Column: Did you strike gold selling your house? A growing chorus says you should share the wealth
The idea of levying a tax on high-end real estate transfers is gaining momentum in some local cities. Above, a home for sale in Corona del Mar in 2021. (Susan Hoffman)
The modest South Pasadena home listed for just under $1.2 million and sold for just over $2.5 million, and writing about it last month I wasn't surprised by the reaction.
I suggested that given the crazy bidding wars in Southern California, cash deals and bids way above asking price, there should be a small equity tax on deadweight gains. Put that money into education, I said, and into housing for those excluded from this market.
Many readers were not particularly interested in my idea.
"The seller of the home... paid an 'equity tax'... and it wasn't a small one," one said. "It's called state and federal capital gains taxes."
Another reader made the same point, telling me to "stop whining about income inequality," saying that getting to the top can come down to "nothing more than ambition and attitude."
Well, it's a little more complicated, but let's move on.
Yes, I am aware that a home seller pays capital gains on profits and that is a big hit. There is also a far more modest real estate transfer tax.
But this idea, which I've been promoting for a number of years, isn't as far-fetched as some might think.
In Los Angeles, a coalition of housing providers and activists just signed for a proposal that could land in November's election. The United to House L.A. initiative would levy an additional tax on home sales over $5 million and use that revenue to fund housing and homelessness prevention.
In Santa Monica, Mayor Susan Himmelrich is collecting signatures for a similar proposal to fund housing and schools.
And in this state of fantastic wealth and the country's highest poverty rate (considering the cost of living and housing), other cities are using what some have called a luxury tax to prop up city services.
"There are about a dozen cities in the Bay Area with an increased transfer tax," including San Francisco and Berkeley, said Shane Phillips, who directs UCLA's Randall Lewis Housing Initiative and author of "The Affordable City: Strategies for Putting Housing Within." is reaching (and keeping there)”.
Cities use different formulas for the tax and don't necessarily channel revenue into housing. In Culver City, where voters approved an additional real estate transfer tax in 2020, annual revenue has already exceeded its forecast of $6 million, with money going to deferred road and park maintenance, after-school programs and homeless services, among other things.
Look, I'm getting the aversion to tax increases. I also get the argument that the government should do more with what we already pay, especially in a high-tax state like California.
But housing stock here and in much of the country has reached trillions of dollars. Phillips said Los Angeles County's appraised values of residential and commercial real estate are increasing at about $100 billion a year.
But while millions of people are becoming millionaires, millions of paper workers can't afford the median home price of $800,000 in L.A. on paper and are paying ever-increasing rents. Thousands more are homeless. And it doesn't help that companies are snapping up houses and converting them into rentals, crowding out potential buyers.
If you're one of the lucky ones whose home has become a commodity rather than just a place to sleep, it's partly due to luck of timing and federal, state, and local policies that favor those who can afford it able to buy a house costs of those who cannot.
The story goes on
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