If these three Moscow-like bills pass in Sacramento, you will see an immediate drop in value of housing properties—a major decline. That means less property tax revenue, worse upkeep of property and fewer buyers. Land developers and speculators will work in free States, not the Moscow like values of Sacramento.
“Three major bills have been introduced in the California Assembly to discourage real estate speculation. Their passage would be the most transformative advance for tenants and affordable housing since at least the passage of AB 1482—which imposed statewide rent increase caps and just cause eviction— in 2019.
Alex Lee’s AB 2050 targets speculators evicting tenants and eliminating affordable rental housing under the Ellis Act. Chris Ward’s AB 1771 imposes a 25% capital gains tax on speculators. Richard Bloom’s AB 2386 would allow local governments to establish regulations for the proper management of Tenancies in Common (TICs). TICs are the overwhelming strategy used by San Francisco real estate speculators to displace tenants.
This is not about speculator—it is about developers providing housing. Democrats want to make it so expensive, developers will go to other States.
CA LEGISLATORS TARGET SPECULATORS
by Randy Shaw, Beyond Chron, 3/21/22
Three New Bills to Stop Speculators
Three major bills have been introduced in the California Assembly to discourage real estate speculation. Their passage would be the most transformative advance for tenants and affordable housing since at least the passage of AB 1482—which imposed statewide rent increase caps and just cause eviction— in 2019.
Alex Lee’s AB 2050 targets speculators evicting tenants and eliminating affordable rental housing under the Ellis Act. Chris Ward’s AB 1771 imposes a 25% capital gains tax on speculators. Richard Bloom’s AB 2386 would allow local governments to establish regulations for the proper management of Tenancies in Common (TICs). TICs are the overwhelming strategy used by San Francisco real estate speculators to displace tenants.
Here’s a brief background on each and why the anti-speculator strategy is so important.
AB 2050: Ellis Act Reform
After AB 854 narrowly failed to win an Assembly floor vote earlier this year, chief author Alex Lee and co-sponsors Coalition for Economic Survival and Tenderloin Housing Clinic (which I head) thought it came close enough to passage to make another try. The bill is jointly authored by Assemblymember Wendy Carrillo (D-Los Angeles), principally co-authored by Assemblymember Ash Kalra (D-San José), and co-authored by Assemblymembers Richard Bloom (D-Santa Monica), Mia Bonta (D-Oakland), Adrin Nazarian (D-Van Nuys), Phil Ting (D-San Francisco) as well as Senators Ben Allen (D-Santa Monica) and Henry Stern (D-Los Angeles).
AB 2050 differs from the prior bill in addressing member concerns that “Mom and Pop” owners would be unfairly connected to the ban on speculators invoking Ellis. The amendment enables small mom and pops to invoke the Ellis Act within five years even if they buy the property under an LLC. Since 2018 (the first year AB 2050 would impact) we have rarely if ever seen small Mom and Pops buy multi-unit buildings and then invoke the Ellis Act. But members were concerned that the original bill might cover such owners. Now that issue has been addressed.
AB 2050, like all Assembly bills, must win a floor vote by the end of May.
AB 1771: A speculator tax
San Diego Assemblymember Chris Ward is among the great recent additions, along with Wendy Carrillo, to the Assembly Housing Committee. Ward has hit the ground running with the CA Housing Speculation Act. The bill imposes a 25% tax on the capital gains realized from a residential sale where ownership was short-lived, which would scale down to zero from 3 to 7 years after acquisition. Exemptions would be afforded for affordable housing, military service members required to relocate, and first-time homeowners.
Ward spoke about his concern with short-term speculators driving up housing prices at his first Assembly Housing Committee meeting in January. It’s great to see him following up with AB 1771.
AB 2382: Stopping TIC Speculators
Richard Bloom leaves office at the end of 2022. Before he goes he’s trying to pass a long overdue and desperately needed bill to allow local governments to regulate Tenancies in Common (TICs). TICs became the major loophole for Ellis Act evictions in San Francisco. Unlike condo conversions the local right to regulate TICs is not spelled out in the Ellis Act. When we got a law passed in San Francisco in 1999 to require Planning Commission approval for the conversion of rental housing to TICs—with big thanks to then Mayor Willie Brown— the courts threw it out. They claimed any regulation of TICs was preempted by the Ellis Act , a terrible court decision that caused countless evictions of vulnerable tenants ever since.
Speculators vs Investors
Speculators drive up housing costs. In Generation Priced Out I show how short-term speculation drives tenant displacement, worsens rental housing affordability, and makes the housing crisis much harder to solve.
The real estate industry and apartment associations understandably spends money and time to protect landlord profits. That’s their business. But these powerful constituencies fight just as hard to protect the profits of short-term investors who are not interested in holding apartment buildings, pricing out the “Mom and Pop” investors these lobbying groups claim to care about.
In the case of AB 2050, Big Real Estate battles for speculators whose profits come from “going out of the rental housing business” without ever being in the business. I assume we will see similar opposition to AB 1771 even though it merely seeks to protect housing affordability by taxing the profits from “flipping” rental housing. AB 2382 addresses how speculators use the tenancy in common form of ownership to avoid local regulation—again, a strategy designed for short-term speculator profits.
The small, non-corporate investors that Big Real Estate tells legislators it wants to protect are hurt by speculators. Yet real estate interests in Sacramento fight as hard for speculator profits as they do for the longterm landlords who make up most of their membership.
Can 2022 produce a different legislative response to this pro-speculator lobbying? We will soon find out.
In the meantime, everyone concerned about California’s affordability crisis should send in letters endorsing all three bills. You can contact the offices of Lee, Ward and Bloom for a template.
