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Friday, Jun 9, 2023

A Tax Business Can Support

A healthy construction industry is a key indicator of a healthy overall economy. At its peak in 2006, the construction industry comprised more than 9 percent of the U.S. gross domestic product. By 2011, it was less than 5 percent. Policymakers on all levels know the importance of a robust construction sector and have introduced several bills in the last few years to protect and expand construction. The latest effort is the California Homes and Jobs Act of 2013, authored by Sen. Mark DeSaulnier, D-Concord, and co-authored by Assemblymembers Toni Atkins, D-San Diego, and Raul Bocanegra, D-Pacoima. The bill places a $75 fee on real estate documents – excluding home sales – to generate roughly $500 million a year for a California Homes and Jobs Trust Fund. This revenue will supplement the $2.78 billion in federal funding, local funding or bank loans that California devotes to building and administering affordable homes. The state needs alternate revenue streams for affordable housing because the funds from the two existing general obligation bonds intended for that purpose – Propositions 46 in 2002 and 1C in 2006 – have been exhausted. Since 2002, state investment through general obligation bonds has built more than 174,000 affordable apartments, for-sale homes and shelters. This bill would use the revenue through private/public partnerships like the CalHOME and Multifamily Housing Program utilized with Propositions 46 and 1C general bonds. The legislation tackles two problems facing California: A lagging construction industry and a shortage in affordable housing. Construction employment in California currently hovers at levels 38 percent lower than the industry’s peak in February 2006. The act is estimated to create 29,000 jobs annually, mostly in the construction industry. This boost would put thousands back to work and bring construction employment statewide closer to peak levels. Additionally, construction is a trade that creates a larger economic impact in the community. The National Association of Homebuilders estimates that the construction phase of 100 apartments creates $7.9 million in local income, $827,000 in taxes and other revenue for local governments, as well as 122 local construction-related jobs. Annually, such a development would continue to bring $2.3 million in local income, $395,000 in taxes and other revenue for local governments, and 32 local jobs. Beyond strengthening the construction sector, the legislation helps relieve the state’s lack of affordable housing. California has always struggled with low rental inventory, but the foreclosure crisis has pushed more people into the rental market, leading to record-setting rent increases. The Los Angeles metropolitan area has a 5 percent vacancy rate for rentals. Meanwhile, the waiting list at Los Angeles County’s Office of Public Housing totaled 301,044 applicants at the end of 2011, and the City of L.A.’s public housing and Section 8 programs report a total waiting list of 37,386 families. The discrepancy between supply and demand needs a solution, and this legislation is a strong first step in finding a long-term solution. The Valley Industry and Commerce Association supports the California Homes and Jobs Act, but recommends that the legislation be amended to include a cap on the number of documents that can incur a fee per transaction. A $75 fee is a worthy investment for much-needed housing and jobs but the policy becomes onerous when an individual is smacked with hundreds of dollars in fees in a single transaction. In the end, a dedicated trust fund of housing seed dollars means California can create new housing and jobs to spur economic growth and find homes for thousands of struggling families. The California Homes and Jobs Act of 2013 is an example of relatively unobtrusive legislation that results in far-reaching programs and economic activity. The Valley Industry and Commerce Association (VICA) is a business advocacy organization based in Sherman Oaks that represents employers throughout the Los Angeles County region at the local, state and federal levels of government.

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