There is pressure to pass a law that prevents short-term investors from buying houses and rental properties and then reselling them at higher rates.
Economists estimate that this practice has helped drive up San Diego housing prices by more than 18% over the past year.
Trisha Cortez is a Scripps Health Pharmacy Technician. Since October, she and her partner have been trying to buy their first home. They were outbid 33 times.
“I was done. I was ready to go back to living with my parents,” Cortez said.
Cortez finally closed a home last week in Talmadge. It’s a 500 square foot condo that she paid $400,000 for. Cortez said she paid $70,000 more than the asking price.
“It’s really frustrating,” Cortez said. “It would be really amazing, you know, not to be constantly overbid or underbid by people who have deep pockets.”
Lawmakers, economists and city leaders think something has to change.
California Assemblyman Chris Ward recently introduced the California Housing Speculation Act. It would impose a 25% tax on an investor’s net capital gains from the time of purchase of the property until the final sale or exchange.
This could deter real estate investors from sitting on properties, driving up home prices and reducing inventory.
“The thought of buying a home today is painful for these families, it’s depressing for the next generation, and it’s an outright failure of the housing market,” Ward said.
Exemptions from the tax include first-time home buyers, affordable housing, relocating military personnel, long-term landlords, and landlords who subdivide land on which they will live.
“Corporations and investment firms that do this are nothing more than economic tyrants,” said San Diego Council Chairman Sean Elo-Rivera.
AB1771 could generate an estimated revenue of $4.02 billion. That money would be pumped back into the community, benefiting infrastructure, schools and affordable housing, according to the bill.
According to the Case-Shiller Index report, the median home price in San Diego is $764,000. That’s eight times the current median income.
University of San Diego economics professor Dr. Alan Gin thinks there should be some sort of moral responsibility.
“Capitalism, there’s a lot of good things about it, but one thing is it doesn’t look at it in terms of equity, and so it doesn’t look at people like overpriced housing here in San Diego” , said Dr. said Gin.
Dr. Gin said the high bids also impact local businesses that struggle to bring workers to San Diego because it’s too expensive.
The legislation could go to its first vote in about a month, Ward said.