Prop 15 will generally not lead to rent increases on small businesses.
Rents are determined by supply and demand for rentable space, NOT BY COSTS.
The only way Prop 15 leads to rent increases is landlords do not behave with economic rationality.
Who are these irrational commercial landlords?
Now there might be some soft n mild landlords like myself who will use a property tax increase as an excuse to raise below-market rent. And then you have those “NNN” or whatever leases that pass on property taxes to tenants. But tenants will demand lower base rent in such circumstances.
Ultimately these are all red herrings and insignificant in the long-run. Rents are determined by supply and demand. Prop 15 ending false and ultralow valuations on old commercial properties taxes don’t change either supply or demand.
The real question is “what is the incidence and dead-wight loss” of Prop 15. The answer is that it is the tax that hit non-residents and the rentier ultra-rich the most. For example, the publicly traded REITS that own a ton of California’s best commercial property are more than 90% owned by out of state people. They will pay the tax increase.
I view the only good argument against it that it should be directly paired with a cut of another tax to prevent the government from wasting the new revenue.
