BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 1220 HEARING: 4/25/12
AUTHOR: DeSaulnier FISCAL: Yes
VERSION: 4/16/12 TAX LEVY: No
CONSULTANT: Grinnell
HOUSING OPPORTUNITY AND MARKET STABILIZATION ACT
Enacts the Home Opportunity and Market Stabilization Trust
Fund Act of 2012
Background and Existing Law
The California Constitution prohibits transaction taxes or
sales taxes on transfers of real property (Article XIIIA,
Section 4); however, in 1967, the Legislature authorized
counties to approve an ordinance to impose a documentary
transfer tax (DTT), which applies to deeds of transfer of
realty within that jurisdiction, and is based on the value
of the transfer. In counties, the rate is fifty-five cents
($0.55) for each five hundred dollars ($500) of value. All
of California's 58 counties apply the tax, which is modeled
after the repealed Federal Documentary Stamp Tax. Cities
may also enact ordinances to impose a DTT: non-charter
cities within a County that impose a DTT may apply its tax
at half of the rate of the county and applies it as a
credit against the county rate. Charter cities may impose
a DTT at a higher rate under the municipal affairs doctrine
in the California Constitution (Article XI, Section 5). If
they do so at a higher rate than the non-charter rate, then
the city DTT does not serve as a credit against the county
tax.
Exemptions exist for public agencies acquiring land, land
acquired as a result of a plan of reorganization or
adjustment such as bankruptcy, and certain transfers in
lieu of foreclosure, among others.
The Government Code prescribes additional fees that county
recorders charge when recording a change in ownership of a
property. The law exempts public agencies from paying
these fees.
In 2006, voters enacted the Housing and Emergency Shelter
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Trust Fund Act of 2006 which authorized the sale of $2.85
billion in general obligation bonds for various housing
projects (Proposition 1C), on top of $2.1 billion in
general obligation bonds approved in 2002 (Proposition 46).
According to the State Treasurer, he has sold almost all
Proposition 46 bonds, but $1.26 billion of Proposition 1C
authorized bonds have not yet come to market.
Citing a significant State General Fund deficit, Governor
Brown's 2011-12 budget proposed eliminating RDAs and
returning billions of dollars of property tax revenues to
schools, cities, and counties to fund core services. Among
the statutory changes that the Legislature adopted to
implement the 2011-12 budget, ABx1 26 (Blumenfield, 2011)
dissolved all RDAs. As 20% of all redevelopment funds were
dedicated to housing for persons of low to moderate income,
ABx1 26 commensurately ended a source of funding for public
housing projects.
Proposed Law
Senate Bill 1220 enacts the Home Opportunity and Market
Stabilization Trust Fund Act of 2012, which creates the
Housing Opportunity and Market Stabilization Fund in the
State Treasury. The Legislature may appropriate moneys in
the fund to support development, acquisition,
rehabilitation, and preservation of low and moderate income
households.
SB 1220 imposes a fee of $75 whenever a person records a
real estate instrument, paper, or notice required or
permitted by law to be recorded, including:
Deeds, grant deeds, trustee deeds, or deeds of
trust,
Reconveyance, and quit claim deeds,
Fictitious deeds of trust,
Assignment of deed of trust,
Request for notice, and notice of default,
Abstract of judgment,
Subordination agreement,
Declaration or abandonment of homestead,
Release or discharge of lien or easement,
Notice of trustee sale,
Notice of completion,
UCC financing statement
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Mechanics' lien,
Maps
Covenants, conditions, and restrictions.
The measure specifically excludes from the fee any document
recorded in connection with a transfer subject to a
documentary transfer tax, essentially exempting property
transfers.
The bill provides that the fees shall be sent quarterly
with the Department of Housing and Community Development
for deposit in the Fund. Counties must pay interest at the
legal rate for any funds not paid within 30 days of the end
of the quarter.
The measure requires the Bureau of State Audits to conduct
periodic audits to ensure that the annual allocation to
individual programs is awarded in a timely fashion
beginning two years from the bill's effective date. The
Department of Housing and Community Development must
include in its currently required annual report how funds
raised by the fee spent, and post the report on its
website.
The measure also makes legislative findings and
declarations.
State Revenue Impact
No estimate. However, the Committee on Transportation and
Housing analysis states that the fee raises an average of
$525 million annually.
Comments
1. Purpose of the bill . According to the Author, "Having
a healthy housing market that provides an adequate supply
of homes affordable to families and individuals at all
income levels is critical to the economic prosperity and
quality of life in California. The decline in housing
production has played a significant role in creating and
prolonging the Great Recession. The lack of sufficient,
affordable homes near jobs impedes economic growth and
development by making it difficult for California employers
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to attract and retain employees. In addition, continued
affordability gaps mean that California has the second
lower homeownership rate in the nation, that minimum wage
earners have to work 120 hours per week to afford the
average two bedroom rental apartment, and that California
has the largest population of homeless persons in the
nation. In the face of these critical needs, California's
investment in affordable housing is declining dramatically.
In 2000 and 2006, voters approved roughly $5 billion in
housing bonds. These funds have financed the construction,
rehabilitation and preservation of over 11,600 shelter
spaces and 57,220 affordable apartments, including 2,500
supportive homes for people experiencing homelessness. In
addition, these funds have helped 57,290 families become or
remain homeowners. Nearly all of the voter-approved funding
for affordable housing has now been awarded, and no more
bond funds are available. In addition, California's
redevelopment agencies used to generate $1 billion per year
for affordable homes as a result of the requirement that
they set aside 20% of tax increment for affordable housing.
With the elimination of redevelopment agencies, this
funding stream has disappeared completely. The loss of
these precious funds means that millions of Californians
affected by the state's chronic housing shortage, including
seniors, veterans, people experiencing chronic
homelessness, working families, people with mental,
physical, or developmental disabilities, agricultural
workers, people exiting jails, prisons, and other state
institutions, survivors of domestic violence, and former
foster and transition-aged youth, will remain unhoused or
living in substandard and unaffordable conditions.
California desperately needs a permanent, ongoing source or
sources of funding dedicated to affordable housing
development. Such investment will create consistency and
predictability in the affordable housing market, leverage
billions of dollars in private investment, lessen demands
on law enforcement and dwindling health care resources as
fewer people are forced to live on the streets or in
dangerous substandard buildings, and increase businesses'
ability to attract and retain skilled workers. In
addition, a dedicated revenue source will allow a "pay as
you go" approach, as opposed to issuing bonds that require
additional interest costs."
2. Who pays ? An old piece of tax policy wisdom
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attributed to Louisiana Governor Russell Long states that,
"Don't tax you, don't tax me, tax the man behind the tree."
SB 1220 assesses a fee of $75 whenever a person records
one of a specified list of documents with the county to pay
for public housing programs, except for documents that
transfer deeds of realty. As such, the responsibility to
pay for housing programs, previously paid for out by a
combination of redevelopment funds, state bonds, federal
funds, and proceeds from local exactions, is shifted onto
the individuals recording these documents, which includes
property owners, lenders, and borrowers, among others.
While resources for public housing programs have rapidly
dried up, is it appropriate to saddle one class with the
burden to provide funds for this purpose? Additionally,
since recent amendments exempt persons purchasing property
from the fee, is the smaller remaining class of fee payer
the right place to look for funding? For example, a
contractor filing a mechanics' lien to secure payment for
services has to pay the fee, but the individual purchasing
a luxury home does not. The Committee may wish to consider
whether the correct group of taxpayers bears the burden of
this fee.
3. Magic words . While SB 1220 states that the charge it
imposes is a fee, Legislative Counsel has keyed the measure
a tax increase for the purposes of Section III of Article
XIIIA of the California Constitution. As such, the measure
requires the approval of 2/3 of the membership of the
Senate to advance from the floor. Prior to 2010, specified
fees could be enacted by majority vote, but this authority
was significantly limited by Proposition 26 (2010).
4. Show me the money ! Joint Rule 37.4 prescribes that any
bill requiring action by the Bureau of State Audits, as SB
1220 does, contain an appropriation for the cost of any
audit. The Committee may wish to consider amending the
bill to provide the appropriation.
5. Suggested amendments . The measure should clearly refer
to county recorders as the agent to collect the fee, deduct
actual and administrative costs, and send the funds
quarterly to the HCD (Page 5, lines 11 and 12).
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Support and Opposition (04/19/12)
Support : California Housing Consortium (sponsor); Housing
California (sponsor); AARP; Affirmed Housing Group;
Affordable Housing Associates; Aging Services of
California; Alameda County Developmental Disability
Council; Alpha Construction Company; AMCAL Multi-Housing;
BAYC; Berkeley Food and Housing Project; Bernal Heights
Neighborhood Center; Bonita House; Burbank Housing
Corporation; Burbank Housing Development Corporation;
Business Leaders Task Force; Cabrillo Economic Development
Corporation; California Association of Housing Authorities;
California Association of Local Housing Finance Agencies;
California Coalition for Rural Housing; California Housing
Partnership Corporation; California Infill Builders
Association; California Labor Federation; Center for
Sustainable Neighborhoods; Center on Policy Initiatives;
Central Coast Residential Builders; Century Housing;
Charities Housing; Christian Church Homes; City of Dublin;
City of Oakland; City of San Leandro; City Heights
Community Development Corporation; Clifford Beers Housing;
Community Action to Fight Asthma; Community Economics;
Community Corporation of Santa Monica; Community Housing
Opportunities Corporation; Community Housing Partnership;
Community Housing Works; Community of Friends; Core
Companies; Corporation for Supportive Housing; Dahlin Group
Architecture Planning; EAH Housing; East Bay Asian Local
Development Corporation; East Bay Housing Corporation; Eden
Housing; Enterprise Community Partners; Equity Community
Builders, Eugene Burger Management Corporation; EveryOne
Home; Fred Finch Youth Center; Goldfarb Lipman Attorneys;
Habitat for Humanity California; Habitat for Humanity East
Bay; Habitat for Humanity Greater San Francisco; Hearth
Homes; Hefferman Insurance Brokers; Housing Advisory Group;
Housing Consortium of the East Bay; Housing Trust of Santa
Clara County; ICON Builders; Jacobs Center for Neighborhood
Innovation; Jamboree Housing Corporation; John Burton
Foundation for Children Without Homes; Koning Eizenberg
Architecture; League of Women Voters of California; League
of Women Voters of Marin County; Leddy Maytum Stacy
Architects; LifeLong Medical Care; LifeSTEPS; Marin
Partnership to End Homelessness; Mental Health America of
Los Angeles; Mercy Housing; MedPen Housing; Mikiten
Architecture; Mill Valley Affordable Housing Committee;
Morley Builders; Move LA; Napa Valley Community Housing;
Natural Resources Defense Council; Neighborhood Housing
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Services Silicon Valley; New Directions; Non-Profit Housing
Association of Northern California; North County Lifeline;
Orange County Business Council; Palm Communities; Project
Sentinel; Pyatok Architects; Public Advocates; Regional
Asthma Management and Prevention; Related California;
Resources for Community Development; Rural Community
Assistance Corporation; Sacramento Housing Alliance; San
Diego Building Trades Council Family Housing Corporation;
San Diego Housing Federation; San Diego LGBT Community
Center; San Luis Obispo County Housing Trust Fund;
Self-Help Enterprises; Shelter, Inc.; Silicon Valley
Leadership Group; South County Housing; Southern California
Association of Non-Profit Housing; Stand Up for Neighborly
Novato; St. Anthony Foundation; St. Ignatius Parish, San
Francisco; Sun Country Builders; Sunseri Construction; USA
Properties; West Bay Housing Corporation; Yolo Community
Care Continuum
Opposition : California Bankers Association; County
Recorders' Association of California;