California's state leaders are debating whether they should tax homebuyers in order to fund more affordable housing for those who struggle with renting a house, let a lone buying one.
It used to be the "American Dream" was to purchase a detached single family home down the street from Ozzie and Harriet Nelson. Today, that dream has been reduced to simply hoping your family can afford rent on a two-bedroom apartment sandwiched in a multi-storied stucco box.
With almost a third of American homeowners owing more on their mortgage than the value of their homes, more of these families with "underwater" loans are experiencing a housing nightmare. Basically, American homeowners are drowning in debt.
Losing a home to the bank means your family joins the other millions of people competing to rent limited living space. With bad credit and depleted savings, the odds of landing an apartment in a good neighborhood can sometimes be worse than being picked to compete on American Idol.
State policy makers in California are becoming aware of the sad state of affordable housing among their constituents. With the state"s decision to eliminate Redevelopment Agencies that in turn cut a billion dollars of funding for affordable housing per year, low-income Californians are reeling from the lack of housing affordable enough for their down-sized family budget.
A new law is being proposed that would add $75 to every real estate transaction in California with the proceeds going to funding affordable housing. The bill is SB 1220, and is called the "Housing Opportunity and Market Stabilization Act" or HOMeS Act.
For anyone who is lucky enough to purchase a home, that long list of fees at the end of escrow is daunting. The HUD-1 Settlement Statement is like a laundry list of backroom payments, and looks sort of like an exorbitant medical bill from a week-long stay in the hospital where the five-cent wood tongue depressor is charged at $25.
There are fees for appraisals, processing documents, notary, transfer tax, and title policy. Everyone has their hands out for a cut of the transaction.
So what's another $75 fee when the average price of a California home is around a quarter of a million dollars? Should families who are wealthy enough to purchase a home donate to families who struggle to stay off the streets? Should the mainstream housing market pay for affordable housing for people who cannot afford to buy into that market?
Critics of this proposed law would say a $75 fee could ruin this state's fragile housing market. But the fragile state of California's families should trump such criticism.
A small $75 fee per transaction would raise between $400 million to $1 billion dollars per year. With leveraged funds, these resources could provide thousands of new homes for low-income and homeless families and individuals.
How would you tell your child that you are living in a motel, rather than an apartment, because the lucky families who are able to buy a house are unwilling to pony up $75, or .03 percent of the price of their home? The justification for not charging this fee does not make moral or economic sense.
For years, Californians have been called national trend-setters, from the cars we drive, to health-conscious lifestyles, to responsibly caring for our environment. With political courage, California's leaders could once again set a national trend in caring for its hurting citizens by creating a fund to build more affordable homes.
I think Ozzie and Harriet Nelson would probably support such an initiative.