Law would focus on less-than-affluent buyers in poorer communities
A bill aimed at attacking California’s affordable housing issues would offer a $5,000 tax break to first-time homebuyers who purchase a home in a distressed community.
Assembly Bill 1590, introduced in February by Assemblywoman Blanca Rubio, D-Baldwin Park, focuses on low- and moderate-income households that are willing to buy in communities identified as “distressed” by the state. It would help buyers who make the move between Jan. 1, 2020 and Jan. 1, 2023.
The legislation, designed to help potential first-time buyers facing a market with few affordable homes, proposes a $50 million allocation to pay for the tax breaks. It faces its first hearing Monday before the Assembly Revenue and Taxation Committee.
Rubio authored AB 1590 with the California Association of Realtors. The organization is sponsoring it “to make the dream of homeownership a reality for low- and moderate-income families in disadvantaged communities,” CAR President Jared Martin said in a statement.
To qualify, a household cannot have an income that exceeds 120% of the median for their area. That would put the limit at about $73,500 in Los Angeles County, $97,200 in Orange County, $72,000 in Riverside County and $67,400 in San Bernardino County, according to state data.
Applicants must never have previously owned a home and must live in an area designated by the state as “disadvantaged.” Factors defining that include low levels of income and education, high unemployment and health and safety risks.
Taylor Woolfork, a spokesman for Rubio, said her staff began meeting with CAR to craft the bill in January. Many homebuyers are hit with sudden expenses, he said, along with the cost of coming up with a downpayment.
“It would really help with the uncertainties involved when you buy a house,” Woolfolk said of the proposed tax break. “Sudden costs like repairs happen. We’re trying to make the case that this is an important piece of legislation. “
CAR is the only organization currently signed on as a sponsor and it’s hoped that additional supporters will join in. If the $50 million is allocated, it could help 10,000 families, Woolfork said.
“It’s a lot of people,” he said. “If this is seen to be successful, it could grow.”
Robert Kleinhenz, an economist with Beacon Economics and executive director of research at the Center for Economic Forecasting and Development at UC Riverside, said potential buyers face a lot of hurdles. For example, he said, it is difficult for many first-time buyers to pass the credit score screenings.
But the bigger problem, according to Kleinhenz, is a lack of inventory and AB 1590 does not address that issue. Essentially, it rewards those who were fortunate enough to find an affordable home with a tax break, addressing demand while ignoring the lack of supply.
“It’s a great idea, but it misses the mark,” he said. “What we need is more inventory, and this doesn’t do that. It subsidizes the first-time buyer, but what we really need are supply-side policies.”
Article originally posted by PE.com