Emerging Trends for 2018
A New Year, 2018
As we enter the new year, we ponder what business opportunities or hurdles may approach us and our clients in the new year. 2017 ended with significant changes to the real estate and business landscape.
2018 brings new opportunities and opens the door to new market areas while at the same time, the political landscape may begin squeezing other industries. Today we take a look at four the emerging trends that we are carefully watching this year.
2018 TAX BILL IMPACTS
December 22, 2017 was a landmark day in recent tax history. The federal government passed and President Trump signed into law the largest tax reform in nearly three decades. Among the major changes was the permanent reduction in corporate tax rates to 21%, reduction in personal tax rates, that phase out over 10 years, changes to the AMT, and an up to 20% deduction for personal service corporations on the first $315,000 of income. The single largest change though to effect Californians will be the $10,000 cap on property and state and local income taxes that are paid. As Californians are some of the highest taxed individuals, the actual impact of this deduction could result in some Californians paying more in federal taxes. The question that will be answered and what we will be watching intently is what impact does this tax law have on the California economy and in particular the California real estate market.
CANNABIS AS EMERGING TREND
Cannabis continues to be an emerging trend within California. In some areas of the state warehouse prices that went for $0.50 a square foot under leases jumped to in excess of $2.50 a square foot. We filed our first lawsuit, which was successful, involving a real property related to legal cannabis cultivation and as real estate prices continue to climb we expect to see more. With the legalization of cannabis, landlords have been forced to become more specific in the lease agreements related to what is and is not allowed cannabis use within the property. This again was made more complicated by AB 1159 which was signed by Governor Brown on October 6, 2017 that made regulated commercial cannabis use a lawful subject of a contract. All in all, as the legal landscape evolves around cannabis and real estate this will be a subject of changes to look for in 2018.
RENT CONTROL IN SACRAMENTO
Rent control has become a hot topic as organizers have pegged Sacramento the new hotbed rent related action. With climbing housing prices and a lack of available inventory on the market, rent prices have seen significant increases in the Sacramento market. The question for the real estate investors is how much traction will the rent control push get. Thus far, it seems to be limited. Mayor Steinberg has expressed his concern to rent control citing the lack of housing inventory that already exists and the detrimental effect rent control would have on new housing starts. Will investors and builders be less likely to start new housing projects in Sacramento if surrounding areas such as El Dorado County and Placer County are unlikely to see any rent control restrictions in their counties? The housing activists seem to be pushing more and more aggressively, but given the sprawling nature of development in the tri-county area, rent control in one municipality is unlikely to have much impact as investors and developers would easily and readily be able to move to other areas.
HOUSING SHORTAGE AND LACK OF NEW HOUSING
2017 was a market filled with ups and downs, but mostly ups. Prices increased as the real estate market continued its upward swing. Part of that upward swing was driven by a lack of inventory on the market. That resulted in a seller-friendly market leading to many properties selling for more than list. As we head into 2018, we will be watching to see what the housing market does and whether more sellers jump into the market with the prices reaching some of the highest levels seen in more than a decade. Additionally, what, if any impact will the recent tax changes have on the real estate market as we begin to move into 2018.
We look forward to an exciting year in 2018 filled with opportunities.
A note from our Keith Dunnagan:
Today, we took the time to look at some emerging trends and expectations for 2018, including changes in the tax laws, real estate market trends, rent control and the commercialization of legalized cannabis in California.
As always, if you have any questions about your real estate, business, estate planning, or any other legal issue, please let us know by e-mailing me at email@example.com.
Also, remember that we do legal presentations for business and community organizations. If your group would like this, please contact Alex, Steve or me to set up a date and time.