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Kammi Foote

SB 2: New Tax on Homeownership

SB 2 (Atkins) hurts families struggling to maintain homeownership, places a significant financial burden on middle-class Californians and weakens the integrity of the land records system – one of the mainstays of our free enterprise economy.

Since 1850, California’s County Recorders have managed and protected the integrity of land records while preserving and defending public access to the information in their care. County Recorders collect a nominal fee on every document recorded to cover the direct cost of providing this valuable service.

SB 2 would impose a $75.00 tax on locally recorded documents to help fund state-administered affordable housing programs. While most can agree that there is a need for affordable housing in California, SB 2 only creates a different hardship as it attempts to alleviate another. This is due in part because the funding mechanism is flawed.

Currently, base recording fees ranges from $6 to $10 depending on where you live in the state. This bill would increase that fee to anywhere between $81 and $85 per document; amounting to a tax increase of up to 1,250%, except on home purchases because special interests have exempted them in the bill.

SB 2 contains an exemption for recording documents in connection with a home purchase. This means that a person buying a million dollar home would be exempt from paying the tax, however the family attempting to refinance their high interest mortgage, the widow filing the affidavit of her husband’s death, the contractor filing a mechanics lien for unpaid work and the senior citizen on a fixed income would all be required to pay. In essence, the majority of the people required to pay the tax would be the least financially capable of doing so.

While it is important for working families to have affordable housing opportunities, this bill is particularly troublesome for middle class families. Across California cities are increasingly home to upper income executives who can pay high rents and lower income people who qualify for subsidized housing. Meanwhile the middle class is increasingly unable to pay for the high cost of housing.

In a recent Wired article, Mechele Dickerson of the University of Texas, an expert in housing and the middle class was quoted as saying “It’s very hard to get people to understand that the affordable housing crisis is not for the very poor. It’s for people with good jobs who are not poor enough to qualify for subsidized housing, nor rich enough to pay the rising housing prices. A family that makes $100,000 can’t afford to buy a house in most US cities.”

In addition, since the act of recording is completely voluntary. A large increase in Recording Fees is likely to preventlow income home owners from recording important transactions. While those transactions would still be legal, potential buyers and lenders would have no knowledge of them.

Any deterrent to record documents is contrary to the very purpose for which the land records system was designed. Congress and legislatures developed our real property system to provide a way for Californians to independently prove ownership to their own homes. What would happen if Californians were unable to pay to provide public notice? Not recording essential documents could lead to deception and confusion in the housing market.

Weakening the integrity of the land records system in an already depressed economy will perpetuate the state’s chronic housing crisis.

The California legislature must recognize the profound and unjust impact that this tax will have on families who have already achieved homeownership. They must ask themselves if requiring ordinary Californians to bear the burden of financing this special project is worth putting them at further economic risk. Finally, they must recognize that this bill will harm all Californians by critically undermining and eroding the public’s confidence in the reliability of our land records. For these reasons, I urge California legislators to reject SB 2, as they have in the past when similar bills have been proposed.

Kammi Foote is Clerk-Recorder and Registrar of Voters for Inyo County.