Real estate transfer tax could help solve Los Angeles housing crisis

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PLANNING WATCH – Because Planning watch columns present such a grim picture of the life and politics of Los Angeles City Hall, I was pleasantly surprised to receive information about a proposed local voting initiative that tackles some root causes of homelessness.

Although it is not perfect, I remember the saying: Not leave it perfect to be the enemy of good. In this case the initiative of the ballot is infinitely better than the state and local real estate scams that I often debunk.

The proposed Los Angeles voting initiative would create a real estate transfer tax and local administrative mechanism. It is based on the state of California’s 0.11 percent (0.0011) document transfer tax. If approved by a majority of Los Angeles voters, the local real estate transfer tax would generate $ 800 million a year, which would be spent solely on local housing programs for low-income people. Unlike Los Angeles County’s HHH measure, which has one-time funding, a local real estate transfer tax would establish a permanent financial pipeline to deal with LA’s housing crisis. The initiative’s sponsors estimate that over a 10-year period, the local property transfer tax would generate $ 8 billion in municipal revenue. Five percent would go to administration, leaving the remaining 95 percent for low-income housing programs.

The precedent for this new local tax is the 0.11 percent (.0011) fee that the State of California charges for the transfer of real estate documents. For example, the state collects $ 1,100 on the sale of a million dollar house. A local tax on real estate transactions, like the one that already exists in Alameda County, would be in addition to the state’s document transfer tax. While LA’s initiative is not yet finalized, it would likely be similar to Alameda State and County fees, meaning a million dollar house would be charged 0.11%. (0.0011) more when sold. Together, the two taxes would amount to 0.22 percent (0.0022) of the sale price.

This is what this permanent housing income stream aims to accomplish, specifically the preservation of Natural Affordable Housing (NOAH).

  • 20 percent for affordable multi-family rental housing construction tax credits
  • 20 percent for new affordable housing.
  • 15 percent for the rehabilitation of existing affordable housing.
  • 10% for innovative production strategies, such as hotel conversions.
  • 5% for rental subsidies linked to the project or to the tenant.
  • 5 percent for short-term rental assistance.
  • 10 percent for heavily encumbered rents (eg, people with disabilities).
  • 10 percent for the eviction defense.
  • 2 percent for tenant awareness and education.
  • 3% for law enforcement against tenant harassment.

What is the difference between this proposal and recent zoning legislation passed by the state legislature, such as Senate Bills 9 and 10, and their local counterparts, LA Housing Element 2021-2029, Zoning Ordinances appended to Community Plan Updates for LA and the de facto zone gaps for developers who build homes within half a mile of transit?

  • This move could curb LA’s current real estate boomlets by taxing sales, unlike state and local programs, which inflate those real estate bubbles even further.
  • The initiative addresses a root cause of the housing crisis, the lack of affordable housing, and not an alleged housing shortage that combines the abundance of luxury and market housing with the lack of low-cost housing. price.
  • The initiative assumes that apartments adjacent to transit must be affordable to become transit-oriented. Otherwise, their high-end tenants will continue to own and drive cars, relying on public transport only in an emergency.
  • The initiative emphasizes that the homeless and overcrowded have been deprived of prices for existing housing due to falling wages and rising housing prices, not a shortage of housing. housing caused by old zoning laws. The basis of this argument is that house prices in Los Angeles have risen faster than wages since the 1970s. Since this is the same period when the federal government eliminated its public housing programs, these trends can be linked.
  • Preserving existing affordable housing is part of the solution, unlike the current practice of demolishing old homes to make way for new apartments at market rates and McMansions.

What the movement of the Initiative on property transfer rights still needs to act.

  • Reduce local real estate speculation by private equity firms that buy and own buildings, condos and homes as speculative investments.
  • New social housing must be built and operated by public bodies, like the Los Angeles Housing Authority, not outsourced to private developers.
  • Indexation of the minimum wage to inflation. The transfer tax is a step in the right direction, but by itself it is not enough to reverse the growing economic inequalities, a major cause of the housing crisis.

(Dick Platkin is a former Los Angeles town planner who reports on local town planning issues for CityWatchLA. He sits on the board of directors of United Neighborhoods for Los Angeles (UN4LA) and co-chairs the new Greater Fairfax Residents Association. The previous Planning Watch columns are available on the site CityWatchLA Archives. Please send your questions and corrections to [email protected] .)

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