By Johnny Khamis

While we are still battling a housing crisis in the bay area one new tool can help free up family units onto the market soon. Prop 19 passed by the voters in November 2020 allows seniors, disaster victims and the severely disabled to transfer their property tax base statewide. Now that it has fully gone into effect, many questions have been brought up about how to utilize the benefits of this new law. In this article we will take a closer look at some of the positive effects of Prop 19 and how it can help solve our need for creating more housing inventory. 

You may recall that up until Prop 19 passed, Seniors (55 and older), only had the ability to preserve their tax basis on their home when moving to a home in a county accepting the transfer of basis and were required to buy a home of equal or lesser value. Under Prop 90 Seniors only had this opportunity if they were moving to Alameda, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, Tuolumne, or Ventura County. This restriction had the effect of making Seniors feel trapped in homes that no longer meet their needs and created shortages for much-needed family housing. 

Now under Prop 19, older homeowners, those who are severely disabled, or victims of wildfires or natural disasters can move anywhere in the state without location restrictions. Qualified homeowners can transfer their existing property tax base to another property regardless of the cost of the replacement home (with an adjustment upward to their tax basis if the replacement property is of greater value).

For example, If my Aunt sold her 4 bedroom home in Morgan Hill for $1 million to move to a senior living condo in San Mateo, she is able to preserve her tax basis as long as the new condo is equal to or less than the value of the home she is selling.  

Now if Aunt Lily wants a high-rise condo in San Francisco and pays $1.2 million she would still be able to preserve most of her tax basis.

The State Board of Equalization has created several new forms to enable homeowners to claim the tax savings. They have made the forms available to all county assessors, but some offices are still working on implementing them. Learn more on the Assessor’s website. You can also use SCCAOR’s Prop 19 tax basis portability calculator. The Santa Clara County Assessor’s Office has created a Prop 19 inheritance tax calculator

Now that seniors have been given the freedom to move closer to their grown children or into housing designed to cater to their needs, we can expect the inventory of 3 and 4 bedroom housing to go up.  While this is one step in increasing family housing inventory, we must continue to build more housing if we are ever going to work our way out of our housing crisis.

By Johnny Khamis

My family immigrated to the United States in 1976 seeking the American Dream. Like many families before and after us, a major component of that dream was to become a homeowner. My parents worked hard and slowly built up their savings—my Mom worked as the Avon Lady and as a hairstylist at Regis and my Dad worked as the Culligan man. Finally in 1982 they put a down payment on a fixer-upper in Blossom Valley. This was their American Dream realized. 

Homeownership is still widely considered the dream for many people today. It builds equity both literally and figuratively. According to the Federal Reserve, homeowners have an average net worth that is 40 times greater than renters. They build equity in their homes and can take advantage of tax incentives such as deducting mortgage interest and property taxes, all of which help build financial security. 

Owners are also usually able to secure a fixed monthly mortgage payment. They don’t have to worry about the uncertainty of rising rents outpacing their earnings. For many families, paying their mortgage is like forced savings. Each payment and every home improvement goes towards increasing equity in their home. Additionally, home owners tend to put down roots in the community and take pride in it. Their children thrive in a more stable housing situation.

It has always been difficult to afford a house in the Bay Area and the dream of owning is getting harder and harder to achieve. This is especially true for our hard-working teachers, nurses, and service industry workers. The current median price in Santa Clara County for a Single Family Residence is $1.49 million and a Condo/Townhouse is $850,000. 

There are many reasons for the sharp rise in the cost of housing, including the cost of labor, materials, and the often-abused state consumer protection and environmental laws. The most important factor, however, is that we are simply not producing enough housing supply. Further exacerbating the problem is the fact that what is being produced is often rental units. 

To that end, we must look for ways to make homeownership more attainable. Thankfully there is legislation being proposed at the state level that could help increase the supply of for-sale housing units. In addition to supporting this proposed legislation, we must also change current laws that make it more expensive to build for-sale units. Onerous consumer protection laws have inadvertently caused insurance rates for builders to go up astronomically. These same laws, while well intended, have made the financing of for-sale units production increasingly more difficult. 

We also need more naturally affordable ownership opportunities in suburban neighborhoods for families that don’t want to live in a downtown core. While mid-rise and high-rise for-sale developments are definitely needed, they are not the only type of naturally affordable ownership housing that can be built. Townhome communities can look and feel similar to a single-family home community and they are much cheaper. Low-rise to mid-rise condos also create opportunities for families to own properties in more suburban neighborhoods. Finally, lot splits can create a pathway for smaller, more affordable single-family homes. These additional ownership opportunities also take far less time than a high-rise development.

Taking these steps will help increase the housing supply and make the dream of homeowners more attainable for many. The Santa Clara County Association of Realtors (SCCAOR) is always looking for avenues to help bring the American Dream of ownership to Bay Area residents. These are just a few of the ideas that SCCAOR will champion in the coming year. If you are interested in learning more or would like to stay up-to-date on upcoming housing legislation, please visit www.sccaor.com/stayinformed

By Johnny Khamis

Covid has not only had devastating effects on our health, but it has also wreaked havoc on our economy. Our favorite restaurants and retailers are going out of business and taking their jobs and tax revenues with them. Unfortunately, we know that lost jobs lead to other issues like the inability of renters to pay their rents and homelessness. What people don’t understand is that many of the mom-and-pop owners of rental properties are also struggling to stay afloat. 

In the past 8 years, many new laws and regulations have reduced housing providers’ ability to raise rents and remove problem tenants through eviction and rent increase moratoriums. New regulations have also forced them to respond to time-consuming bureaucratic requirements like rent registries. Many mom-and-pop housing providers have had to hire staff and expensive lawyers just to keep up with the ever changing government regulations. A new survey from the Santa Clara County Association of REALTORS® (SCCAOR) shows that nearly half are ready to sell and get out of the business altogether.

Thankfully the state has started to recognize that local and state laws are putting hard-working housing providers out of business. Recently, California passed SB91 which reimburses housing providers up to 80% of their unpaid rents as long as renters meet certain qualifications.  

  • The program is voluntary for housing providers to participate and apply but they will only be able to receive up to 80% of unpaid back rent and must forgo the remaining 20%.
  • Tenants of housing providers who do not opt in to the program will be eligible to apply for 25% payment of unpaid rent so they receive monthly protection from the statewide eviction moratorium.

The bill prioritizes households with the highest need for rent relief, targeting lower Area Median Income (AMI) categories first.

  • Round 1: Below 50% AMI or unemployed for 90 days.
  • Round 2: Income below 80% AMI and in a community disproportionately impacted by COVID-19.
  • Round 3: Everyone below 80% AMI not addressed in round 1 or 2 above.

But is SB91 really going to help renters and struggling property owners? 

SCCAOR interviewed several owners and found that in some cases, tenants making more than 80% of the AMI are still struggling financially and not paying rent. This leaves housing providers and tenants alike in a tough spot as they have no path to receive assistance through SB91.

Owners are also worried that the paperwork will be overwhelming to tenants and owners alike and require a lot of time and effort to fill out. They also fear that the $2.6 billion will not be enough to even cover the promised 80% of unpaid rents. In fact, over 45% of the small property owners we surveyed did not receive their full rent.  

In the meantime, SCCAOR’s survey shows that 70% of the owners have mortgages, property taxes, and other expenses that must be paid even if they are not receiving rent or aid. Owners like Carlos Padilla have worked hard to find resources for tenants who can’t pay their rent and to protect his lifetime investment. When asked about his tenants who lost their jobs, Carlos said that “they have filled out numerous forms from nonprofits and other non-government organizations with no results and no feedback.”

Owners are now questioning how much longer they can hold on to their investments with all the new levels of bureaucracy and moratoriums. They hope that SB91 can help them and their tenants avoid selling and leaving California or going bankrupt.