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Did you strike gold selling your house? Maybe you should share the wealth

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The idea of ​​imposing taxes on the transfer of luxury real estate is gaining momentum in some local cities. Above, a house for sale in Corona del Mar in 2021. (Susan Hoffman)

Modest South Pasadena House It went on the market for just under $ 1.2 million and sold for over $ 2.5 million in hair, and when I wrote about it last month, I wasn’t surprised by the reaction.

I suggested that a small stock tax should be levied on the profits of the storm if there are crazy bidding wars in Southern California, full cash transactions, and offers that far exceed the asking price. As I said, spend that money on education and build housing for those who are locked out of this market.

Many readers didn’t care much about my thoughts.

“The seller of the house … paid a’stock tax’… and it wasn’t a small thing,” said one. “It’s called state and federal capital gains tax.”

Another reader said the same thing, saying, “Stop whining about income inequality,” and that being at the top is “only ambition and attitude.”

It’s a little more complicated than that, but let’s move on.

Yes, I know home sellers pay capital gains on profits, and it’s a big hit. There is also a much more modest real estate transfer tax.

However, this idea I’ve been proposing for years hasn’t been accepted as much as some people think.

In Los Angeles, a coalition of homeowners and activists has submitted a signature suggestion It could end with a vote in November. The United to House LA Initiative imposes additional taxes on real estate sales in excess of $ 5 million and devotes its income to housing and homelessness prevention.

In Santa Monica, Mayor Susan Himmerrich is collecting signatures. Similar suggestions Fund housing and schools.

And with both this great wealth and the highest poverty rate in the country (taking into account living and housing costs), other cities are using what is called a luxury tax to enhance city services.

Shane Phillips, who manages the Randall Lewis Housing Initiative at UCLA and author of “Affordable Cities: Strategies for Housing,” said “The Bay Area has about 12 cities, including San Francisco and Berkeley.” And the distribution tax is high. ” Reach (and maintain it). “

Cities use different formulas for taxes and do not necessarily direct their income to housing. In Culver City Voter approved With the transfer tax added in 2020, the $ 6 million annual revenue forecast has already been exceeded, and the money is being used, among other things, for postponed street and park maintenance, after-school programs and homeless services.

You see, I hate the tax increase. I also get the argument that the government should do more with the amount we have already paid, especially in high tax states like California.

But Housing equity Here and much of the rest of the country, it has skyrocketed to trillions of dollars. According to Phillips, the value of valued residential and commercial real estate in Los Angeles County is increasing by about $ 100 billion annually.

But while millions of people become millionaires, on paper, millions of workers can’t afford the median home price of $ 800,000 in Los Angeles, rising. I’m paying the rent to continue. Thousands are homeless.And it doesn’t help it Corporate They robbed their homes and turned them into rents, squeezing out future buyers.

If you’re one of the lucky ones and your home is a commodity rather than a place to sleep, it favors those who can afford a home, thanks to timing luck and federal, state, and local policies. I am. The cost of those who cannot.

You can deduct the mortgage loan fee.

Proposal 13 keeps property taxes low, depending on when it was purchased in California, but new neighbors pay far more taxes, basically subsidizing those who have artificially lower taxes. doing. Commercial real estate also enjoys the benefits of even greater Proposal 13 by using legal controls to avoid revaluation at the time of sale.

Also, the value of three-bedroom ranches continues to rise as many of the states are zoned to single-family homes and homeowners are opposed to cheaper, denser homes. For a South Pasadena seller, he bought a home for $ 155,000 in 1983 and sold it for $ 2.5 million this spring.

He and the other sellers deserve their luck, and I haven’t asked them to fork all their profits. At the time of sale, a small portion of the government-sponsored profits are essential to the economy but locked in a way that helps nurses, teachers, drivers, domestic aides, landscaping, retail workers, etc. It suggests that it could be used, robbing salaries of more and more bytes with long commute and rising rents.

“We built Santa Monica behind these people, but now we can’t accommodate them,” Himmelrich said. She and her husband, like her, are lawyers from their pockets when qualifying for a ballot that adds a 5% tax to residential and commercial real estate that sells for over $ 8 million. She said she expected to withdraw about $ 200,000.

Himmelrich wants to raise $ 50 million a year from the additional taxes and use that money for rental assistance, homelessness prevention, and affordable homes and schools.

In Culver City, the transfer tax on homes sold for $ 1.5 million has gone from 0.45% to 1.5%. The tax is 3% for sales between $ 3 million and $ 10 million and 4% for sales above that.

Only very wealthy people will hit, so it’s easier to pass a suggestion to add taxes only to high-end sales. However, Culver City Councilor Alex Fish demanded a $ 1.5 million standard in principle. He said he wants more people to “get skin in the game” rather than just imposing big taxes on the wealthiest residents.

“I feel like my members believe in Culver City and believe in each other,” Fish said.

Under the United to House LA initiative, the current 0.45% transfer tax jumps to 4% for real estate sales above $ 5 million and to 5.5% for sales above $ 10 million.

Laura Raymond, one of the leaders of the coalition, told me that the tax applies to only 3% of the city’s total sales, but generates more than $ 800 million in revenue each year. The coalition states that it will build 26,000 affordable homes in 10 years and use the funds to provide housing stability to 475,000 lessors annually.

“We’re telling stories of two very different cities, and it’s time to do something really bold,” Raymond said, humanitarian the struggle between the homeless and burdensome elderly and the detained renters. I called it a humanitarian crisis.

In Santa Monica, Los Angeles and elsewhere, there is more opposition to this type of proposal than ever before. A Real estate industry In December, a tax increase on real estate transactions “sends the wrong message to further increase the already high costs of housing in the region without addressing key issues. We are still in housing production. Is in danger of being affordable. “

But Michael Manville, an associate professor of urban planning at UCLA, takes a different view.

“If your home’s value doubles, it’s not because you’ve remodeled your killer kitchen, it’s because LA’s economy is rocket-like. Kick-start the LA economy personally. Did you? It’s as impressive as you are, maybe you weren’t, “Manville said.

“The whole community has created that value. You need to wipe out most of it while the lessor is punished just because you were lucky enough to own the house when it happened. There is no particular reason. “

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This story was originally Los Angeles Times..

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