March 21, 2023 #1 Local News, Forum, Information and Event Source for Venice Beach, California.

Affordability Answer: A New Tax on Housing Speculators?

By Tom Elias, Columnist

The TV commercials and online ads are fast becoming ubiquitous: “We’ll buy your house as is,” they trumpet. “No need to spend any money fixing it up.”

That’s commonly the message from housing speculators, often institutional investors including real estate investment trusts less interested in preserving or maintaining housing than cashing in as land values rise. It’s the land, not the houses, that interests them most.

Says a Northern California citizens group called United Neighbors, “Non-wage capital, especially institutional and private equity, is entering the single-family market in unprecedented amounts.”

That’s a big reason why, the group contends, “California housing costs have inflated at such a rate that housing costs have completely decoupled from their historical wage-based income basis.”

That, they say, is the root cause of the affordability crisis. It is furthered by the fact that institutional investors, including pension funds like CalSTERS (the California State Teachers’ Retirement System) and CalPERS (the California Public Employees Retirement System) keep many purchases vacant while they await land value increases. This frees them from dealing with tenants and evictions when they decide to sell or to demolish existing homes and turn them into multi-unit properties.

United Neighbors claims institutional buyers, including Wall Street investment banks, spent a record $77 billion on single-family California homes over the last six months of 2021.

That makes them the ultimate house flippers, people or companies buying homes to hold for awhile before they resell at a hefty profit.

It creates large vacancy rates in some places at a time when California supposedly has a housing shortage. The actual shortage is in affordable housing, as 73 percent of houses permitted in 2020, for just one recent year, were affordable only to households with incomes well over $100,000.

All this has also seen vacancy rates rise among housing units built since 1970 – more than 50 years’ worth. Statewide, the vacancy rate on these “newer” units was 12.4 percent in late spring. In Los Angeles County, it was 16.3 percent, while San Francisco had an overall vacancy rate of 8.7 percent and more than 40,000 vacant units.

All of which suggests none of the controversial housing bills passed with alacrity by the Legislature in recent years can be effective, including last year’s Senate Bills 9 and 10, which essentially did away with R-1 single-family zoning statewide and allow subdividing of almost all lots in those areas.

The problem, it appears, is less a lack of housing – especially while California’s population is relatively stable and not growing fast, if at all – than the fact that wages and home prices have gotten out of the usual synch, partly because of institutional investments.

This year, Democratic state assemblyman Chris Ward of San Diego, which recently “won” the ranking as America’s least affordable city, proposed a bill to tax the profits of house flipping, especially by corporations and pension funds. It died in committee, but deserves resurrection.

His bill, known as AB 1771, aimed to place a 25 percent levy on after-capital-gains-tax profits from reselling any house within three years after it’s bought. After that, the rate would have dropped to 20 percent and then declined steadily before disappearing after seven years.

Taxes collected would have gone to cities, counties and affordable housing funds, said Ward, whose purpose, he told a press conference, was to create a disincentive for equity investors, thus opening more opportunities for people who plan to live in homes they buy.

This would especially help mid-priced housing availability, because institutional buyers are more likely to buy that type of housing than high-end homes, whose appreciation rates are far less steady and predictable, often selling for millions less than their asking prices.

The bill was opposed by building trades unions, whose workers don’t much care whether or when the places they build are occupied, so long as paychecks arrive on schedule.

Those unions and the developers with whom they work have been the main drivers behind the Legislature’s recent spate of unwise, unneeded new housing laws.

The bottom line: Yes, there is a housing crisis, but it’s at least as much a matter of hoarding and waiting for profit as it is of supply.

Email Thomas Elias at tdelias@aol.com. His book, “The Burzynski Breakthrough, The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It,” is now available in a soft cover fourth edition. For more Elias columns, visit www.californiafocus.net

Related Posts

Venice Shorts: “V” for Venice Volunteer

March 20, 2023

March 20, 2023

Media professional, local business owner and Dad, Eric Alan Donaldson is defined by his volunteerism and love of Venice. By...

Deborah Keaton, a Consensus Building Candidate for VNC Community Officer!

March 20, 2023

March 20, 2023

Creative director, global brander and private business owner seeks a general consensus on what’s best for Venice moving forward.  By...

Brand New Four-Bedroom Farmhouse in Venice Hits Market

March 19, 2023

March 19, 2023

Louella Avenue listed for $4.2 million.  A modern farmhouse in Venice designed by Joanna Leon has hit the market for...

Developer Seeks Approvals for New Multifamily Residential Building in Palms

March 19, 2023

March 19, 2023

Helio, a Los Angeles-based real estate development firm, has submitted an application for a new multifamily residential building at 3734...

Venice Shorts: Actress, Advocate Alley Bean Seeks Second Term as a Venice Community Officer

March 14, 2023

March 14, 2023

33-YEAR RESIDENT, GRANDMOTHER AND CANAL HOMEOWNER IS OPTIMISTIC ABOUT VENICE’S FUTURE! By Nick Antonicello  VENICE – Alley Bean (also known...

Venice Shorts: A Reliable Community Voice

March 13, 2023

March 13, 2023

By Nick Antonicello An accomplished architect and neighborhood advocate, J. Robert Thibodeau is a consensus moderate who seeks solutions for...

Column: SB 9 Ended R-1 Zoning, but It’s Not Meeting Goals

March 11, 2023

March 11, 2023

By Tom Elias More than a year after it took effect, the landmark housing density law known as SB 9...

YouTuber Cody Ko Lists Venice Architectural Compound for $4.3M

March 10, 2023

March 10, 2023

4-bed, 4-bath private estate in Silver Triangle is now listed boasting deluxe master retreat, outdoor patios, and lush grounds By...

Scooter Braun Buys Former Broad Art Foundation Building Near Santa Monica-Venice Border for $25.9 Million

March 10, 2023

March 10, 2023

Music entrepreneur buys 1927 four-story brick building at 3355 Barnard Way By Dolores Quintana Scooter Braun, a talent manager and...

Apartment Association of Greater Los Angeles Sues City Over Renter Protection Ordinances

March 10, 2023

March 10, 2023

The AAGLA’s lawsuit seeks to overturn Ordinance No. 1877764 and Ordinance No. 187763 The Apartment Association of Greater Los Angeles...

Beverly Hills-Based Developer Proposes New Six-Story Apartment Complex in Palms

March 10, 2023

March 10, 2023

Project proposed for 3751 S. Delmas Terrace would bring 17 apartments to the area just north of downtown Culver City...

Del Rey Multifamily Development Plans Change After Setback

March 10, 2023

March 10, 2023

Plans call for 27 apartments and 800 square feet of retail at 13481-13485 W. Beach Avenue  Plans for a proposed...

OpEd: Venice Bridge Housing in Blatant Violation of the Coastal Act; Continues to Burden Neighbors

March 9, 2023

March 9, 2023

By Mark Ryavec As everyone in North Venice knows, the Venice Bridge Housing facility should never have been placed on...

Venice Shorts: A New Bloom for Flower!

March 6, 2023

March 6, 2023

Beautification takes place after encampment cleanup by city officials By Nick Antonicello VENICE – After years of crime, encampments and...