SAN DIEGO (KGTV) – A proposed bill introduced by a San Diego-based Assemblymember could create a tax penalty for certain investors who have made it nearly impossible for many working-class families to purchase a home in California.
The California Housing Speculation Act, or Assembly Bill 1771, was written by 78th District Assemblymember Chris Ward and aimed at short-term investors who buy homes/property and then sit on the inventory until they can sell them for a profit -- often outbidding people with cash offers.
The bill "would impose a tax up to 25% on an investor’s net capital gain from the time of purchase until the final sale or exchange of a property," according to information on the Housing Speculation Act's website.
Ward believes the bill would help discourage investors or slow down speculators so potential homeowners can have a fair chance to buy a home.
"Speculators are taking gobs of tens of millions of dollars out of our community through the cumulative effect of all these transactions… that's not fair either because the people that are left struggling are people… who get outbid 30 times trying to get into their home," said Ward.
Said Abdallah is a real estate investor. The San Diego native and veteran said he agrees that there is a housing issue, but this suggested bill is not a good solution for multiple reasons.
He said he knows buyers come in with cash offers, but many of those are from wealthy people selling homes in places like the Bay Area, meaning this bill is targeting the wrong people.
"The assumption I took away from the meeting was that a cash buyer is automatically assumed to be an investor, and I just know that’s not the case," he said, adding that "they bring with them equity that they just sold their house for in a high salary to be able to afford the cost of living."
He believes that flippers help the housing market by purchasing homes that are in extremely bad condition and would be difficult for families to renovate, then updating them and selling them to families.
He also said that if this bill passes, the problem could get worse. He said the bill would drive local investing companies out of the industry, but mega-investing companies would be able to continue to buy homes and sit on them for a few years, then sell later, adding to the housing shortage problem.
"It’ll push us out of the picture and open the door for more institutional corporate buyers to hold properties longer and decrease the supply," said Abdallah.
His solution: ease the building process. He said if the permitting process was improved, more homes could be built.
"Supply is the big issue, it’s not house flippers. The majority of the homes that house flippers like myself and my counterparts are buying are direct from sellers who can’t put the house on market," he said.
For more information on the Housing Speculation Act, visit www.cahousingspeculation.org.