Reaching Deeper into Taxpayer’s Wallets No Solution for High Cost of Housing

OC Register





By: Michelle Steel and Hugh Nguyen

The lack of affordable housing is an ever-increasing problem for us here in California. Unfortunately, this problem will only be made worse by Senator Atkins and others in Sacramento who have chosen to reach further into hardworking taxpayer’s wallets instead of addressing the real cause of the high cost of housing.

Senate Bill 2 will require County Recorders to collect a $75 fee-- with a few exceptions-- on every real estate instrument, paper, or notice required by law due and payable at the time or recording. This translates into a 930% increase in recording fees for affected documents.

To understand the effect this will have consider when a senior citizen’s spouse dies, the grieving spouse must record several legal papers with the county recorder to help him or her to deal with bank accounts, trusts, ownership of their home, and other financial affairs requiring these documents to be recorded.   The cost in taxes to a grieving senior before SB 2 is approximately $36.  After the passage of SB 2, their costs jump to $261.

Sacramento claims to be pushing this bill forward in an effort to help those vulnerable individuals afford housing, but what about the hardworking Californian’s who will now be hurt? A low-income homeowner who is looking to refinance will see his previous fee of $102 jump to $327.  The homeowner working to try and avoid losing their home to foreclosure, through a modification of a loan would have previously paid $43 and now will be forced to pay $268 in an attempt to keep their home.

Why does the Legislature say they need SB 2?  They claim it is to pay for the construction of affordable housing in California.  The proponents of SB 2 claim the bill will increase recording fees by upwards of $700 million dollars. Achieving affordable housing for all Californians is a commendable goal. However, according to a report issued by the California Legislative Analyst’s office last year- greater subsidies, such as those proposed in SB 2 - won’t fix the problem.

Instead Senator Atkins and the rest of Sacramento should be looking at lasting effective reforms by overhauling the California Environmental Quality Act or reforming the tax code to incentivize residential development.  Construction labor is more expensive in California metro areas than in the rest of the country by about 20 percent. Not to mention that the building codes and standards in California are some of the most comprehensive and strict in the nation demanding homeowners to pay more for the increased materials and labor requirements.

Even Governor Brown has proposed streamlining the costs of building and permitting of new affordable housing in California.  SB 2 is just a quick fix for politicians to feel like they’ve helped to address this increasingly worrisome issue, but it will not work to resolve the greater problem of the ridiculous costs of building a house in this state. Until these issues are addressed any revenue raised from SB 2 won’t even begin to properly address the issues of providing affordable housing to Californians. 

Another problem that this bill doesn’t address is a common theme in Sacramento—the money doesn’t always end up where it should. Supporters of SB 2 argue that these new taxes are needed to replace funding that was eliminated when the Legislature abolished redevelopment agencies in 2012. But, an audit of State-administered housing fees in California last year found that the Housing and Emergency Shelter Trust Fund Acts of 2002 and 2006, which provided nearly $5 billion in bonds for financing affordable housing for low- to moderate-income Californians, were often administered without the Housing and Community Development Department (HCD) knowing if the funds were used properly or if they went to the targeted populations.

Instead of hurting hardworking taxpayers to fund a flawed system providing affordable housing, Sacramento should put in the work to address the real issue of over-regulation and high construction costs.