When COVID-19 first emerged in early 2020, the Santa Clara County Assessor’s Office braced for a repeat of the Great Recession, when property value plummeted. Instead, 2021 boomed in residential and commercial property sales, even with a pandemic hanging over the South Bay.
The Santa Clara County assessment roll—which includes the value of all real estate and business property—grew by $25.4 billion in 2021, rising to a record $576.9 billion. This is a 4.6% increase over 2020, according to an annual report from the Assessor’s Office.
In his 27 years as County Assessor, Larry Stone has only seen one year when the value of the roll declined instead of increased. That was in 2010 in the wake of the Great Recession.
Although the pandemic had a seismic impact on the county’s economy, overall it did not harm property values or slow development this past year.
“What surprises me is the extremely robust development of major high-rise office buildings and residential properties,” Stone told San José Spotlight. “It’s like COVID didn’t exist.”
Changes of home ownership and new construction are the greatest drivers of growth in the assessment roll, Stone said. The pandemic did cause growth from new construction to decline by 21%, dropping to $6.7 billion from $8.5 billion. This is largely due to the pandemic hitting multiple layers of the development process: work stoppages due to government mandated shutdowns, labor and material shortages and planning departments suffering various disruptions.
But commercial real estate kicked off in a major way after the first few months of the pandemic. Mountain View is home to four major new construction projects, including one by Google subsidiary Planetary Venture. Two significant projects also got underway in Sunnyvale, including a development in the Pathline Park business complex.
San Jose saw four significant construction projects take off during the pandemic, such as SJSC Towers, which will eventually hold 610 residential units, plus retail and office space, and Adobe’s office development, also located in the downtown core.
“You just have a tremendous number of approved developments going on just in downtown San Jose,” Assistant Assessor Greg Monteverde told San José Spotlight. “There was a tremendous amount of investment there, from Adobe Towers to the commitment of the Google (campus)—probably all driven by the fact that we’re going to have a fantastic transit hub in about a decade with Diridon Station being the focal point for it.”
The residential market also proved surprisingly resilient during the pandemic. Home sales in Santa Clara County during 2020 were nearly identical to 2019. But the median price of a single-family home rose 3.5%. Stone attributed this trend to the unique supply and demand characteristics of Silicon Valley.
“You’ve got high-tech professionals with a lot of money chasing too few homes, which will drive property values up,” he said.
Mountain View and Sunnyvale had the strongest assessment growth of any cities at 8.06% and 5.02%, respectively. That growth is mainly from commercial and industrial projects by Google, Jay Paul and Nvidia, according to the report. San Jose recorded 4.28% growth in its property roll.
Assessments also continue to be affected by the 1978 state law Prop. 13, which caps assessed property value increases at no greater than 2% annually. Once a property is sold, it can be reassessed and taxed based on its more recent market value. As a result of this law, new property owners can end up paying a disproportionate amount of a city’s property taxes. For example, 42% of properties in Sunnyvale were purchased in the past 10 years, but they account for 69.5% of total property taxes.
Stone said it’s hard to know for sure how much Prop. 13 depresses the assessed value of real estate in the county, but he doesn’t believe it’s marginal.
“I would guess the market value of property in Santa Clara County is probably three to four times at least what the assessments are,” he said.