California Lawmakers To Tax Real Estate Investors
There’s been a push to pass a law that stops short-term investments from driving up the demand in San Diego’s housing market. Economists think it might explain why prices have risen 18% faster there than anywhere in the country.
Trisha Cortez is a Scripps Health pharmacy technician who’s been trying to purchase her first home since October, consequently being outbid 33 times in the process.
“I was done. I was ready to move back in with my parents,” Cortez said.
Finally closing last week in Talmadge at $400,000 on a 500-square-foot condo, Cortez paid $70,000 over the asking price.
“It’s really frustrating,” Cortez said. “It would be really amazing, you know, to not be consistently outbid or underbid by people that have deep pockets.”
Lawmakers, city leaders, and economists seem to be in agreement that something needs to change.
Recently, United States Assemblyman Chris Ward introduced the California Housing Speculation Act. It would impose a 25% tax on an investor’s net capital gains from the property’s time of purchase until final sale or exchange.
If this change goes into effect, it could deter real estate investors from sitting on properties, which drives up property prices and reduces inventory.
“The thought of buying a home today is painful to these families, it’s depressing for the next generation and it’s an outright failure of the housing market,” Ward said.
Exemptions from property tax are available for first-time homebuyers purchasing primary residences, affordable housing properties, military personnel who move with their families or government workers assigned to the community on long-term assignments, or those who subdivide residential lots into two lots and live in one of them.
“The corporations and investment companies that are doing this are nothing more than economic bullies,” San Diego Council President Sean Elo-Rivera said.
AB1771 could generate $4.02 billion in revenue, which will go back into the community to build up infrastructure, schools, and affordable housing.
Over the last few years, west coast housing prices have continued to skyrocket. According to the Case-Shiller index report, San Diego’s median home price sits at $764,000, eight times the current median income.
University of San Diego economics professor, Dr. Alan Gin, agrees with the idea that some moral responsibility should be put into the equation.
“Capitalism, there’s a lot of good things about it, but one thing is, it doesn’t look in terms of equity, and so it doesn’t look at people being sort of priced out of housing here in San Diego,” Dr. Gin said.
Dr. Gin said high-bid activity sends workers away from San Diego to find work elsewhere and leaves local businesses without qualified candidates.
Legislation for these proposed changes could go up for its first vote in about a month, Ward said.
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