SAN DIEGO, CA – California housing speculation is hurting working class individuals and families, making it nearly impossible for them to purchase a home. Short-term investors have contributed to California’s housing crisis by buying homes and property across the state to sit on until they can sell them for a profit. Meanwhile, working class Californians are getting outbid by cash offers and are unable to borrow hundreds of thousands of dollars to compete or pay for new construction. Today, Assemblymember Chris Ward (D-San Diego) introduced AB 1771, the California Housing Speculation Act, to help make homes affordable again for the average Californian.
“Homes are places to live in. Homes help families preserve and grow their wealth. Homes aren’t a quick trade on the market – and this activity unchecked affects us all,” said Assemblymember Ward (D-San Diego).
The California Housing Speculation Act uses tax policy to target short-term investment and aims to change behavior so speculators are specifically putting their profits at risk and decide to invest elsewhere, leaving more doors open for traditional homeowners to have their bids accepted. By placing a 25% income surtax on the profits gained on a property’s appreciation within three years, a rate that would depreciate in full to year seven, the California Housing Speculation Act takes away the motivation for short-term interests, while leaving long-term homeowners without penalty.
The bill makes several exemptions for traditional homeowners, including first-time homebuyers, military service members who are ordered to move every few years, affordable housing properties and newer properties with inclusionary housing built in. It also includes properties where homeowners subdivide a lot and choose to stay on site.
Revenue collected through the California Housing Speculation Act would be placed in the “Speculation Recapture Community Reinvestment Fund.” The funds would then be allocated toward creating affordable housing, improving school districts and supporting community infrastructure.
California’s unique housing crisis requires a unique solution. The California Housing Speculation Act targets investor-buyers who are looking to make a quick profit at the expense of working class individuals and families. Without disincentives, investors will continue to contribute to the housing shortage and drive up home prices for everyone.
Assembly Bill
No. 1771
Introduced by Assembly Member Ward (Coauthor: Assembly Member Mullin) |
February 02, 2022 |
LEGISLATIVE COUNSEL’S DIGEST
Existing law requires the State Air Resources Board, in conjunction with the State Energy Resources Conservation and Development Commission, to develop and administer a program to provide grants to individuals and various entities to encourage the purchase or lease of a new zero-emission vehicle.
This bill would make a nonsubstantive change to that provision.
Digest Key
Vote: MAJORITY2/3 Appropriation: NO Fiscal Committee: NOYES Local Program: NO
Bill Text
The people of the State of California do enact as follows:
SECTION 1.
This act shall be known, and may be cited, as The California Housing Speculation Act.
SEC. 2.
The Legislature finds and declares all of the following:
SEC. 3.
Article 1 (commencing with Section 18200) is added to Chapter 14 of Part 10 of Division 2 of the Revenue and Taxation Code, to read:
Article 1. Capital Gains Tax for Housing
18200.
(a) (1) For each taxable year beginning on or after January 1, 2023, in addition to any other tax imposed by this part, an additional tax shall be imposed at the rate of 25 percent, and as modified pursuant to paragraph (2), on that portion of a qualified taxpayer’s net capital gain generated as a result of the sale or exchange of a qualified asset.
SEC. 4.
Section 19602 of the Revenue and Taxation Code is amended to read:
19602.
Except for amounts collected or accrued under Sections 17935, 17941, 17948, 19532, and 19561, and revenues deposited pursuant to Section Sections 18200 and 19602.5, all moneys and remittances received by the Franchise Tax Board as amounts imposed under Part 10 (commencing with Section 17001), and related penalties, additions to tax, and interest imposed under this part, shall be deposited, after clearance of remittances, in the State Treasury and credited to the Personal Income Tax Fund.
SEC. 5.
Section 19604 of the Revenue and Taxation Code is amended to read:
19604.
(a) Except for fees received for services under Section 23305e, and revenues deposited pursuant to Section 25000, all moneys and remittances received by the Franchise Tax Board as amounts imposed under Part 11 (commencing with Section 23001), and related penalties, additions to tax, fees, and interest imposed under this part, shall be deposited in a special fund in the State Treasury, to be designated the Corporation Tax Fund. The moneys in the fund shall, upon the order of the Controller, be drawn therefrom for the purpose of making refunds under this part or be transferred into the General Fund. All undelivered refund warrants shall be redeposited into the Corporation Tax Fund upon receipt by the Controller. Fees received for services under Section 23305e shall be treated as reimbursement of the Franchise Tax Board’s costs and shall be deposited into the General Fund.
SEC. 6.
Article 1.5 (commencing with Section 19609) is added to Chapter 8 of Part 10.2 of Division 2 of the Revenue and Taxation Code, to read:
Article 1.5. Speculation Recapture Community Reinvestment Fund
19609.
(a) There is hereby created in the State Treasury the Speculation Recapture Community Reinvestment Fund for the purpose of allocating moneys deposited pursuant to Article 1 (commencing with Section 18200) of Chapter 14 of Part 10 and Article 6 (commencing with Section 25000) of Chapter 15 of Part 11.
SEC. 7.
Article 6 (commencing with Section 25000) is added to Chapter 15 of Part 11 of Division 2 of the Revenue and Taxation Code, to read:
Article 6. Capital Gains Tax for Housing
25000.
(a) (1) For each taxable year beginning on or after January 1, 2023, in addition to any other tax imposed by this part, an additional tax shall be imposed at the rate of 25 percent, and as modified pursuant to paragraph (2), on that portion of a qualified taxpayer’s net capital gain generated as a result of the sale or exchange of a qualified asset.
SEC. 8.
This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.
SECTION 1.Section 44260 of the Health and Safety Code is amended to read:
44260.The state board, in conjunction with the State Energy Resources Conservation and Development Commission, shall develop and administer a program to provide grants to individuals, local governments, public agencies, nonprofit organizations, and private businesses to encourage the purchase or lease of a new zero-emission vehicle. The state board may reserve, allocate, and reallocate funds to any of those potential grant recipients. The state board shall periodically review grant applications and the award of grants to ensure, to the greatest extent possible, that all grant funds are used. The state board may reduce or eliminate grants awarded pursuant to this chapter if the state board determines that the recipient received a grant for the purchase or lease of a zero-emission vehicle in the Budget Act of 2001.
5 comments
Awesome, more government involvement in free and open markets, what else can California screw up? How does San Diego elect such bad policy makers?
Ah yes, again we have government drafting policy based upon an emotional appeal rather then on logic, common sense and factoring the law of unintended consequences.
#1 This law may be unconstitutional as it is double taxation as government already taxes capital gains.
#2 This proposed law may need to be submitted to the voters for approval.
#3 This proposal was obviously designed by one who has little knowledge of the real estate industry and does not understand what a true flipper does. A true flipper takes a deteriorated property, expends substantial sums in the restoration of said property to code and marketability.
#4 Ok, you have created affordable substandard housing and the buyer has no resources to upgrade the property to equal its neighbors and thus drags down the values in the neighborhood negatively affecting those owners who purchased in good faith.
Now, if one wants to restrict this policy to institutional entities, then I might go along with the policy.
Be forewarned that there is likely to be a substantial increase in foreclosures as the mortgage moratorium has ended and defaults have increased.
Anyway, note that the real estate lobby will have lots to say about this ill conceived policy. It’s bad law. As is most of what Sacramento does and that is liberalism in a nutshell. No common sense and no sense of the long term affects of their legislation.
It must be a requirement to be half brain dead to be a politicians. The better move would be to penalize people who own two or more homes. I can’t tell you how many people I’ve meet in San Diego that own 3, 4, 5 homes and rent them out. It’s massively lucrative because it reduces supply while not gaining any additional property taxes. Many do it as part of a trust which further reduces taxes on income.
If the want to fix the supply problem don’t give property tax breaks to non-owner occupied homes, set them at double the market rate and adjust them to market rate each year. I guarantee if you make it less profitable people would sell those 3, 4, 5 homes in a heartbeat. Rent controls will cover the issue of them being able to just jack the rent rates up to cover their cost.
The current rise in home prices is largely due to a combination of: (1) Higher demand for home buying, which was caused by eviction moratoriums that reduced the rental supply and consequently raised rental prices; and (2) lower home supply caused by mortgage forbearance and Covid restrictions. This Act would further DETER HOME SALES, lowering supply again and raising prices even higher!!! Obviously the writers of this bill don’t understand basic economics. Scary to think how uneducated our California lawmakers are.
Flippers are actually good for home buyers because they usually improve the properties before they re-sale.
SO REMEMBER – this current price spike was caused by the government, not the home flippers.
Oh, and BTW, I’m a prospective home buyer, not a flipper. Hopefully this Act doesn’t pass.
How in the heck can encouraging people to NOT sell their homes help with inventory and therefore rising prices. Did this guy fail Econ 101? As a Realtor who helps veterans in a military community, this will hit them the hardest. And what’s wrong with fix and flip anyway? People and companies going into neighborhoods, and buying up the homes that are falling apart. They fix them and resell. Capitalism (feels like a dirty word here in California). I just bought a home in another state…I can’t wait to get out of here. Everyday I talk to someone moving out of this state due to its insane policies.
Comments are closed.