For most people, their home is their largest investment. As a local Realtor, I am on top of all the news and information that affects real estate. My intention is to provide you a source that shares useful information for you to use in making decisions about your real estate holdings.
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LEGISLATION & REAL ESTATE - THE GOOD, THE BAD AND THE UGLY - STAY INVOLVED - MAKE A DIFFERENCE
Last week, C.A.R. filed three versions of a tax portability initiative with the Attorney General for title and summary. This is the first step in eventually qualifying a statewide ballot proposition. The three filings each would allow more Californians to move and keep their original Proposition 13 tax basis, similar to Propositions 60 and 90 but with fewer restrictions.
The first version would allow a property tax basis to be transferred to a replacement home regardless of the age of the homeowner, the location of the home in the state, the price of the home, and the number of prior transfers. The second version would be identical to the first version except that transfers to another county would be at the receiving
county’s option. The third version is also identical to the first version except that it would be limited to homeowners who are aged 55 years and older. In each version, the homeowner can buy a more expensive home, as opposed to Propositions 60 and 90 which requires the replacement home be equal to or less than the sales price of the original home; the basis will be “blended,” meaning the new basis will be the original basis, plus the difference between the sales price of the original home and the sales price of the replacement home.
The title and summary process allows up to 50 days to complete a fiscal analysis done by the Department of Finance and the Legislative Analyst. The Attorney General will then have up to 15 days to complete the title and summary. The C.A.R. Task Force is expected to meet before the C.A.R. fall meeting in October and based on the Title and Summaries, Fiscal Analysis and any additional polling make a recommendation to C.A.R. on next steps which could include going forward with one of the initiatives or not.
Legislature Begins Summer Recess
The California Legislature has adjourned for its month-long summer recess. Although no legislative hearings will take place in the Capitol, most Legislators will continue to work in their district offices until the Assembly and Senate reconvene on August 21 to conclude their work on the first half of the current two-year session.
Summer recess is an excellent time for REALTORS® to meet with their legislative representatives in the district. Many legislators host district fundraisers and attend a number of community events during their month-long break.
Upon their return, the Legislature will wrap up pending legislation including a number of bills relating to real estate and the housing crisis. Between reconvening on August 21 and September 15, the Legislature will have to work quickly to consider bills ahead of several critical deadlines. All bills must pass final committee votes by September 1 and pass final floor votes by September 15. Any bills that do not meet these deadlines will be held until January when the Legislature begins its work on the second half of the two-year session. Bills that pass before the deadline and are signed by Governor Brown will become law on January 1, 2018 unless another date is specified in the bill.
Bakersfield Repeals PACE Program
The Bakersfield city council voted to repeal the PACE program last week. The Property Assessed Clean Energy (PACE) program provides loans to homeowners to fund energy efficiency upgrades to a home, most often HVAC or solar panels. PACE loans are paid back through increased property taxes and take the form of a super-priority lien that is senior to the priority of all other liens, including the mortgage. Homeowners with an outstanding PACE loan often find it difficult to sell or refinance their property.
The Bakersfield Association of REALTORS®, with support from NAR and C.A.R., has fought the PACE program in Bakersfield for months while providing elected leaders and residents with information about the problems faced by people with PACE loans.
The Kern County Board of Supervisors, where Bakersfield is located, similarly repealed the PACE program in unincorporated areas in recent weeks.
Legislative Day 2017 Video
When more than 2000 REALTORS® came to Sacramento for Legislative Day, it was monumental! C.A.R. filmed some of the highlights of that day and compiled them into a short video. REALTORS® who attended are encouraged to watch the video to spot themselves and their friends and to share the video with REALTORS® who might want to attend in 2018. REALTORS® who have never attended Legislative Day are encouraged to watch to see what their missing. The video is available at http://bit.ly/2vyVVa8.
Mark your calendar for Legislative Day on May 2, 2018.
RED ALERT UPDATE: C.A.R. Continues to Oppose AB 71, SB 231
C.A.R. continues to oppose two bills with Red Alerts. So far, the tireless work of Assembly Key Contacts and thousands of phone calls from everyday REALTORS® have helped to delay action on these bills. However, neither bill has been defeated and either bill could still be considered for a vote. If it appears that either bill is headed for a vote, C.A.R. will notify members.
SB 231 (Hertzberg)
C.A.R. OPPOSES SB 231 (Hertzberg), a bill that allows local governments to circumvent the State Constitution and Proposition 218 and directly tax property owners for costs related to stormwater infrastructure projects without the legally required voter approval. C.A.R opposes SB 231 because it uses legal “word games” to allow local governments to impose new taxes without required voter input.
Current law, as enacted by voters with Proposition 218 – The Right to Vote on Taxes initiative, requires that all new property-related taxes and most fees proposed by a local government or agency must be approved by 2/3 of the voters. A limited exception to this general rule exists for fees assessed for water, garbage, and sewer service.
SB 231 will redefine the word ‘sewer’ in the law in order to avoid the 2/3 vote requirement and directly tax property-owners for larger stormwater infrastructure projects.
AB 71 (Chiu)
C.A.R. has taken an OPPOSE UNLESS AMENDED position on AB 71, a bill that would eliminate the mortgage interest deduction for second homes to fund an increase in low-income housing tax credits. While C.A.R. supports increasing the support for affordable housing, the association is opposed to doing so at the expense of the mortgage interest deduction for second homes.
If the MID were eliminated for second homes, more than 2000 home sales would be lost in the first year after implementation. The potential impact of the MID elimination is an economic loss of $180.2 million to the state of California in the year following the implementation. C.A.R. opposes changing the mortgage interest deduction because:
The state shouldn’t change the rules after the fact. People made significant financial decisions, trusting that the mortgage interest deduction would be there to make the property affordable.
Second homes are not necessarily “vacation homes.” For example, someone faced with a one-way commute of an hour or more may choose to purchase a small housing unit near where they work in which to live during the workweek.
Local economies and communities will suffer. The economic health of the recreational areas of the state will be harmed by elimination of the mortgage interest deduction on second homes. Homeowners in those areas of the state are going to be hard pressed to find a buyer at current prices if the mortgage interest deduction on second homes is eliminated.
The MID is already capped. The amount of the mortgage interest deduction is already capped regardless of whether the taxpayer has one home or two homes.
C.A.R. Opposes Threat to Net-Neutrality
In a letter to the Federal Communications Commission regarding a proposed rule, C.A.R. asked the FCC to maintain net-neutrality.
The proposed rule, “In the Matter of Restoring Internet Freedom,” would hinder internet access, incentivize “fast-lanes” and/or “paid prioritization,” and create opportunities of conflict of interests where internet service providers (ISP) and internet content providers are owned by the same company. C.A.R. believes the FCC must maintain a “net-neutrality” policy that prioritizes the ability of consumers to access ALL internet content at the same speed.
Over the last 20-years, real estate and the home buying and home selling process have become more dependent upon the internet and use of smart devices. To assure a continued level playing field in our industry going forward, net-neutrality must be maintained so brokers of all sizes and means are able to compete. Real numbers indicate the need. Recent surveys of home buyers and home sellers in California showed:
• 91-percent of buyers used a mobile device in the home buying process,
• 50-percent of sellers found their real estate agent online,
• 97-percent of buyers used the internet, and
• 77-percent of buyers used social media.
The implementation of a paid prioritization or fast-lane on the internet where one broker would have a competitive advantage over another would create an uneven playing field. Real estate, like all other industries, has become more competitive because of net-neutrality and the winner of this has been the consumer and the process by which they buy and sell real estate. Moving away from net-neutrality would harm the industry and the gains made over the last two decades. The FCC must take the necessary steps to ensure that net-neutrality and the equal treatment of all content by ISPs are the primary components of an open internet.