Private Transfer Tax Opposed by Realtors

The following is a California Association of Realtors update from Sacramento:

C.A.R. OPPOSES AB 1574 (HOUSTON) PRIVATE TRANSFER TAX
AB 1574 was scheduled to be heard by the Senate Transportation and Housing Committee on Tuesday, June 26. AB 1574 is the builder-sponsored response to C.A.R. sponsored SB 670 and would legitimize the use of private transfer taxes without real safeguards needed to protect home buyers.

C.A.R. is opposing AB 1574 because these "taxes" add to the cost of owning a home and will encourage a tidal wave of developers, private entities and others hoping to profit from increased sales prices that are not required to add value to the property. While the developers who currently employ this scheme try to define it as a "mitigation fee," implying that the funds somehow improve the property or the development, this is not required to be the case.

How We Got Here:
A loophole in California law lets developers and other non-government entities impose "private" transfer taxes (PTTs) on homes every time the property is sold--with NO oversight, NO accountability and NO limit on the number of separate private transfer taxes that can be piled onto a home. While AB 1574's supporters claimed that the bill addressed many problems with these taxes brought to light by C.A.R.'s bill, it really did nothing to fix them. As recently amended, AB 1574 requires that the Department of Real Estate to provide oversight for the imposition of PTTs and requires that these taxes be imposed though a covenant, restriction, or condition contained in any deed, contract, security instrument, or other instrument affecting the transfer or sale of real property.

Why C.A.R. is Opposing AB 1574:
This is REAL money! If you impose a 1.75% private transfer tax the highest rate that's come to light so far on the state's median priced home of $567,690, that's a tax of almost $10,000, due and payable EVERY TIME the property is sold!

AB 1574 DOES NOT PLACE A CAP ON THE AMOUNT OF THE FEE.
The taxes are imposed on buyers EACH TIME the property sells. Private transfer taxes can go on and on and on. These taxes are collected as long as mandated by the deed, which can be indefinitely.

AB 1574 NOW CAPS THE DURATION OF THE FEE TO 99 YEARS, LONGER THAN MOST LIFETIMES!!
There are few controls over how the collected revenue is spent. AB 1574 allows the entities receiving the revenue to spend up to 10 percent on administration and overhead and there is no prohibition on using the funds for lobbying or litigation.

AB 1574 WILL PROVIDE AN ON-GOING SOURCE OF REVENUE TO NON-PROFITS WITH WHICH THEY CAN ADVANCE THEIR POLITICAL AGENDA.
Private transfer taxes increase the already substantial cost of buying a home. A recent C.A.R. study shows that every time the cost of a home increases by $10,000, another 200,000 purchasers can't afford to buy a home.

Despite what some developers claim, these aren't mitigation fees they're taxes. They don't necessarily benefit the assessed homeowners and, instead, serve largely as an ongoing revenue source for the organizations benefiting from the fee.

These taxes will hurt the housing market. Home buyers will either avoid homes that require paying a private transfer tax or seek to offset the cost of the tax.

Even the disclosure provided by AB 1574 is inadequate! For example, AB 1574 fails to provide prospective home buyers with any of the following information: actual cost estimates, expiration date of the fee, or notice that the cost of the tax should be weighed against any benefits when deciding whether to buy the home.