A California real estate giant

It’s no secret that the California Association of Realtors® (CAR) is a massive force in lobbying for candidates and legislation in California — and it’s been at it for a long time.

In 2010, CAR was respectively the 5th and 4th largest contributor to state senate and assembly elections, according to Ballotpedia. Not much has changed.

And that’s before taking into account what CAR spends on campaigning for ballot measures and other initiatives, or associated political action committees (PACs) like the California Real Estate PAC (CREPAC) and the Issues Mobilization PAC (IMPAC) — not to mention the political arm of CAR’s countrywide manifestation, the National Association of Realtors® (NAR).

Clearly, CAR and friends wield a significant amount of influence in both state and local politics. So far, the association doesn’t own the state legislature — but it’s purchased a big chunk of lawmakers’ attention.

Additionally, CAR’s ubiquity in the California real estate industry — from its virtual forms monopoly to its sway over approximately 60% of active licensees — gives it a unique platform from which to espouse its political opinions.

In light of all that, it might be helpful to answer a few questions: Where does CAR get its lobbying money? What is it lobbying for? Where does the money actually go? And is it actually doing what you think it is?

I scratch your back, you scratch mine

The first question is the easiest to answer — after all, CAR is upfront about using its member fees for lobbying revenue.

And why shouldn’t it flaunt this? After all, political advocacy is one of CAR’s few tangible selling points. In addition to forms, conduit access to a multiple listing service (MLS) and a handful of other less concrete perks, membership fees also buy a louder, more influential voice with which to engage in the state’s political process. With those funds, CAR lobbies for issues it believes to be in the best interest of its members.

Editor’s note — Despite popular belief, CAR membership is not necessary for MLS access. Any agent may pay for MLS access without a CAR membership.

Here’s the problem: While CAR may claim to have the support of its base, ultimately CAR leadership — not its members — decides where to throw CAR’s support.

Real estate agents sign up for a CAR membership with the organization’s benefits and services in mind (or because their broker told them they had to), not necessarily its political advocacy. Even so, CAR expressly allocates a significant portion of its membership dues for lobbying purposes.

In a legal notice regarding their Realtor Action Fund, CAR estimates $230.92 of each member’s combined dues for both CAR and NAR constitute non-deductible lobbying expenses. On top of this, CAR increased its dues by $100 in 2018 — an amount all Realtors® are required to pay — for “initiative campaigns” including lobbying for CAR’s own Property Tax Fairness Initiative, a measure intended to alter the provisions of Proposition (Prop) 13.

And if you don’t care, or you’re politically opposed? It doesn’t matter — as a member of CAR, you pay upwards of $300 a year to lobby for CAR’s positions.

Ask not what you can do for CAR, but what CAR can do for you

So on what measures is CAR actually taking a stand?

For starters, the association is sponsoring the following bills, all of which are, as of this writing, currently moving through the state legislature in some form:

  • AB 448, which requires the notice sent to a property owner after the approval of a parcel tax to be sent within 30 days of approval of the tax;
  • AB 943, which requires any proposed ordinance that reduces density or stops development of parcels located less than one mile from a major transit stop in a city or county to receive at least 55% voter approval to become effective;
  • AB 1289, which updates the language in the Agency Law Disclosure to clarify a dual agent may not disclose a participant’s confidential information to the other participant;
  • AB 2458, which streamlines the process to receive a parcel tax exemption;
  • AB 3041, which prohibits the creation of a transfer fee for residential sales or transfers; and
  • SB 348, which requires ballot pamphlets to inform voters of their ability to challenge new taxes within 60 days of voter approval.

Most of these bills — and a majority of other legislation CAR currently supports or opposes — are minor or procedural tweaks.

CAR, however, has bigger fish to fry — its current crusade is the aforementioned Property Tax Fairness Initiative (also known as the People’s Initiative to Protect Proposition 13 Savings or the Tax Transfer initiative).

Editor’s note — For a more comprehensive rundown of Prop 13 initiatives that might end up on the 2018 ballot, see: 2018 ballot initiatives seek to amend California’s Proposition 13. For an in-depth explanation of Prop 13, see: Prop 13, explained.

Under the original provisions of Prop 13, annual property tax increases are capped. Furthermore, property taxes are based on a property’s assessed value (the base value plus a maximum annual inflation factor). In practice, this means that property tax rates under Prop 13 are based on the property’s value at the time of purchase, disproportionately benefiting long-time property owners, who tend to be wealthier than new homebuyers.

One of the effects of Prop 13 is that homeowners are discouraged from moving or downsizing, as property values are not reassessed until a property changes hands. This fosters a strong incentive to stay put — not good for licensees whose income is based on sales. Turnover in ownership is necessary for both the real estate market and a proper allocation of national resources.

CAR’s Property Tax Fairness Initiative sets out to change that, allowing homeowners over the age of 54 to avoid reassessment and keep their property tax rates regardless of where, when, and how they move — as long as it is within the state.

This may motivate older homeowners to downsize, increasing both turnover and California’s for-sale inventory — a boon for both seniors who want to have more mobility and comfort without paying the price, and the real estate industry.

Sounds great, right?

Sure, until you consider the loss of about $150 million annual tax dollars for local governments over the next few years (likely climbing to $1 billion with an aging population and rising prices), most of which would fund public schools.

There’s no doubt that Prop 13 needs to be amended for fairness and tax equality — but creating low turnover is not its only flaw, and more reasonable provisions have been proposed to fix it.

CAR has also expressed heavy opposition to rent control measures. This an understandable position, given that the long-term positive effects of rent control are dubious at best. But without an equally heavy stand for zoning changes to increase housing density — like more SFR construction, whether in horizontal or vertical subdivisions of acreage or airspace — CAR’s opposition offers no relief to tenants.

Doing the math

All that said, how much money does CAR actually have for lobbying? How much does it spend? And where does that money go?

Taking into account the extra $100 in membership dues CAR extracted from its base in 2018, and the association’s self-professed 190,000 members, we can safely assume a $19 million budget specifically for the qualification and passage of the Property Tax Fairness Initiative, including gathering signatures. As of this writing, CAR has made a total of around $4.2 million in contributions through IMPAC to Homeownership for Families and Tax Savings for Seniors, a CAR-sponsored committee. (NAR has also contributed $3 million to the initiative for a total of $7.2 million raised.)

And this is on top of the upwards of $43 million in annual dues CAR and NAR collect from California Realtors® that qualify as lobbying expenses.

The point is, CAR and its associated organizations and committees have a lot of money to throw around the political arena. And they’re using it — on everything from the opposition of zoning measures like LA’s Measure S to its Prop 13 initiatives to rent control. CAR dropped several hundred thousand dollars last year to oppose rent control-related measures in Santa Rosa and San Mateo County, and shows no sign of stopping.

Look: Not all of CAR’s contributions are necessarily bad for real estate agents or the housing market — but that doesn’t mean its lobbying activities won’t have unintended consequences for the economy or the industry, and industry professionals should be aware of that.

Whether or not you agree with CAR on the issues the association is putting their weight behind, if you’re a CAR member, you should be asking questions about how they’re spending your money.