C.A.R. Opposes SB1220 – Transfer Tax for Affordable Housing
C.A.R. is OPPOSING SB 1220 (DeSaulnier) which imposes a transfer tax to generate funds for affordable housing. C.A.R. is opposing SB 1220 because it will add to the cost of buying a home at a time when the housing market is struggling to recover. C.A.R. is an aggressive advocate for affordable housing, but believes it is bad policy to fund affordable housing by making housing less affordable and to fund affordable housing at the expense of homebuyers.
Senator DeSaulnier has introduced SB 1220 to permanently fund an affordable housing trust fund. Unfortunately, SB 1220 creates a real estate transfer tax of $75 per document to fund this program. In virtually all transactions a minimum of three documents are recorded – the grant deed, the release and reconveyance and a trust deed. SB 1220 will create a minimum $225 transfer tax and the amount may go higher depending on the number of documents recorded.
Over the last several decades, state and local agencies and organization have created affordable housing programs. Historically, state and local affordable housing programs have been funded through state bonds such as Prop 1C and Prop 46, or through local redevelopment agencies, among other sources. The funds generated from these bond measures have been exhausted, and local redevelopment agencies no longer exist. It is unlikely that future bonds will be viewed favorably by California voters given the current state of government finances and public’s concern over fiscal accountability. Therefore affordable housing groups have been seeking a permanent funding source for these programs and have unfortunately settled on SB 1220. SB 1220 creates a $75 per document transfer tax to create a housing trust fund that will support affordable housing for low and moderate income households including emergency shelters, transitional and permanent rental housing, foreclosure mitigation and homeownership opportunities.
C.A.R. is opposing SB 1220 because:
- SB 1220 targets one group (homebuyers) to pay for affordable housing which is an issue of broad social concern. While there may be a need for affordable housing funds, it is unfair to require only those individuals recording real estate documents to be the sources of that funding. The lack of sufficient affordable housing is a statewide concern. As such, if it is deemed necessary to implement some type of funding mechanism to generate funds for affordable housing, that mechanism should be as broad based as possible. It is simply unfair that SB 1220 seeks to fund affordable housing at the expense of home buyers. An affordable housing advocate suggested that C.A.R. could support SB 1220 if the tax applied to ALL recordings and not just those pertaining to real estate. WRONG! The concern remains the same. Even if the tax were applied to all recordings, only a relatively small group of citizens, namely those recording real estate documents, would still be taxed for a program that should be supported by all Californians.
- SB 1220 increases the already substantial cost of buying a home. Many cities already have local transfer taxes. SB 1220 creates an additional transfer tax of $225 on almost all real estate transactions, including refinances, adding to the already substantial fees and taxes already paid by homebuyers. Keep in mind that every $1,000 increase in the median price of a home disqualifies almost 20,000 California households from affording homes.
- While C.A.R. adamantly supports the creation of homeownership opportunities, SB 1220 is clearly not the way to achieve this goal.
What the Other Side is Saying:
This is a “flat recordation fee.” C.A.R.’s Response: This is NOT a fee, it is a tax! The money collected is not going to pay for the recordation of documents, but to an entirely different fund that has nothing to do with the transaction at hand. It’s not flat either. The cost can go up depending on the number of documents that need to be recorded.
SB 1220 is necessary because median home prices are high. C.A.R.’s response: Supporters are attempting to imply that this fund will substantially support homeownership. Very little of the money will support homeownership opportunities. The money will be used for shelters, transitional and permanent rental housing, as well as foreclosure mitigation and homeownership opportunities.
This is a “modest” fee. C.A.R.’s response: There is nothing “modest” about adding another burdensome tax to closing costs, which must be paid at the close of escrow.