California remains among the most expensive housing markets in the country.
The median price for a home in June was $352,000 statewide, according to Data Quick. The income needed to afford this house would be about $135,000 annually. Of course, median income is nowhere near that less than $60,000 a year.
Even in Sacramento, which is lower-priced, a family would need to earn about $79,000 to afford the median-priced house price of $205,661.
California continues to have a giant mismatch between incomes and housing prices.
Not surprisingly, a preschool teacher earning an annual salary of $30,000 and a construction worker earning $39,500 struggle to find an affordable home to buy or rent. So do senior citizens on fixed incomes, veterans returning home from war and anyone earning minimum wage.
We have to figure out how to produce affordable housing for those who are on fixed incomes or working at lower-wage jobs.
This task has become all the more urgent since voter-approved housing bonds from 2002 and 2006 that provided $500 million a year have run out. And the Legislature and Gov. Jerry Brown eliminated redevelopment agencies as of 2012 which had been required to allocate 20 percent of tax-increment monies generated in redevelopment districts for affordable housing, totaling about $1 billion per year.
How to replace that $1.5 billion a year to produce affordable housing of the future and leverage private bank loans and federal funds?
Of 47 states and the District of Columbia that have housing trust funds, the most common revenue source is a real estate transfer tax tied to the value of the property but that is vigorously opposed by the California Association of Realtors. The second most common source is a document recording fee in Connecticut, Delaware, Illinois, Kentucky, Massachusetts, Missouri, Ohio, Oregon, Pennsylvania, Washington and the District of Columbia.
Senate Bill 391 by Sen. Mark DeSaulnier, D-Concord, would put a $75 document recording fee on real estate transactions such as refinancing but, to allay industry opposition, excludes home and commercial property sales. Raising an expected $300 million in low-activity years and $700 million in high-activity years, this would allow the state to add an average of 10,500 new affordable apartments and single-family homes annually.
This is worth supporting, has a nexus to housing and is in line with how other states fund affordable housing.
The Senate passed SB 391 in May.
Now the bill goes to the Assembly, which holds hearings on Monday and Wednesday. This bill should garner support from both Democrats and Republicans. Builders and almost every major business association across the state support SB 391. The California Bankers Association, which opposed the idea in the past, has taken a neutral position.
The powerful Realtors association opposes the bill, though it supported a similar bill last year, making this an uphill battle. Legislators should ask, if not a document recording fee, what source would you support to raise enough funds to add 10,500 new affordable apartments and single-family homes annually?
Supporters might take a playbook from Oregon, where a document recording fee passed easily in 2009 with eight Republican votes in the Oregon House and two in the Oregon Senate.
An increase in the fee this year targeting affordable housing for veterans not only won Republican votes, but Republican sponsors.
How would a $75 document recording fee work? A traditional refinance results in two documents being recorded (deed of trust and reconveyance).
Compare this one-time $150 fee with the hundreds each month that homeowners, mostly at the upper end of the income spectrum, save through refinancing. This is not onerous.
Further, a $500 million-a-year investment in affordable housing would be small in comparison with California's $5 billion annual mortgage interest deduction subsidy for homeownership, a benefit that goes disproportionately to higher-income households.
The Assembly should champion SB 391 on a bipartisan basis to reduce the number of California households that are priced out of affordable housing.