Over the past two years, California Bill 1335 has been making its way through the California Legislature. AB1335, named the Building Homes and Jobs Act, is attempting to establish “permanent, ongoing sources of funding dedicated to affordable housing development.” As a real estate investor and homeowner, this bill may peak your interest. Here’s a quick overview of the bill, and what you can expect if it passes through the California Legislature in 2016.What is AB1335?
California Bill 1335 is a fair housing initiative designed to create a state-mandated local program to collect a tax on real estate document recording. The bill proposes a $75 per document recording fee to fund an affordable housing trust fund for the development of affordable housing and down payment assistance for very low and low income California families.According to an article published by the Los Angeles Times, this tax will “generate $300 million to $500 million annually.”
What will this law change?
If AB1335 is passed by the California Legislature, the bill will create a state-mandated local program requiring county recorders to collect fees on real estate recordings. The county recorder will then send quarterly payments to the Department of Housing and Community Development for deposit into the Building Homes and Jobs Fund. This fund will be created within the State Treasury.
Per the bill literature, the fee will be paid “at the time of the recording of every real estate instrument, paper, or notice required or permitted by law to be recorded, per each single transaction per single parcel of real property, not to exceed $225.”
Currently, the cost to record a document ranges from $6 to $10 depending on the city. This bill would place a $75 tax on this service, increasing the basic recording fee to anywhere between $81 and $85 per document; which is a tax increase of up to 1,250%.
What will happen with the money?
According to the current iteration of the bill, 20% of the money will be used for affordable owner-occupied workforce housing, 10% will be allocated for housing purposes related to agricultural workers and their families, and the remaining 70% will be used to support affordable housing, homeownership opportunities, other housing-related programs, and administrative costs.Who will be affected?
The political nature of this topic has homeowners, investors, community leaders, and politicians from various parties arguing different social impacts. The following groups will be affected by this bill:
- Anyone who buys, sells, refinances, or owns real estate: This will affect a wide range of real estate transactions including buying and selling, mortgage refinancing, mortgage modification, filing an affidavit, transferring real estate, and more.
- Contactors: Contractors filing a mechanics lien for unpaid work and supplies.
- California Workers. According to Steve Lopez of the Los Angeles Times, the “bill would create an estimated 20,000 to 30,000 construction-related jobs” in California.
- Low Income Families: This bill funds new construction of low cost housing for very low and low-income families.
Assembly Bill 1335 it currently suspended, but will be back on the table in 2016 when the legislature reconvenes. To learn more about the bill, read the most current version here.