz 1997). Some empirical evidence suggests these pressures exist in California,
and local policymakers act on them. According to survey data, California city managers prefer land uses
that generate sales taxes, like commercial development, over other land uses (Lewis and Barbour 1999).
Jurisdictions in which property taxes make up a larger share of local revenue have been more likely to
convert land from nontaxable uses to taxable uses (Chapple 2018).
But some research refutes the claim that localities in California prioritize revenue generation in
their land-use decisions. A report by the California Legislative Analyst’s Office (LAO) found little
evidence that Proposition 13 affects local government land-use decisions (Taylor 2016). The LAO
examined rezoning decisions and building permits and found that, although cities that relied more on
sales taxes were slightly more likely to rezone more land for retail uses than comparison cities, fiscal
incentives have little or no effect on the amount of land rezoned for housing. In fact, cities with lower
property tax shares permitted more housing construction than those with higher shares (Taylor 2016).
Proposition 13 may also indirectly affect local land-use decisions (Hill 2018). Schwartz (1997)
argues that Proposition 13 limits cities’ ability to fund infrastructure to support new housing. In
addition, Proposition 13 may encourage local governments to rely on impact fees and other charges to
residential developers that make it more expensive to build new housing, unless they can pass along
those costs to consumers (Dresch and Sheffrin 1997; Hill 2018; Schwartz 1997).
Switching from a uniform property tax system to a split-roll classification system may affect land-
use decisions in California, though the direction and strength of these effects remain unclear. Some
research suggests that split roll can help balance municipal budgets between property, income, sales,
and other tax revenue (Auxier, Gordon, and Rueben 2020; Sheffrin 2009). With more balanced budgets,
localities might rely less on sales taxes and redistribute resources to infrastructure and housing (Benner
and Guista 2018; Chapple 2018; Hill 2018; Paulsen 2014; Schwartz 1997). Localities also might not
have to chase sales taxes if they had more reliable property tax revenue, which could ease the fiscal
zoning pressures described above (Gallagher 2016; Hill 2018; Sexton, Sheffrin, and O’Sullivan 1999).
On the other hand, some economic analysts argue that split roll will increase the incentive for localities
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to zone for commercial and industrial uses to capture the additional property tax revenue from higher
assessments on commercial and industrial land and development (BRG 2020; Coffill et al. 2020).
Property Taxes and Development Incentives
Past research provides mixed and inconclusive evidence about the effects of local taxes on private
property owners’ investment and development decisions (Dye, McGuire, and Merriman 2001; Swenson
2016; Walker and Greenstreet 1991; Wu 2010). There are competing theoretical frameworks for
analyzing property taxes, with different assumptions about whose incentives are affected by local tax
policy (Youngman 2016; Zodrow 2001). Some evidence suggests that, all else equal, lower property
taxes are associated with higher levels of residential investment (Lutz 2015; Wassmer 1993). This
effect is difficult to measure, however, because local tax revenues fund local amenities, which make a
place more desirable to residents and increase demand for housing.
For current property owners, Proposition 13 discourages sales and has potentially offsetting,
positive effects on development and investment. Proposition 13 also reduces the costs of owning and
holding vacant land and therefore may discourage development and reduce investment (Taylor 2016).
Proposition 15 might affect owner incentives in two ways. First, it effectively removes the
limitations of Proposition 13 for commercial properties. Because we do not know whether Proposition
13 encourages or discourages investment, we do not know the effects of this partial repeal.
Second, Proposition 15 would increase operating costs of commercial or industrial properties
relative to residential properties, which will create an incentive, at least on the margin, for owners to
use land for residential use. Crucially, however, the effect of this incentive is limited by land-use
regulations that may permit only residential use or commercial or industrial use (Youngman 2016).
Perceived Effects of Split Roll
on Housing Supply in California
Opponents of Proposition 15 argue that split roll could decrease housing production. First, it could
increase incentives for localities to zone for commercial and industrial uses to capture the additional
property tax revenue from higher assessments on commercial and industrial land and development
(BRG 2020; Frates and Shires 2012).
20
Second, in zones where multiple uses are permitted,
H O U S I NG AN D L AND - U S E I M PL I CA T I ON S O F SPL I T R OL L
9
municipalities may be more likely to scrutinize or delay residential development and more likely to
expedite and entitle commercial and industrial uses to recoup the additional revenue that these uses
generate over time.
On the other hand, proponents of Proposition 15 argue that split roll could increase housing
production. First, it could increase incentives to private owners of vacant or underutilized commercial
or industrial land to develop or convert that land for multifamily housing to reduce tax liability (Coffill et
al. 2020).
21
Second, it could increase municipal revenue that could be used to support housing
development, either directly through housing subsidies or indirectly by supporting infrastructure and
services.
22
In this report, we examine only the first arguments for and against split roll from a housing
perspective: we estimate and compare municipal incentives to rezone for commercial or industrial uses
with private incentives to redevelop vacant or underutilized land for housing. We focus on these
arguments because they are measurable using available data on zoning, land uses, property values, and
taxes. We also focus on the fiscal zoning issues so often cited by opponents of Proposition 15 because
even though they are frequently raised, they have not been empirically tested.
The second arguments for and against split roll from a housing perspective focus on municipal
decisions regarding entitling new development and allocating new revenue. These are primarily political
decisions, and they are not readily measurable. But as we discuss in our findings, the strength of
incentives for cities to rezone and owners to redevelop are likely to influence the politics of land use and
development in California cities.
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3. Methods
Research Questions
In this research, we attempt to identify Proposition 15’s net effects on new residential development in
California cities. There are different incentives for municipalities and for private owners that pull in
different directions. Proposition 15 requires jurisdictions to reassess commercial and industrial
properties at market value but keep the assessment structure for residential (including multifamily)
properties intact based on original cost. As such, municipalities may have an incentive to prioritize
commercial or industrial properties over residential development.
At the same time, there are countervailing incentives for owners of commercial and industrial
properties to convert these properties to multifamily housing where zoning rules allow it. Because
multifamily and commercial development are often alternative uses of land zoned for commercial or
mixed use, on the margin, private owners and developers may prefer to develop or redevelop land as
multifamily housing to avoid the increased tax liability associated with the split-roll classification
scheme.
We attempt to estimate the relative strengths of these offsetting incentive structures and attempt
to identify which incentive structure is dominant. Specifically, we aim to answer the following
questions:
1. Will Proposition 15 create incentives for California cities to rezone residential land for
commercial and industrial development? If so, what is the magnitude of these public incentives?
2. Will Proposition 15 create incentives for owners of vacant or underutilized commercial or
industrial land to develop or convert that land for residential use? If so, what is the magnitude
of these private incentives?
3. On balance, and without additional subsidies, will split roll increase or decrease housing
development?
To answer these questions, we used a mixed-methods approach that consists of both quantitative
and qualitative analysis.
H O U S I NG AN D L AND - U S E I M PL I CA T I ON S O F SPL I T R OL L
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Selecting Case Study Cities
Our quantitative analysis involved combining information on property taxes, assessed values, and
zoning codes. Because zoning codes are not standardized across jurisdictions and had to be manually
reviewed and then coded and matched to property-level data, we selected four case study cities,
intended to be representative of different community types.
To select cities for analysis, we used property records data from First American DataTree. These
data are collected at the county level and contain detailed information on properties, such as current
land use, zoning designation, assessed value, ownership, and year built. In some cities, we supplemented
these data with county land-use definitions and zoning information; specifically, what uses were
permitted in which zones.
In selecting cities, we considered all census-designated places with at least 30,000 housing units, as
smaller jurisdictions would not yield a large enough number of observations for our model. We then
evaluated cities on a set of criteria to determine whether data quality in our datasets was sufficiently
high to conduct the analysis. Specifically, the jurisdictions had to have a low rate of missing values for
key variables, at least 2.5 percent of parcels had to be vacant, and they had to have a publicly available
zoning map and code. Of the 92 jurisdictions in the state with at least 30,000 housing units, 18 cities fit
all these criteria.
After screening for data quality, we selected cities that represent the diversity of housing markets
and regions within California. We evaluated cities based on their median home value, population, region
(Bay Area, Southern California, and Central Valley), and position within a regional housing market (core
cities versus suburban or satellite cities). Because the strength of municipal incentives to rezone
depends on how much property tax revenue a jurisdiction will receive from a given parcel, we also
calculated apportionment schedules based on data from the California State Controller’s Office. We
selected cities that include a range of implicit tax rates both currently and under Proposition 15.
Our final selections were Los Angeles, Fresno, Berkeley, and Chula Vista. For each, we found low
rates of missing data and publicly available zoning maps and codes. They also represent different
housing market conditions and apportionment formulas (table 3.1).
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TABLE 3.1
Characteristics of Selected Cities
City
County
Population
Median home value
Current (2019) implicit tax rate
Los Angeles
Los Angeles
3,959,657
$599,700
0.265%
Fresno
Fresno
522,277
$224,600
0.232%
Berkeley
Alameda
120,926
$938,400
0.382%
Chula Vista
San Diego
266,468
$465,000
0.117%
Source: Population and median home values come from the 2018 American Community Survey.
Notes: The implicit tax rate is the city’s share of the 1 percent property tax plus local levies and fees. We calculated the implicit
tax rate using data from the California State Controller’s Office. For more information on calculating apportionment formulas and
implicit tax rates, see appendix A.
Model Description
For each case study city, we estimated the strength of municipal incentives to rezone properties from
residential use to commercial or industrial use. To do this, we developed a definition for “at-risk
properties” that could be rezoned for commercial or industrial use. We then estimated the aggregate
value of these properties and determined how much additional revenue the jurisdiction would receive
from the increase in tax revenue in the short and long term applying the municipality’s apportionment
ratio.
We then compared these municipal incentives to rezone (at-risk properties) with incentives for
owners of vacant or underutilized commercial or industrial properties, which we call “opportunity
properties,” to convert these properties to residential use. We estimated the aggregate value of the
incentives to owners to convert properties in the short term caused by an assessment hike and in the
long term based on the increased tax liability for commercial or industrial use. For our analyses of at-
risk and opportunity properties, we excluded properties with a current estimated value of at least $3
million to account for the exemption in Proposition 15 for lower-value properties and smaller property
owners.
We unite the two analyses by quantifying, for each municipality, how the public incentives to
convert from residential use to commercial or industrial use compares with private incentives to do the
opposite.
Identifying At-Risk Properties
Using property records data, we developed a set of criteria and evaluated which parcels are most likely
to be rezoned for commercial or industrial use. Whether the jurisdiction would rezone for commercial
H O U S I NG AN D L AND - U S E I M PL I CA T I ON S O F SPL I T R OL L
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or industrial use is based on the jurisdiction’s zoning code. In Los Angeles and Berkeley, multifamily
housing is allowed in all commercial districts but not in industrial districts, so the city would have to
rezone to an industrial use to block residential development. In Fresno and Chula Vista, some
commercial districts do not allow any residential development by right.
For a parcel to be considered an at-risk property, it must meet all the following criteria:
1. Land use. Either vacant or improved land with an aging residential structure. “Aging” is defined
as multifamily or single-family residential structures in the bottom 25th percentile of age by
land use in each jurisdiction.
2. Zoning. Land is currently zoned for multifamily residential use. Multifamily zoning is defined as
a zone that allows lots to have more than one unit.
3. Surrounding land use. At least 2 percent of surrounding parcels, defined as parcels within 0.25
miles, must have a commercial or industrial land use. For Los Angeles and Berkeley, we use only
industrial land use, as multifamily housing is permitted in all commercial districts. In Fresno and
Chula Vista, we use all commercial uses, which includes industrial use.
4. Estimated market value. Properties must have an estimated current market value of at least $3
million to account for exclusions under Proposition 15. For the methodology on predicting
market values, see appendix A.
We limited at-risk properties to those in zones that allow multifamily development and those near
existing commercial or industrial uses because it is highly unlikely that a municipality would rezone
areas used solely for single-family homes and far removed from other commercial or industrial uses. A
municipality would face considerable community resistance to rezoning these parcels, and developers
would be deterred by a lack of amenities for workers in any future commercial and industrial
development.
Quantifying the Public Incentives for At-Risk Properties
For each at-risk property, we estimate the value of the parcel if it were improved and brought up to its
current market value. To do this, we used the average of a log-linear model on sales price by lot size and
price per acre of recent sales in the area. For more details on this model, see appendix A. This
estimation, as well as the estimation of the value of “opportunity properties,” does not account for the
specific characteristics of each property. Some properties may have characteristics that make it
uneconomically expensive to be improved. In estimating both short- and long-term incentives for at-risk
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properties, we assumed that every eligible residential property would be rezoned and redeveloped as
commercial or industrial use in the first year Proposition 15 goes into effect.
The jurisdiction’s short-term incentive is defined as the gap between the revenue the jurisdiction
receives from the current vacant at-risk properties and the revenue the city would receive on the
market value of the vacant parcels. Because Proposition 15 classifies improved properties based on
their current use, there is no short-term municipal incentive to rezone aging residential structures.
Additional revenue would be collected only if and when the property is redeveloped and converted to
commercial use. Because vacant lots are classified based on zoning, however, cities could theoretically
increase revenue immediately by rezoning. Revenue is determined through apportionment formulas,
with any increase in value subject to the split-roll apportionment formula.
The jurisdiction’s long-term incentive is the wedge in property tax revenue over time that comes
from commercial properties being assessed at their market value (as opposed to residential properties,
which are limited to a 2 percent increase in assessed value). We estimate the new revenue available to
cities from aggressive rezoning by assuming that every at-risk property is redeveloped and reassessed
within a year of Proposition 15 taking effect and that ownership is fixed from that point forward.
We were unable to estimate the revenue from at-risk properties that remain residential and are
redeveloped but not sold. Under Proposition 15, the new residential structure would be reassessed
when built, but the land’s value would continue to be assessed based on the sale price. We were unable
to separately estimate the value of land and improvements. Instead, we assumed that redeveloped
residential properties are reassessed at full market value when they are redeveloped—in effect, we
assumed that all redeveloped properties are sold.
The assumption that every at-risk property is redeveloped led us to overestimate municipal
incentives. In contrast, the assumption that redeveloped residential property is reassessed at full
market value when redevelopment occurs led us to underestimate municipal incentives. Because most
at-risk properties will not be developed in the first years after Proposition 15, and a large portion of
redeveloped properties will be sold shortly before or after redevelopment, our estimate of long-run
municipal incentives can be thought of as an upper bound.
Results are reported as revenue to the city from at-risk parcels, and the short- and long-term
results are reported separately. We also show these results in context, as a share of the jurisdictions’
total property tax revenue in 2019.
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Identifying Opportunity Properties
We developed an additional set of criteria to determine which properties are viable candidates to be
converted to residential use by private owners.
For a parcel to be considered an opportunity property, it must meet all the following criteria:
1. Land use. Either vacant or improved land with an aging commercial structure. “Aging” is defined
as commercial structures in the bottom 50th percentile of age for commercial properties in
each jurisdiction.
2. Ownership. Land must be privately owned (not owned by a government entity).
3. Zoning. Parcels must be zoned for both commercial and multifamily development.
4. Estimated market value. Properties must have an estimated current market value of at least $3
million to account for exclusions under Proposition 15. For the methodology on predicting
market values, see appendix A.
Our criteria for identifying opportunity properties diverge from our criteria for at-risk properties to
account for the differences between residential and commercial or industrial uses, as well as differences
in how municipalities make rezoning decisions and how owners make decisions about improving their
land. We allow a broader age range for opportunity properties because commercial and industrial
buildings tend to have shorter life spans and are repurposed or redeveloped more quickly than
residential properties (Aktas and Bilec 2012). We also limit our at-risk properties to those in zones that
allow for multifamily residential development. Although we recognize that owners can lobby for
rezoning, as discussed below, we were not able to model the effects of lobbying in this research, so we
conservatively estimate the incentives only to redevelop for residential use where permitted. We also
remove the proximity screen for opportunity properties because virtually all commercial and industrial
properties in our four case study cities are within a quarter of a mile of a residential district, and by our
definition, multifamily use must already be allowed under the existing zoning code to qualify as an
opportunity property.
Quantifying Private Incentives for Opportunity Properties
We then measured the incentive for a private owner to convert a commercial or vacant property to
residential use in terms of the decrease in tax liability caused by different tax treatment of residential
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and commercial properties under Proposition 15. Residential properties can increase in their assessed
value by only 2 percent a year, while commercial properties will be taxed at their market value.
For each opportunity parcel, we used the same valuation model for that of at-risk properties to
determine market value, based on lot size and comparable sales in the area, and we assumed no market
value differentiation between residential and commercial properties. We then measured the long-term
tax liability of a commercial property, compared with a residential property of the same value. As with
at-risk properties, we assumed that every opportunity property would be redeveloped as residential in
the first year Proposition 15 goes into effect when calculating incentives.
We present these results both in terms of dollar savings and as taxes paid on a residential property
as a share of taxes paid on a commercial property of the same value.
Again, we do not differentiate between reassessment of land and reassessment of improvements.
For opportunity properties, we assumed that owners cannot convert from commercial or industrial use
to residential use before the initial reassessment called for in Proposition 15. If this assumption is
incorrect, our estimates of owner incentives could be thought of as lower-bound estimates, but
California has a cumbersome approval process for new development, including an environmental
review, which makes a quick approval unlikely.
Appreciation Rates
To determine the long-term effects of Proposition 15, we made assumptions for low, medium, and high
rates of annual commercial price appreciation. Our assumptions are derived from the Moody’s
Analytics Commercial Property Price Indices. For a low estimate, we used 2.0 percent. For a medium
estimate, we used the annual price appreciation from 2002 to the present, 3.5 percent. For a high-
growth scenario, we used the annual price appreciation from 2009, which was near the lowest point
following the financial crisis, to 2019, which was 5.7 percent.
Qualitative Analysis
After developing a preliminary model, we sought the advice of experts and stakeholders in California to
evaluate our assumptions and preliminary model. We conducted these interviews to understand how
core stakeholder groups think about how the proposed split-roll tax reforms will affect land-use
decisions and housing production in California municipalities. Those four groups of interest were real
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estate developers, affordable housing advocates, local planning and zoning officials, and experts in
municipal finance.
We conducted four interviews in May and June 2020, focusing on statewide experts across real
estate, affordable housing, zoning, and municipal finance. Because of the COVID-19 crisis and the
additional burdens it placed on local governments, we limited the number of interviews and focused on
interview candidates who could provide a statewide perspective.
We used insights from these interviews to refine our analytic model, including our definitions of at-
risk and opportunity parcels and how we measure incentives for cities and developers. Through these
interviews, we also gained a better sense of how our research findings could be used and applied in the
current context and debate over split roll.
We shared preliminary research findings with a wider group of stakeholders in two case study
cities. In July 2020, the research team hosted two workshops. The workshops featured an overview of
findings for either Los Angeles or Fresno, followed by a group discussion about the research methods,
findings, and implications. Workshop invitees included our interview candidates and a wider range of
stakeholders in each city, such as developers, affordable housing advocates, or other interested parties.
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4. Findings
We find that cities have few opportunities and little incentive to rezone residential land for commercial
or industrial use. All four case study cities have few at-risk parcels, and any incentives to rezone to
capture additional property tax revenue are reduced significantly by apportionment formulas. Even
under our most aggressive estimates, we find that any incremental revenue to all four cities from
rezoning will be a small share of the city’s property tax revenue. In contrast, property owners have
significant incentives to convert vacant or aging commercial or industrial properties to residential use,
where allowed, to reduce their tax burdens.
Comparing At-Risk and Opportunity Properties
For all four cities, the number of at-risk vacant or aging residential properties that the city could rezone
to allow for commercial or industrial use exclusively is much lower than the number of opportunity
parcels that property owners could convert from commercial or industrial use to residential use. In both
cases, the numbers are low.
Los Angeles provides an apt illustration. Consider first the at-risk properties. Of the city’s more
than 800,000 parcels, 177,420 are either aging residential structures or vacant land with residential
zoning. But only 40,899 are within 0.25 miles of industrial parcels. Because multifamily housing is
permitted in all commercial zones in Los Angeles, we look only at proximity to industrial properties in
this analysis.
Figure 4.1 shows a parcel map of Los Angeles and illustrates the scarcity of at-risk properties. There
are large areas of the city that are solely residential and far removed from both industrial and
commercial uses.
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FIGURE 4.1
Los Angeles Land-Use Map
Source: First American property records data.
Note: This map displays a random sample of 100,000 parcels in Los Angeles (the city has around 800,000 total parcels). Each point
represents one parcel. “Other” contains agriculture, vacant, education, and all other land uses.
We also imposed the criterion that current zoning for at-risk parcels must allow for multifamily
development, as it is unlikely that a property in an area zoned for single-family homes would be rezoned
for commercial or industrial use. This reduces the number of parcels to 29,309. In addition, Proposition
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15 does not require reassessments of properties valued below $3 million, and we estimate that 3,820
parcels are over the $3 million threshold and hence qualify as at risk. (We provide these figures for all
four cities in appendix table B.1.)
For opportunity properties, we measure the incentives to convert from vacant or aging commercial
or industrial use to residential use in zones that allow for both. In Los Angeles, 27,526 parcels have
either aging commercial or industrial structures or vacant land that is zoned for commercial or
industrial use. Of these, 26,356 parcels are privately owned, and 21,232 also allow for residential use.
Adding the constraint that the property’s estimated market value is at least $3 million reduces the
number of at-risk properties to 8,104. (We provide these figures for all four cities in appendix table B.2.)
Table 4.1 shows the total number of opportunity and at-risk properties, broken down by those that
are vacant and those with aging structures. Of the 3,830 at-risk parcels in Los Angeles, 151 are vacant
and 3,679 are aging residential structures. Even if the city aggressively rezoned parcels to increase
property tax revenue, Los Angeles could plausibly rezone only about half of 1 percent of the city’s
800,000 parcels. At-risk parcels are even more scarce in Fresno (19), Chula Vista (5), and Berkeley (23).
Opportunity parcels far outnumber at-risk parcels in all the case study cities. In Los Angeles, there
are more than twice as many opportunity parcels (8,104) than at-risk parcels. And the multiple is even
higher in our other selected cities. In Fresno, there are more than 15 times more opportunity parcels
(291) than at-risk parcels. Chula Vista has 91 opportunity parcels (18 times the number of at-risk
properties), and Berkeley has 88 (4 times the number of at-risk parcels).
TABLE 4.1
Number of At-Risk and Opportunity Parcels in Case Study Cities
At-Risk Parcels
Opportunity Parcels
Vacant
Aging residential
Total
Vacant
Aging commercial or
industrial
Total
Los Angeles
151
3,679
3,830
176
7,928
8,104
Fresno
9
10
19
34
257
291
Chula Vista
1
4
5
11
80
91
Berkeley
2
21
23
20
68
88
Source: Authors’ calculations from First American property records data, review of local zoning codes.
There are few parcels in each city where the municipal government could plausibly attempt to
increase revenue by rezoning for commercial or industrial development. There are far more parcels for
which Proposition 15 is likely to incent private owners to convert from commercial or industrial use to
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residential use to reduce their tax liability. We now turn to quantifying and comparing those incentives
for eligible parcels.
Municipal Incentives to Rezone
If Proposition 15 passes and goes into effect, cities will likely see a significant increase in property tax
revenue (Ito et al. 2018; LAO 2020). In the short term, reassessment of commercial and industrial
properties will substantially increase the tax base. Over time, as reassessments continue, revenue from
commercial and industrial properties will increase at the same rate as property values. We estimate
upper-bound estimates of additional revenue cities might receive both from the initial reassessments
(the short-term incentive) and from higher appreciation rates over time (the long-run incentive).
Short-Term Incentives
We limit our analysis of municipalities’ short-term incentives to vacant at-risk properties (and exclude
aging residential structures) because development lags in California make it unlikely that aging
residential structures could be rezoned and redeveloped before Proposition 15 goes into effect. If
privately owned property were rezoned, the land would be carried at historical cost, and the differences
in the structure’s tax treatment are accounted for in our estimates of long-term incentives. In each city,
we measure the revenue increase the city would receive from vacant at-risk properties being improved
and brought to market value for commercial or industrial use.
Los Angeles would stand to gain up to $3.8 million in revenue for rezoning all at-risk vacant
properties in the short term (table 4.2). The city’s short-term revenue is calculated as the difference
between the estimated market value if redeveloped and the current total assessed value of all vacant
at-risk property times the implicit tax rate (see appendix A for calculation of implicit tax rates). For more
information on how we estimated market values, see appendix A. The short-term incentive numbers are
much smaller for Fresno ($144,057) and Berkeley ($12,785). There were so few at-risk properties in
Chula Vista that we did not display the results.
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TABLE 4.2
Short-Term Incentives for Municipalities on Vacant At-Risk Parcels
Los Angeles
Fresno
Berkeley
Annual revenue on at-risk parcels
$964,226
$10,729
$16,596
Potential revenue if reassessed
$4,731,524
$154,786
$29,381
Additional revenue
$3,767,298
$144,057
$12,785
Jurisdiction’s total property tax revenue (2019)
$1,612,148,631
$84,219,614
$73,721,177
Share of total property tax revenue
0.23%
0.17%
0.02%
Sources: First American and the California State Controller’s Office.
In context of the jurisdictions’ annual revenue from property taxes, the additional revenue is small.
The short-term incentive alone makes up 0.23 percent of the jurisdiction’s total 2019 property tax
revenue in Los Angeles, 0.17 percent in Fresno, and 0.02 percent in Berkeley.
Long-Term Incentives
We also examine the long-term incentives for municipalities to rezone all at-risk properties to
commercial or industrial use. For this estimate, we assume that each rezoned property has been
redeveloped, sold, and reassessed at market value in the first year. We then compare the property tax
revenue to the city if the properties remained residential with the property tax revenue the city would
receive if the property is converted to commercial or industrial use. We model the market value of the
improved structure based on similar sales of commercial and multifamily properties. More detail on this
approach can be found in appendix A.
Over time, the jurisdictions will see revenue increases from properties being taxed on their true
market value instead of being frozen at a 2 percent annual increase. In practice, the increase in revenue
is based on how much the property appreciates each year. Amid uncertain economic conditions, we
estimate three scenarios: low growth (2 percent appreciation), medium growth (3.5 percent
appreciation), and high growth (5.7 percent appreciation).
Figure 4.2 displays the net revenue Los Angeles would receive if it rezoned all at-risk properties to
prevent residential use and all the parcels were sold or redeveloped within a year of Proposition 15
taking effect.
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FIGURE 4.2
Wedge in Revenue between Commercial or Industrial
Properties and Residential Properties in Los Angeles
URBAN INSTITUTE
Source: Authors’ calculations using data from First American and the California State Controller’s Office.
Note: The dollar figures represent the increased revenue to the city in that year (i.e., they are not cumulative), and these estimates
are not discounted by interest rates over time.
In the long term, under a medium- or high-growth scenario, revenue on commercial or industrial
properties will exceed revenue on redeveloped or sold residential properties because those properties
appreciate faster. At a 2 percent growth rate, revenue to the city will not increase, as the taxes paid on
the parcels increase at 2 percent regardless of land use.
Under a medium-growth scenario, Los Angeles will see an additional $28.7 million in year 20. Under
a high-growth scenario, the city would see an additional $86.8 million.
Fresno and Berkeley show similar patterns (figures 4.3 and 4.4). But in Fresno, there were only 19
at-risk properties, so even 20 years after Proposition 15 is enacted and under the highest growth
scenario, the city stands to gain just over $1 million.
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FIGURE 4.3
Wedge in Revenue between Commercial or Industrial
Properties and Residential Properties in Fresno
URBAN INSTITUTE
Source: Authors’ calculations using data from First American and the California State Controller’s Office.
Note: The dollar figures represent the increased revenue to the city in that year (i.e., they are not cumulative), and these estimates
are not discounted by interest rates over time.
Berkeley has only 23 at-risk parcels. By year 20, annual revenue on commercial parcels will be
$270,000 higher than on residential parcels of the same value under a medium-growth scenario,
compared with $816,000 higher under a high-growth scenario.
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FIGURE 4.4
Wedge in Revenue between Commercial or Industrial
Properties and Residential Properties in Berkeley
URBAN INSTITUTE
Source: Authors’ calculations using data from First American and the California State Controller’s Office.
Note: The dollar figures represent the increased revenue to the city in that year (i.e., they are not cumulative), and these estimates
are not discounted by interest rates over time.
Cities stand to receive a short-run benefit for rezoning vacant residential lots to commercial or
industrial uses. But this revenue is small relative to new revenue received when parcels are sold or
redeveloped. In cities like Fresno and Berkeley, it will take 10 years for the municipality to realize
significant additional revenue on parcels that are sold or redeveloped, even under a high-growth
scenario. And in the COVID-19 environment, it is difficult to see a high-growth scenario emerge.
Moreover, both the short- and long-run revenue increases are only a small share of each city’s total
property tax revenue, even in the highest-growth scenario. As shown in the figures above, even with the
most aggressive assumptions (i.e., the city rezones all at-risk residential properties to industrial use, all
those properties convert to industrial use in the first year, and prices appreciate by 5.7 percent
annually), Los Angeles would stand to gain an additional $86.8 million in property tax revenue 20 years
after Proposition 15 goes into effect. But this constitutes less than 4 percent of the city’s total property
tax revenue in 2019 ($1.6 billion) when discounted by 2 percent annually (figure 4.5). Under a medium-
growth scenario, increased revenue in Los Angeles would equate to less than half of 1 percent of
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property tax revenue. And, once again, under a low-growth scenario the benefits of rezoning disappear,
as the taxes paid on at-risk properties are increasing at 2 percent regardless of the land use.
Increased revenue in the 20th year would be less than 1 percent of Fresno’s total property tax
revenue in 2019 under a high-growth scenario and around 0.7 percent of Berkeley’s. Under a medium-
growth scenario, neither city would see a revenue increase of more than 0.4 percent of their total
revenue by year 20.
FIGURE 4.5
Potential Revenue from Taxing At-Risk Properties at Market Value,
as a Share of Total Jurisdiction Property Tax Revenue in 2019 in Los Angeles
URBAN INSTITUTE
Source: Authors’ calculations using data from First American and the California State Controller’s Office.
Note: The dollar figures represent the potential for increased revenue to the city in that year (i.e., they are not cumulative). These
estimates are discounted by a 2 percent annual interest rate to make a fairer comparison with the city’s 2019 property tax
revenue.
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Owner Incentives to Redevelop
The opportunity for jurisdictions to increase their revenue is limited, but private property owners have
a larger incentive to convert parcels to residential use to reduce their future tax liability. This is because
they can pocket every dollar they save in taxes.
If Proposition 15 passes, owners of commercial and industrial properties will face an increase in
their tax liability. Facing these higher costs, some owners may sell their property. This may be especially
likely for owners holding vacant or underutilized land that produces less revenue. The decision to hold,
sell, or develop a property will depend on its current value, its profitability in its current use, and the
owner’s expectations about its future value. Without property-level information on revenue streams,
we cannot estimate the short-run incentive for a commercial property owner to sell their property or
the likelihood that the next owner would use the property for residential development.
We can, however, estimate the tax savings the new owners realize if they purchase properties that
have been or can be converted from commercial or industrial use to residential use. And assuming that
existing owners would be unable to convert a property’s use before the initial reassessments required
under Proposition 15, the same savings would apply to current owners who choose to redevelop and
convert from commercial use to residential use. In year 1, existing commercial and industrial property
owners will see their properties reassessed at market value, and improvements on the land will be
reassessed when it is developed, regardless of use. Similarly, new owners will pay property taxes on the
market value no matter the use or zoning.
Over time, owners will see a significant decrease in their tax liability for residential properties
under medium- and high-growth scenarios, as increases in their tax bill for residential parcels are
capped at 2 percent, compared with commercial and industrial properties, which are taxed at their true
market value.
Table 4.3 shows how much private owners stand to gain from converting commercial and industrial
properties to residential land use in all four case study cities. To make apples-to-apples comparisons
with at-risk properties, we assume every eligible parcel will be redeveloped or sold and compare the tax
liability if the parcel is redeveloped or sold for commercial or industrial use with the tax liability if it is
redeveloped for residential use.
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TABLE 4.3
Decrease in Tax Liability from Converting Commercial
or Industrial Properties to Residential Land Use
Low growth
Medium growth
High growth
Los Angeles
1 year
$0
$0
$0
5 years
$0
$51,341,749
$130,435,526
10 years
$0
$132,368,803
$355,408,462
20 years
$0
$367,402,037
$1,109,052,388
Fresno
1 year
$0
$0
$0
5 years
$0
$4,578,385
$11,631,548
10 years
$0
$11,803,948
$31,693,441
20 years
$0
$32,762,964
$98,899,407
Chula Vista
1 year
$0
$0
$0
5 years
$0
$486,715
$1,236,517
10 years
$0
$1,254,845
$3,369,241
20 years
$0
$3,482,939
$10,513,720
Berkeley
1 year
$0
$0
$0
5 years
$0
$292,350
$742,726
10 years
$0
$753,734
$2,023,767
20 years
$0
$2,092,061
$6,315,166
Source: Authors’ calculations using data from First American property records and the California State Controller’s Office.
In Los Angeles, the jurisdiction with the most opportunity parcels, owners would see a $367 million
decrease in their tax liability 20 years after Proposition 15 was enacted if they converted their
opportunity parcels to residential use, rather than leaving them vacant or used for commercial or
industrial purposes. Under a high-growth scenario, tax savings increase to $1.1 billion.
Owners in Fresno, Chula Vista, and Berkeley would also see reduced tax liability when converting
their commercial or industrial properties to residential uses under Proposition 15. In Fresno, by year 20,
owners would save $32.8 million under a medium-growth scenario and $98.9 million under a high-
growth scenario. In Chula Vista, owners would save $3.5 million under a medium-growth scenario and
$10.5 million under a high-growth scenario. In Berkeley, owners would save $2.1 million and $6.3
million.
We can put these numbers into context by looking at the taxes paid on a residential property as a
share of the taxes paid on a commercial or industrial property of the same value. If the properties of
different land use start at the same value, the taxes paid over time is a function of the commercial or
industrial appreciation rate. This is because taxes paid on a commercial or industrial property under
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Proposition 15 will increase at the market value, whereas taxes paid on a residential property cannot
increase by more than 2 percent a year.
Under low-growth conditions (a 2 percent appreciation rate), owners will have the same tax liability
for commercial, industrial, and residential properties. Under medium- and high-growth scenarios, taxes
paid on a residential property will decline as a share of taxes paid on a commercial or industrial
property. Under a medium-growth scenario, taxes on a residential parcel will be 88 percent of taxes
paid on a commercial property in 10 years and 76 percent in 20 years. Under a high-growth scenario,
the owner sees even more savings: taxes paid on a residential property will be 73 percent of taxes paid
on a commercial or industrial use after 10 years and 51 percent after 20 years.
FIGURE 4.6
Taxes Paid on a Residential Property, as a Share of Taxed Paid
on a Commercial Property of the Same Value
URBAN INSTITUTE
Source: Authors’ calculations using data from First American property records.
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Comparing Public and Private Incentives
Public incentives to rezone at-risk parcels to exclusively commercial or industrial uses are weaker than
private incentives to convert commercial or industrial opportunity properties to residential use. This is
true regardless of the time horizon for the analysis. In table 4.4, we compare the competing public and
private incentives under a medium-growth scenario, with the caveat that owners and local
governments may respond to their incentives differently.
TABLE 4.4
Comparison of Incentives from At-Risk and Opportunity Parcels
Year
Los Angeles
Fresno
Berkeley
At-risk
benefits
Opportunity
benefits
At-risk
benefits
Opportunity
benefits
At-risk
benefits
Opportunity
benefits
Short term
$3,767,298
n/a
$144,057
n/a
$12,785
n/a
1 year
$0
$0
$0
0
$0
$0
2 years
$926,243
$11,831,071
$11,254
$1,055,032
$8,710
$67,368
5 years
$4,019,497
$51,341,749
$48,837
$4,578,385
$37,798
$292,350
10 years
$10,363,028
$132,368,803
$125,912
$11,803,948
$97,450
$753,734
20 years
$28,763,558
$367,402,037
$349,481
$32,762,964
$270,481
$2,092,061
Source: Authors’ calculations of a medium-growth split-roll scenario using data from First American property records and the
California State Controller’s Office.
In every city, private owners stand to gain more in tax savings by converting opportunity properties
to residential use than jurisdictions could gain by rezoning at-risk parcels. This is partly because cities
receive only a share of the revenue generated from properties within their boundaries—with the rest
going to schools, the county government, or special districts.
Considerations and Limitations
To estimate the scope and scale of incentives related to land use and housing development that public
and private actors would face under Proposition 15, we relied on several stylized facts and assumptions,
which we present in the methods section. How Proposition 15 affects local land-use and development
decisions in practice will depend on several factors we could not account for or fully model.
For example, the strength of incentives for public and private actors will depend on the strength
and diversity of local real estate markets. Public decisions regarding zoning and private decisions
regarding land development are not based solely (or even primarily) on tax revenue and liability
considerations. Public decisionmakers will respond to constituent preferences and market demand for
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different land uses. Private decisions will be driven by current market demand for each use, current and
expected revenue streams that can be derived from it, and expectations about current and future real
estate prices. The COVID-19 pandemic and its economic fallout creates additional uncertainty about
demand for land uses and the strength of local markets. To the extent that COVID-19 increases demand
for residential properties and weakens demand for commercial properties, our results would be even
stronger.
Because of data limitations, we could not model the relationship between land use and local
demand, current or future revenue streams, or changes in demand or future revenues caused by
expected market shifts from COVID-19 and the current recession. Although these factors will have
major implications on land use and municipal revenue, they will not affect the direction of our estimates.
This is because we estimate only the marginal changes in incentives caused by Proposition 15, which
itself is only one of many factors that affect property values or land-use decisions. In addition, we
account for market uncertainty by including assumptions based on high, medium, and low price-
appreciation scenarios.
Similarly, we could not estimate the pace at which properties will transact. In estimating the
magnitude of incentives, we assumed that for both at-risk and opportunity properties, every eligible at-
risk property would be rezoned and redeveloped as commercial or industrial use and every eligible
opportunity property would be redeveloped as residential use in the first year Proposition 15 goes into
effect. Of course, in reality, properties are likely to be rezoned and redeveloped over time, which would
moderate the magnitude of incentives, especially for at-risk properties. But even under this aggressive
assumption, the potential gains in revenue to cities are trivial compared with the city’s total property
tax revenue and compared with the incentives to owners.
On the at-risk property side, we model incentives to cities to rezone properties, not incentives
related to public permitting and entitlements for new residential developments. Where cities retain
significant discretion to approve or disapprove residential development projects, Proposition 15 may
affect discretionary decisions regarding permitting and entitlements of residential properties even
when rezoning is implausible or impossible. But the moderating effects of apportionment schedules will
reduce these incentives as well. Most cities in California would receive only a fraction of any
incremental tax revenue from commercial or industrial development under Proposition 15, mitigating
any additional incentive (beyond current ones) to withhold entitlements for residential development. In
addition, because most of the bump in tax revenue to cities comes from the sale of a property, not from
a conversion of its use, it would be irrational for cities to withhold entitlements hoping for an alternative
use to come along, at least from the perspective of generating new tax revenue. And to the extent that
32
H O U S I NG AN D L AND - U SE IM P L I CATION S O F SPLI T R OLL
commercial properties sell for less than comparable residential properties, the incentives to rezone
commercial parcels are further reduced.
We also did not model how Proposition 15 may affect public incentives for counties to rezone land
in unincorporated areas of California. Most of the state’s 482 municipalities are responsible for zoning
(and otherwise regulating land) within their borders, and they are subject to the apportionment rules
for property taxes described above. But county governments in California are responsible for zoning
land in unincorporated areas, and they are subject to different rules regarding apportionment.
Generally, property taxes constitute a higher share of counties’ revenue and counties “keep” a greater
share of the property taxes they raise in unincorporated areas (Elledge 2006; ILG 2016). This could lead
to greater incentives for counties to rezone residential land for industrial or commercial use to capture
additional property tax revenue under Proposition 15. As a result, our analysis and findings regarding
incentives to rezone at-risk properties apply to municipalities only. Our analysis and findings regarding
private incentives to redevelop vacant and underutilized commercial and industrial land for residential
use apply to both municipalities and unincorporated areas.
Lastly, we could not model the political or legal dynamics that may thwart attempts by cities to
rezone or owners to redevelop. Ultimately, Proposition 15 is unlikely to substantially alter the politics
of land-use development, including community opposition to new development (especially when it
involves more intensive uses than currently allowed) and lobbying and pressure from multiple local
stakeholders, including property owners and developers.
In terms of legal dynamics, California has adopted several statewide laws that limit cities’ ability to
exclude or deny new residential development, such as the Housing Crisis Act of 2019, which
temporarily limits the power of cities and counties to restrict new housing developments through new
regulations or conditions, including though zoning changes that result in a less intensive use (Maclean,
Sussman, and Golub 2019).
23
Other statewide laws prevent cities from further restricting housing
development (Infranca 2019).
24
So even though our analysis provides an estimate of municipal
incentives to rezone to exclude new housing development under Proposition 15, it tells us nothing about
cities’ ability to act on these incentives. State laws in California that prohibit rezoning to exclude new
residential development would render the municipal incentives we estimate here moot, while
preserving incentives to private owners and developers to build more residential units under
Proposition 15.
H O U S I NG AN D L AND - U S E I M PL I CA T I ON S O F SPL I T R OL L
33
5. Implications
By any measure, California has one of the worst housing supply shortages in the nation. It ranks 49th
out of the 50 states in the number of housing units per resident. The gap between housing production
and population growth has increased. Since 2005, California has added fewer new housing units per
capita than any other state (Woetzel et al. 2016). This housing shortage has led to a sharp increase in
prices relative to incomes, which affects homeowners, renters, and employers and constrains the state’s
economy (Taylor 2015). According to the Public Policy Institute of California, median monthly housing
costs for homeowners with mortgages in California are 47 percent higher than in the rest of the nation,
and renters in California pay 40 percent more that the nationwide median (PPIC 2018).
For low-income Californians, the picture is even bleaker. More than 80 percent of low-income
households in California are cost burdened (i.e., they pay more than 30 percent of their income on
housing), and more than half of low-income households are severely cost burdened (i.e., they pay more
than half of their income on housing) (Kimberlin 2019). High housing costs have also contributed to
high—and rising—rates of homelessness. Between 2014 and 2018, the number of unsheltered people
experiencing homelessness across the state grew by 25 percent to 89,500 (JCHS 2019).
Although Proposition 15 is not designed to address the housing shortage, some housing advocates
argue that new property tax revenue generated by marking larger commercial properties to market
could be used to support affordable housing and services. On the other hand, several critics of the ballot
initiative argue that Proposition 15 could exacerbate California’s housing shortage by incenting
municipalities to rezone properties from residential use to commercial or industrial use to capture new
tax revenue from a split-roll assessment scheme.
In this report, we have shown that the incentives to do the latter are low. All four cities we
examined have few residential properties close to commercial or industrial centers than could plausibly
be rezoned. In addition, municipalities with zoning authority receive only a fraction of any incremental
increase in property tax revenue from split roll because of the apportionment formula by which
counties determine how much property tax revenue is returned to municipalities in which a property is
located. California’s apportionment formulas, which divide the property tax revenue among schools,
special districts, and local governments, diminish the incentive even further.
In contrast, we have shown that owners of vacant and underutilized commercial and industrial
properties in California would have strong incentives to develop or convert those properties to
residential use to limit their tax liability under a split-roll assessment scheme. All four cities we
34
H O U S I NG AN D L AND - U SE IM P L I CATION S O F SPLI T R OLL
examined have more properties eligible to be converted to residential use than to be rezoned away
from residential use. And financial incentives for owners and developers to build residential housing
where permitted increase significantly under split roll. Unlike cities, property owners would also
capture the full amount of savings. We believe this set of incentives has not been given the proper
weight in prior analyses.
Even so, Proposition 15 is not a panacea for California’s housing woes. Our estimates of the
incentives for owners to convert vacant and underutilized commercial and industrial properties to
residential use rely on moderate to high price appreciation. In addition, even where residential
conversions are permitted, they may not materialize because of high construction costs, complex
permitting and entitlements processes, and other factors.
Far more dramatic actions than Proposition 15 are needed, and there are plenty of smart proposals
for statewide reforms that could boost the housing supply and ease cost burdens in California (Garcia,
Tucker, and Schmidt 2020; Reid, Galante, and Weinstein-Carnes 2017; Terner Center 2019; Woetzel et
al. 2016). And state lawmakers are already taking bold action to boost supply and lift local barriers to
housing production and affordability.
25
Our research is not designed to evaluate alternative proposals
for housing reforms. Rather, we set out to test whether Proposition 15 is likely to make matters worse,
and we conclude that it will not.
But there are a few insights our research offers that might inform future tax and land-use reform
efforts aimed at boosting the housing supply. Allowing multifamily housing development as of right on
any land zoned for commercial use would eliminate most use-based constraints on housing
development in local zoning codes. In this research, we defined “at-risk” properties as parcels that could
be rezoned from residential use to commercial or industrial use, depending on whether residential
properties were permitted in commercial zones (as in Los Angeles or Berkeley) or excluded or only
allowed as a conditional use (as in Fresno and Chula Vista). If Fresno and Chula Vista allowed residential
development as of right in all commercial zones, the number of at-risk properties in both cities would
have been significantly reduced. Conversely, if Los Angeles or Berkeley prohibited residential
development in commercial zones, more properties would have been at risk.
More generally, allowing residential development as of right on land zoned for commercial use
would allow the sizeable (and growing) stock of empty or underutilized offices and strip malls to be
converted to sorely needed residential development without a lengthy rezoning process.
26
This flexibility will be even more important as the state recovers from the COVID-19 pandemic and
its economic fallout. COVID-19 has reduced demand and prices for commercial properties, while
H O U S I NG AN D L AND - U S E I M PL I CA T I ON S O F SPL I T R OL L
35
demand and pricing for residential properties remains strong. The likely result of the underperformance
of commercial properties versus residential properties is that market forces will generate more
conversions from commercial use to residential use in the months and years ahead.
COVID-19 gives us a unique opportunity to undertake policy actions that encourage commercial-
to-residential conversions, augmenting those provided by market forces. Proposition 15, if it passes, will
provide an additional incentive in this direction. But more direct actions (e.g., accelerating construction
permitting for this type of conversion and waiving development impact fees) would provide further
incentives in this direction.
36
A P P E N D I X A
Appendix A. Model Description
Apportionment Rates
We retrieved property tax assessment and revenue data from the California State Controller’s Office.
27
Using these data, we estimated the current implicit city property tax rate by dividing total city property
tax and levy revenue by total assessments on properties in the city. We then separately calculated an
implicit “1 percent” tax rate by dividing total city property tax allocation from the 1 percent property
tax by total assessments. And we calculated a local levy rate by dividing levy revenue by total
assessments. These values appear in table A.1.
TABLE A.1
Estimated Implicit Tax Rates
City
County
Apportionment
rate
Implicit “1%” tax
rate
Local
levy rate
Estimated
implicit tax rate
Los Angeles
Los Angeles
24.1%
0.241%
0.023%
0.265%
Fresno
Fresno
19.9%
0.199%
0.033%
0.232%
Berkeley
Alameda
33.1%
0.331%
0.051%
0.382%
Chula Vista
San Diego
11.7%
0.117%
0.000%
0.117%
Source: Authors’ calculations based on 2019 data from the California State Controller’s Office.
Estimating Market Values
To estimate incentives for both cities and property owners, we had to predict the market values of the
at-risk and opportunity parcels. We built a model using deeds data of sales transactions from the case
study jurisdictions from 2005 through 2019.
The sample we used consisted of all multifamily and commercial transactions. We used historical
data from the Moody’s Analytics Commercial Property Price Indices to estimate the appreciation that
would have occurred since the quarter of the sales transaction to the present. For multifamily
transactions (four or more units), we used the apartment index, and for commercial transactions, we
used the general commercial index. We calculated the change in the index since the quarter of the sale
to the most recent quarter (fourth quarter of 2019) and then applied this change to the sales price to
estimate what the property would have sold for today. This is the adjusted sales price.
A P P E N D I X A
37
Our estimated value was the average of two valuation methods. The first method was a log-linear
model of lot size on adjusted sales price, with tract fixed effects. Using lot size allowed us to predict the
value of vacant lots if they were to be developed and predict the market value of other parcels that are
aging or may not have been reassessed for many years because of Proposition 13. We used this model
to predict values for all parcels in the case study cities. If a census tract did not have any commercial or
multifamily transactions since 2005, we used a model without tract fixed effects.
TABLE A.2
Log-Linear Lot-Value Regression Dependent Variable: Log Sales Price
Los Angeles
Fresno
Lot size (acres)
-0.00002***
-0.00003***
0.0003***
0.0003***
(0.00000)
(0.00000)
(0.00001)
(0.00001)
Constant
14.421***
14.267***
13.068***
12.794***
(0.349)
(0.007)
(0.087)
(0.012)
Tract fixed effects
Y
N
Y
N
Observations
28,102
28,666
6,489
6,742
Chula Vista
Berkeley
Lot size (acres)
0.0004***
0.0002***
0.001***
0.001***
(0.00003)
(0.00002)
(0.0001)
(0.0001)
Constant
14.419***
13.755***
13.749***
14.114***
(0.507)
(0.047)
(1.015)
(0.043)
Tract fixed effects
Y
N
Y
N
Observations
784
804
906
916
Source: Author’s calculations from First American property records data.
*** p < 0.01.
The second method was a metric for price per acre by census tract. For all transactions, we divided
the adjusted sales price by the lot size (in acres) and took the average by census tract. For census tracts
that did not have any transactions, we used the jurisdiction-wide average. We used this price-per-acre
metric to calculate an estimated market value for all transactions.
Our final estimated value was the average of the log-linear model and the price-per-square-foot
metric. This market value estimation does not account for the specific characteristics of individual
properties, and some properties may have characteristics that make it prohibitively expensive to be
improved. We did not include separate valuations for commercial and multifamily uses, assuming that
the land would be used for the highest and best use. This allows our results to be comparable under
different tax environments.
38
A P P E N D I X A
TABLE A.3
Descriptive Statistics of Case Study Cities
Los Angeles
Fresno
Chula Vista
Berkeley
Observations
796,756
136,833
68,137
29,259
Average lot size (acres)
179
202
208
130
Standard deviation of lot size (acres)
363
475
470
134
Average assessed value
$656,301
$235,391
$390,265
$616,363
Standard deviation of assessed value
$2,843,994
$811,795
$883,475
$1,320,985
Average estimated market value
$2,936,514
$703,566
$1,087,210
$2,056,544
Standard deviation of estimated market value
$3,409,549
$1,026,953
$1,322,465
$1,481,318
Source: Authors’ calculations based on 2019 data from the California State Controller’s Office.
A P P E N D I X A
39
Appendix B. Identifying At-Risk
and Opportunity Parcels
To be considered at risk or opportunity, parcels had to meet various criteria. This resulted in a small
amount of at-risk and opportunity parcels. Table B.1 shows how many parcels meet the criteria for at-
risk or opportunity parcels after layering the different requirements. For instance, looking at at-risk
parcels, Fresno has 132,540 parcels available to analyze. Of those, 31,263 were either vacant or had an
aging residential structure, and 19,445 of those parcels are near commercial or industrial parcels. Of
those, only 2,112 are zoned for multifamily housing. Finally, only 19 of those parcels had a market value
of at least $3 million.
TABLE B.1
Layered Criteria for At-Risk Parcels
Los Angeles
Fresno
Chula Vista
Berkeley
Total parcels
757,168
132,540
64,169
28,108
…with a vacant or aging residential structure
177,420
31,263
14,836
6,158
…and proximity to industrial or commercial parcels
40,899
19,445
5,112
621
…and zoning allows multifamily
29,309
2,112
1,567
500
…and predicted market value ≥ $3 million
3,830
19
5
23
Source: Authors’ calculations from First American property records data, review of local zoning codes.
Notes: We included only parcels with precise geographic information. For Los Angeles and Berkeley, we used proximity to
industrial parcels. For Fresno and Chula Vista, we used proximity to commercial or industrial parcels.
TABLE B.2
Layered Criteria for Opportunity Parcels
Los
Angeles
Fresno
Chula
Vista
Berkeley
Total parcels
757,168
132,540
64,169
28,108
…with a vacant or aging commercial or industrial structure
27,526
3,877
1,138
743
…and on privately owned
26,356
3,870
1,137
743
…and zoning allows commercial and multifamily
21,232
2,939
463
322
…and predicted market value ≥ $3 million
8,104
291
91
88
Source: Authors’ calculations from First American property records data, review of local zoning codes.
Note: We used only parcels with precise geographic information.
40
N O T E S
Notes
1
Gabriel Petek and Keely Martin Bosler, letter to Attorney General Xavier Becerra, October 2, 2019,
https://lao.ca.gov/ballot/2019/190523.pdf.
2
Jaques Leslie, “This Reform of Proposition 13 Is Needed Now More Than Ever,” Los Angeles Times, July 16, 2020,
https://www.latimes.com/opinion/story/2020-07-16/proposition-13-proposition-15-property-tax-revolt.
3
John Wildermuth, “Big Change in California’s Proposition 13 Could Be Headed to Ballot,” San Francisco Chronicle,
August 14, 2018, https://www.sfchronicle.com/politics/article/Big-change-in-California-s-Proposition-13-
could-13155927.php; Walter Wilson and Reginald Swilley, “Pass Prop. 15 to Speed Recovery, Advance Racial
Justice,” The Mercury News, July 19, 2020, https://www.mercurynews.com/2020/07/19/opinion-split/; and
Nicole Knight, “California’s Anti-Tax Las has ‘Robbed’ Schools of Billions. That Could Change in 2020,” Rewire
News, August 16, 2018, https://rewire.news/article/2018/08/16/californias-anti-tax-law-has-robbed-schools-
of-billions-that-could-change-in-2020/.
4
Tom Campbell, “Split Roll Will Only Make California Less Attractive to Businesses,” Orange County Register,
February 4, 2019, https://www.ocregister.com/2019/02/04/split-roll-will-only-make-california-less-attractive-
to-businesses/.
5
Matt Kristoffersen, “Voters Could Change California’s Landmark Property Tax Law after Measure Qualifies for
Ballot,” Sacramento Bee, May 29, 2020, https://www.sacbee.com/news/politics-
government/article243033991.html.
6
Marc Joffe, “The Risks and Negative Side Effects of California’s Split-Roll Initiative Grow,” Reason Foundation,
July 22, 2020, https://reason.org/commentary/the-risks-and-negative-side-effects-of-californias-split-roll-
initiative-grow/.
7
Noah Buhayar and Christopher Cannon, “How California Became America’s Housing Market Nightmare,”
Bloomberg, November 6, 2019, https://www.bloomberg.com/graphics/2019-california-housing-crisis/.
8
Wildermuth, “Big Change in California’s Proposition 13.”
9
Bella An, “The ‘Split-Roll’ Initiative: California’s New Hope for Its Property Tax Loophole,” Berkeley Political
Review, October 18, 2019, https://bpr.berkeley.edu/2019/10/18/the-split-roll-initiative-californias-new-hope-
for-its-property-tax-loophole/; and Liza Veale, “Could Proposition 13 Reform Help Ease the State’s Housing
Crisis?” KALW, April 11, 2018, https://www.kalw.org/post/could-proposition-13-reform-help-ease-state-s-
housing-crisis#stream/0.
10
Joffe, “The Risks and Negative Side Effects”; and “Ed Kilgore, “California to Vote on Partial Repeal of Sweeping
Tax Law,” New York, August 17, 2018, https://nymag.com/intelligencer/2018/08/california-to-vote-on-partial-
repeal-of-sweeping-tax-law.html.
11
Proposition 13 also includes exceptions to the tax rate cap to finance certain types of public debt (Taylor 2016).
See also “State-by-State Property Tax at a Glance,” Lincoln Institute of Land Policy, accessed September 16,
2020, https://www.lincolninst.edu/research-data/data-toolkits/significant-features-property-tax/state-state-
property-tax-glance/property-tax-data-visualization.
12
“State-by-State,” Lincoln Institute.
13
“State-by-State,” Lincoln Institute.
14
“Allocations Broken Down by Entity Type,” California State Controller’s Office, accessed September 16, 2020,
https://propertytax.bythenumbers.sco.ca.gov/#!/year/2020/revenue/0/entity_type?vis=pieChart.
N O T E S
41
15
Authors’ calculations using 2019 data from the California State Controller’s Office. Analysis excludes San
Francisco’s consolidated county and city government.
16
“State-by-State,” Lincoln Institute.
17
Proposition 15 excludes the residential portion of mixed-use properties from its proposed assessment system. It
also allows the California legislature to exclude from reassessment the commercial potion of a mixed-use
property if at least 75 percent of the property (by square footage or value) is residential.
18
Gabriel Petek and Keely Martin Bosler, letter to Attorney General Xavier Becerra, October 2, 2019,
https://lao.ca.gov/ballot/2019/190523.pdf.
19
“State-by-State,” Lincoln Institute.
20
Joffe, “The Risks and Negative Side Effects”; and Kilgore, “California to Vote.”
21
An, “The ‘Split-Roll’ Initiative”; and Veale, “Could Proposition 13.”
22
Wildermuth, “Big Change in California’s Proposition 13.”
23
See also Kenneth Kecskes and Kaitlyn Sikora, “How California’s New Housing Crisis Act Can Help Developers
Get Their Projects Done,” JD Supra, March 10, 2020, https://www.jdsupra.com/legalnews/how-california-s-
new-housing-crisis-act-36354/.
24
Sara Kimberlin, “Understanding the Recently Enacted 2017 State Legislative Housing Package,” California Budget
Bites (blog), California Budget and Policy Center, October 17, 2017,
https://calbudgetcenter.org/blog/understanding-recently-enacted-2017-state-legislative-housing-package/.
25
Kimberlin, “Understanding the Recently Enacted”; and David Garcia, “2019 Califonia Housing Legislation Round
Up,” University of California, Berkeley, Terner Center for Housing Innovation blog, October 14, 2019,
https://ternercenter.berkeley.edu/blog/2019-california-housing-legislation-round-up.
26
CA FWD, “New California Bill Could Expand Land Available for More Homes,” California Forward, May 21, 2020,
https://cafwd.org/reporting/entry/new-california-bill-could-expand-land-available-for-more-homes; and Laura
Waxman, “Proposed Law Could Make It Easier to ‘Pivot’ to Housing for Office, Retail Properties,” San Francisco
Business Times, June 4, 2020, https://www.bizjournals.com/sanfrancisco/news/2020/06/04/sb-1385-covid-19-
pivot-housing-office-retail.html.
27
“Property Tax Raw Data for Fiscal Years 2019–20,” California State Controller’s Office, last updated April 27,
2020, https://bythenumbers.sco.ca.gov/Raw-Data/Property-Tax-Raw-Data-for-Fiscal-Years-2019-20/cigd-
fqva.
42
RE F E R E N C E S
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A B O U T T H E AU T H O R S
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About the Authors
Solomon Greene is a senior fellow in the Research to Action Lab and the Metropolitan Housing and
Communities Policy Center at the Urban Institute. His research focuses on how land-use and housing
policy can improve access to opportunity and how data and technology can support inclusive urban
development. Before Urban, Greene was a senior adviser at the US Department of Housing and Urban
Development (HUD), where he helped develop federal regulation to reduce residential segregation and
promote regional housing opportunities. He was also HUD’s principal adviser on the United Nations
process for setting global sustainable development goals. Before that, Greene was a senior program
officer at the Open Society Foundations, where he managed grants and programs on affordable
housing, community development, and fair access to credit. He launched and led the Neighborhood
Stabilization Initiative, the first and largest philanthropic initiative to address how the foreclosure crisis
affected low-income communities. Greene was a law fellow at NYU Furman Center, an adjunct
professor at NYU Wagner, a law clerk for the Honorable Dorothy W. Nelson on the US Court of Appeals
for the Ninth Circuit, and a litigation associate at Munger, Tolles & Olson. Greene serves on the board of
directors for the National Housing Law Project and on the advisory board for the Up for Growth
National Coalition. He also served on the board of the Neighborhood Funders Group. Greene received
his BA from Stanford University, his MCP from the University of California, Berkeley, and his JD from
Yale Law School.
Laurie Goodman is a vice president at the Urban Institute and codirector of its Housing Finance Policy
Center, which provides policymakers with data-driven analyses of housing finance policy issues that
they can depend on for relevance, accuracy, and independence. Goodman spent 30 years as an analyst
and research department manager on Wall Street. From 2008 to 2013, she was a senior managing
director at Amherst Securities Group LP, a boutique broker-dealer specializing in securitized products,
where her strategy effort became known for its analysis of housing policy issues. From 1993 to 2008,
Goodman was head of global fixed income research and manager of US securitized products research at
UBS and predecessor firms, which were ranked first by Institutional Investor for 11 years. Before that,
she held research and portfolio management positions at several Wall Street firms. She began her
career as a senior economist at the Federal Reserve Bank of New York. Goodman was inducted into the
Fixed Income Analysts Hall of Fame in 2009. Goodman serves on the board of directors of MFA
Financial, Arch Capital Group Ltd., and DBRS Inc. and is an adviser to Amherst Capital Management. She
has published more than 200 journal articles and has coauthored and coedited five books. Goodman has
46
A B O U T T H E AU T H O R S
a BA in mathematics from the University of Pennsylvania and an AM and PhD in economics from
Stanford University.
Sarah Strochak is a research analyst in the Housing Finance Policy Center. She works with researchers
to analyze data, write blog posts, and produce data visualizations for the center’s work on access to
credit, homeownership, and affordable housing. Strochak received a BA with honors in economics from
the University of California, Berkeley, with minors in city and regional planning and geospatial
information science and technology. While at Berkeley, she was a student fellow for the University of
California Carbon Neutrality Initiative and a research assistant at the Terner Center for Housing
Innovation. For her senior honors thesis, she developed a methodology for analyzing mandatory
foreclosure mediation laws.
Daniel Teles is a research associate in the Metropolitan Housing and Communities Policy Center,
where he specializes in applied microeconomic policy analysis. His research examines the effects of
public policy on local communities. Previously, Teles worked on Louisiana’s Hazard Mitigation Grant
Program and for the New Orleans Area Habitat for Humanity. Teles earned a bachelor’s degree from
the George Washington University and a master’s degree and a doctorate degree in economics from
Tulane University. At Tulane, Teles was a community-engaged graduate fellow and coprincipal
investigator of the AmeriCorps Crowd Out Study. He has contributed to the Journal of Economic
Inequality, the Handbook of Research on Nonprofit Economics and Management, and the Lincoln Institute
for Land Policy’s Significant Features of the Property Tax.
Patrick Spauster is a research assistant in the Metropolitan Housing and Communities Policy Center.
His research focuses on housing affordability, public housing service delivery, homelessness, place-
based economic mobility, and nonprofit measurement and evaluation. He graduated from Davidson
College with a BA in public policy and a minor in economics.
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