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New CA bill would impose 25% gain tax on house flippers who sell within 3 years

Assembly member Chris Ward says that process is hurting the housing market and keeping average people from buying a home.

SAN DIEGO COUNTY, Calif. — A state law maker from San Diego says short-term investors are contributing to the housing crisis. Now he’s introduced a Bill he says will give average people a chance to own a home again.

Flipping houses is nothing new. You purchase a property, make necessary changes and then sell it for a profit. 

But Assembly member Chris Ward, from the 78th District, says that process is hurting the housing market and keeping average people from buying a home.

The California Housing Speculation Act or Assembly Bill 1771, is designed to change real estate tax policy and discourage some investors from quickly reselling properties like single family homes.

“It would be an additional income tax on the profit gain from a sale that occurred within three years of the previous sale,” said Ward.   

Ward is proposing an additional 25% tax on the gain from the sale beginning January 1, 2023. 

He says research shows U.S. investors bought a record $63.6 billion worth of homes by late last year. Nearly three-quarters of that was single family homes, the highest level it’s ever been.

“But we’ve also seen this influx of short-term investors trying to get into the market, outbid San Diegans and Californians with all-cash offers, and drive the prices up for everyone,” Ward said. 

Ward says California does have a housing supply deficit, but profits continue to grow by 26% each year, which isn’t sustainable. 

University of San Diego real estate professor Norm Miller says the Bill may help, but California’s tax laws are still more favorable to investors.

“But if you’re an investor, an institutional buyer, not only do you get unlimited tax right offs from the mortgage interest and the property taxes, you’ll also get depreciation, which is something an owner does not get on their own personal residence,” Miller said. 

“So, if somebody’s trying to go in there, fix up a fixer-upper and then sell it for record profits, that is distorting the market because somebody else could have gone in there, done the same and kept the home,” Ward said. 

Ward will speak publicly about the Bill at the San Diego County Administration Center Wednesday at 9 a.m.

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