The housing market at the time of this writing still has not rebounded, as some financial experts have hoped. California is ranked third in foreclosures nationwide. California enacted several important pieces of legislation to help spur the market and provide relief to those who sold their homes as short sales or modified their loans to ward-off foreclosures. In 2009, a bill was enacted SB 15 X2 (Ashburn), Chapter 11, Statutes of 2009-10, 2nd Extraordinary Session, which attempted a 10% tax credit or 5% of the purchase price, if that amount is lower, for taxpayers purchasing qualified homes after March 1, 2009 and before March 1, 2010. The legislation allocated $100 million in credits for previously unoccupied homes that serve as the taxpayer’s principal residence. The Franchise Tax Board allocated all of the available credits by July 2, 2009, on a first come, first-served basis. The law itself was to sunset on January 1, 2013.
Homeownership tax subsidies that already exist include (1) the mortgage loan interest deductions, which according to the Department of Finance will result in more than $5.4 billion in foregone revenue in 2009-10, (2) the capital gains exclusion, which the Department of Finance estimates will result in more than $3.7 billion in foregone revenue in 2009-10, (3) the deductibility of property tax from federal income, and (4) the approximately $6.6 billion in other federal tax credits made available as part of the federal economic stimulus package to encourage homeownership.
This year, the Legislature passed and the Governor signed AB 183 (Caballero) which authorizes the $10,000 credit. Specifically, AB 183 gives the Franchise Tax Board authority to extend a total of $200 million in tax credits to homeowners: $100 million for buyers of new unoccupied homes and another $100 million for first-time buyers of existing homes. The credit is extended from May 1, 2010 to December 31, 2010, to be available to buyers on a first-time, first-served basis and is applied in equal amounts over a period of three years. To qualify, the buyer must not be a dependent and must purchase a home that does not belong to a relative. The legislation is designed to encourage home purchasing, jumpstarting building projects, and boost local economies. A second bill, SB 401 (Wolk), extends the law providing mortgage debt forgiveness to homeowners who have already lost their homes due to declining home prices and cannot afford to pay thousands of dollars in taxes because the mortgage company forgave the remainder of the loan. This means that Californians who have sold their homes as short sales are allowed to exclude from taxable income the amount that was still owed to the mortgage company. The legislation, which increases the amount of mortgage debt forgiveness available, also applies to homeowners who made loan modifications in 2009.
Also in Housing, California was awarded $318 million in American Recovery and Reinvestment Act funds by the Housing and Urban Development Department. These awards are funded through the federal Neighborhood Stabilization Program to help reinvest and rehabilitate foreclosed homes, eliminate blight and reinvigorate and stabilize affected neighborhoods hit hardest by foreclosures. These funds can be used to acquire land and property, demolish or rehabilitate abandoned properties, and/or offer down payment and closing costs assistance to low- to middle-income homebuyers. Granters can also create “land banks” to assemble, temporarily manage, and dispose of foreclosed homes. A land bank is a public authority created to effectively hold, manage, and develop foreclosed property. Also, in June, the Governor announced the approval of the California Housing Finance Agency’s plan to use nearly $700 million in federal funding to develop programs to help homeowners struggling to meet their mortgage payments.
Other important Housing legislation which was enacted included SB 183 (Lowenthal) enacting the Carbon Monoxide Poisoning Prevention Act of 2010 requiring all existing dwellings intended for human occupancy that have a fossil fuel burning appliance, a fireplace, or an attached garage to install a carbon monoxide device; SB 812 (Ashburn) requiring cities and counties to include an analysis of the housing needs of the developmentally disabled in the analysis of special housing needs in their housing elements; SB 931 (Ducheny) providing that in the case of a short sale on residential real property, the holder of the first mortgage or deed of trust shall fully discharge any remaining borrower’s indebtedness following the sale when the sale has been agreed to in writing; SB 951 (Correa) extending the sunset on the mobilehome park maintenance inspection program until January 1, 2019; SB 1493 (Wright) extending the sunset on the Multifamily Improvement District Law from January 1, 2012 to January 1, 2022; AB 702 (Salas) expanding the definition of who may reside in farmworker housing to include any person who works on or off the farm in processing of any agricultural commodity until it is shipped for distribution; AB 1641 (Hall) establishing that public housing projects over 50-years-old are blighted if they meet the “blight” definition and provides the requirements for redevelopment public housing projects; AB 1867 (Lieu) changing, for local governments, the eligibility requirements for the substantial rehabilitation of units for purposes of meeting housing element and regional housing needs assessment requirements; AB 2325 (Lieu) requiring a foreclosure consultant who provides an audit or any obligation secured by a lien on a residence in foreclosure to register with the Department of Justice; and AB 2406 (Blakeslee) allowing redevelopment agencies in adjoining cities to pool their low- and moderate-income housing funds to construct, rehabilitate, and preserve housing for extremely low-income persons.
Vetoed Housing legislation included SB 194 (Florez) which would have enacted the Community Equity Investment Act of 2010 specifying how funds received under the federal State Community Development Block Grant Program are expended at the local government level; AB 602 (Feuer) which would have protected developer’s rights and promoted compliance with existing legal obligations to make appropriate plans for affordable housing to meet all community needs; AB 2293 (Torres) which would have required the Department of Housing and Community Development’s authority to reserve funds for awards for the Multifamily Housing Program, Transit-Oriented Development Program, and the Joe Serna, Jr. Farmworker Grant Program that meet specified qualifications; AB 2536 (Carter) which would have allowed Emergency Housing and Assistance Program funds, approved by the voters in the Housing and Emergency Shelter Trust Fund Acts of 2002 and 2006, to be used for supportive housing programs; and AB 2743 (Nava) which would have prohibited landlords from imposing conditions on occupancy of real property that might cause an animal that is allowed on the premises to be devocalized or declawed.