Tag: news

The Bills That The Business Lobby Doesn’t Want Passing

The business lobby in California, and in particular the California Chamber of Commerce, has had quite a lot of success taking down bills that they deem “job killers.” Many of these bills are not at all designed to kill jobs, but rather to improve conditions for employees. To the business lobby, these are the same thing, but these are often the types of bills that the majority of the populace in California would tend to support.

One of the bills the California Chamber of Commerce is targeting is a bill to tax total wealth on individuals with a net worth of $50 million or more. Introduced by Milpitas Democratic Assemblymember Alex Lee, the bill would be the first of its kind if it passes. Obviously, there have been taxes on income, but so far, none on net worth. Lee’s argument is that the stocks and properties owned by the ultra-wealthy allow them to legally borrow and transfer funds in a way that avoids a significant percentage of income taxes. According to the chamber, this would simply convince the ultra-wealthy to leave California, rather than increase tax revenues.

The second bill was proposed by Los Angeles Democratic Senator María Elena Durazo. The bill would increase the minimum wage for health care workers to $25 per hour. According to Durazo, health care workers — especially whose who are women or people of color — frequently take home poverty wages, despite working multiple shifts due to being understaffed. The chamber argues that increased payroll costs for health care facilities would simply be passed onto patients, reducing health care affordability.

The chamber has a similar argument against the proposal to increase the required minimum paid sick days offered per year from three to seven, claiming that either the costs will be passed to consumers or the employers will cut benefits or lay off workers. Long Beach Democratic Senator Lena Gonzalez, who introduced the bill, says that the current sick leave is not adequate and forces employees to either forego pay to stay home or risk infecting coworkers.

Photo by charlesdeluvio on Unsplash

More: https://calmatters.org/newsletters/whatmatters/2023/03/california-business-job-killer-bills/

Sharp Divide Between East And West US Market Direction

For the past couple of years, house prices had been rising dramatically across the country. Here in California, we’re now starting to see prices drop since the start of this year. Prices are now falling in all 12 major housing regions west of Texas, as well as in Austin, TX. The same can’t be said everywhere, though. In the 37 largest metros east of Colorado, excluding Austin, TX, prices are still rising. Of course, markets can differ drastically by state, but such a clear divide between eastern and western US may be unprecedented.

Falling home prices was the expected result of the federal benchmark rate hikes. It seems to be working in the western US, as prices become too unsustainable to continue to increase. The regions with the most significant price drops are the ones that were rather expensive. But there are still other factors at play in the eastern US, driving prices still upward. Some areas, such as Hartford, CT and Buffalo, NY, never reached unsustainable home prices and remain rather affordable. They also have rather low inventory. These factors combined are keeping prices from dropping, leading to an 8% increase in prices in January. Florida is attracting many new employees with multiple financial companies relocating to Miami in 2021 and 2022. Prices are expected to eventually start falling even in the east, but don’t expect anything drastic. Low inventory across the country is preventing any sudden market collapse.

Photo by Will Francis on Unsplash

More: https://www.foxbusiness.com/real-estate/tale-two-housing-markets-prices-fall-in-west-while-east-booms

Huntington Beach Adamant About Anti-ADU Stance

SB 9, also called the HOME Act of 2021, is a California law requiring cities to allow homeowners to subdivide lots into potentially up to 4 units. This law makes it significantly easier to built accessory dwelling units (ADUs). Huntington Beach has decided it doesn’t like this, and is willfully ignoring the law, stating that they won’t process ADU applications. The City Council has even gone as far as to enact an ordinance declaring that they are exempt from some of the requirements of the Housing Accountability Act (HAA). The HAA streamlines the approval process for low- and moderate-income housing. Huntington Beach is not compliant with HAA requirements, and so the city is attempting to declare that the regulations simply don’t apply to them.

This is entirely illegal on the part of Huntington Beach, and so naturally, it hasn’t gone over well. The city has received letters from the Department of Housing and Community Development (HCD) and has been sued by the California Office of the Attorney General (OAG). Knowing that the state does have authority in this regard, the Huntington Beach City Council is starting to backpedal. But this probably isn’t the end, nor was it the beginning. Huntington Beach has already been sued previously by the state for housing law violations, settling in 2020 and losing millions of dollars in state funding.

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More: https://journal.firsttuesday.us/california-attorney-general-clashes-with-nimbys-in-huntington-beach/89592/

You May Be Eligible For California’s New Dream For All Shared Appreciation Loan

The California Housing Finance Agency (CalHFA) recently launched the Dream For All Shared Appreciation Loan, a secondary loan to be used in conjunction with CalHFA’s Dream For All Conventional first mortgage. This secondary loan carries its own set of requirements, which may or may not differ from the initial Dream For All Conventional first mortgage. The requirements of the secondary loan are provided here, but you should consult with CalHFA to be sure that you meet all requirements. The requirements are provided for two categories, both for the borrower and for the property.

The borrower must be a first-time homebuyer, which CalHFA defines as not having owned and occupied a home in the past three years. The borrower must also occupy the property as their primary residence and meet income limits for the program. In addition, the borrower, or at least one of the co-borrowers if there is more than one, for any CalHFA first-time homebuyer loan must take a CalHFA approved Homebuyer Education and Counseling course. This course does have a fee, which varies by method and agency, and can be done online or in-person. The Dream For All program also has its own additional course. Fortunately, this course is free, but it is only accessible online.

The property requirements are simple for single-family residences and manufactured homes, which are both allowed, but may be more complex for other types of properties. Condominiums must also meet the guidelines for whichever initial mortgage you choose. Guest houses, granny units, and in-law quarters may be eligible, but would not be eligible in addition to the main residence, since the property must be only one unit.

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More information about the Dream For All Shared Appreciation Loan here: https://www.calhfa.ca.gov/dream/index.htm

What The Increasing Benchmark Rate Means For You

You’re probably aware that the Federal Reserve has been repeatedly hiking up interest rates. The idea behind this anti-inflationary measure is that increasing interest rates will result in lower consumer spending, which will force prices down to recover demand. The Fed’s eighth and most recent benchmark rate increase was on February 1st, just a couple days ago. However, this increase was the lowest of the series — only 0.25 percentage points, compared to prior increases of 0.75 or 0.5 percentage points. This is because we’re starting to see the desired result, decreases in inflation. It’s not enough to stop cold turkey, but it’s enough to reduce the pressure on interest rates.

But what else has the increasing benchmark rate done, besides reduce inflation? Well, obviously it has increased interest rates. This includes credit card rates, auto loan rates, and some student loan rates. Up until recently, it has also included mortgage rates. But mortgage rates are only indirectly affected by the benchmark rate, and they’re actually starting to decrease now. Another rate indirectly affected by benchmark rates is the savings rate. You’ll start to earn more money from savings accounts and certificates of deposit. It’s important to note, though, that with inflation being as high as it is right now, it has already entirely negated the effect of this savings over time, so you’ll have to save for quite some time for it to matter.

Photo by Raymond Pang on Unsplash

More: https://www.cnbc.com/2023/02/01/what-a-federal-reserve-quarter-point-interest-rate-hike-means-for-you.html

City National Bank Settles For $31 Million In Discrimination Lawsuit

City National Bank, based in Los Angeles, was accused of refusing to underwrite mortgages in predominantly Black and Latino communities. The Justice Department alleged that this occurred between the years of 2017 and 2020. They used two major pieces of evidence: First, other banks operating in the same areas with predominantly people of color received six times as many mortgage applications during this time period. Second, of the 11 branches City National opened in the past 20 years, only one was in a neighborhood with predominantly people of color, and this branch did not have a designated underwriter. While it’s theoretically possible that City National Bank simply doesn’t have many customers that are people of color, discrimination is a likely reason for that.

While City National Bank denied the Justice Department’s allegations, they seemed cooperative with the investigation. They claimed that they supported efforts to ensure equal access and readily agreed to a settlement. The terms were a $29.5 million loan subsidy fund for Black and Latino borrowers as well as an outreach campaign costing $1.75 million. The 31.25 million dollar value makes this the largest settlement ever for the Justice Department.

Photo by Trust “Tru” Katsande on Unsplash

More: https://www.npr.org/2023/01/12/1148751006/redlining-city-national-bank-doj-settlement

Wells Fargo Shifts Focus Away From Mortgage Lending

Wells Fargo is one of the biggest banks in the nation as well as one of the top mortgage lenders. In fact, it was the number 1 mortgage lender in 2019. However, that’s about to change. 2019 was also the year that Wells Fargo acquired a new CEO, Charlie Scharf, who inherited a company under strict scrutiny as a result of a 2016 fake account scandal. Among the changes Scharf is making is a massive shift away from mortgage lending to focus mainly on investment banking and credit cards.

According to Wells Fargo exec Kleber Santos, investigations into the 2016 scandal also revealed that their mortgage lending business was simply too large in scope. The implication is that it was too difficult to manage oversight of all the facets of the company, and that mortgage lending was the one that needed to be trimmed down. Wells Fargo will not be completely eliminating its mortgage lending business, but it will be cut down dramatically to prioritize existing customers and borrowers in minority groups.

Photo by Erol Ahmed on Unsplash

More: https://www.cnbc.com/2023/01/10/wells-fargo-once-the-no-1-player-in-mortgages-is-stepping-back-from-the-housing-market.html

CDI Releases 2021 Report On Wildfires & Insurance

The California Department of Insurance (CDI) has provided the latest update to their resources on the effect of wildfires on insurance. Statewide data on policy counts is now available for 2021, and county-level and zip code-level multi-year data has been updated to 2021, going back to 2015. You can also view archives of older statewide data up to 2015. In addition to policy counts, the CDI has compiled updated info on coverage limits, premiums, losses, and claims.

Also available are additional resources for those wanting to know their wildfire risk or looking for insurance. A report with a large amount of data, including but not limited to coverage amounts and losses for each zip code, is available for download under the “SB 824 Wildfire Risk Information” header of the CDI’s Rate Filings page. This data is from 2018-2019. There is also a list of insurance companies offering incentives for wildfire safety, last updated in November, as well as a searchable list of insurance companies and real estate agents that work with high-risk areas.

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Links to the above resources can be found here: https://www.insurance.ca.gov/01-consumers/200-wrr/DataAnalysisOnWildfiresAndInsurance.cfm

Pandemic-Motivated Home Features Still Increasing In Popularity

When the lockdowns hit, homeowners very quickly realized what their homes were lacking in terms of comfortably getting through the lockdown period. The result was a shift in which home features were most in demand. People began to favor more outdoor space so they weren’t stuck inside, home amenities, and variable living space, among other things. While the virus certainly hasn’t disappeared, lockdowns are no longer in effect, masks are no longer mandatory in most cases, and people are gathering together more. But the lockdown-era trend shifts continue to be apparent.

Backyards are a popular feature, with 22% of listings highlighting them. Patios and pools are also the focus of an increasing amount of marketing, with 13% of listings mentioning patios and 11% calling attention to the pool. Home gyms are also increasing in popularity. Of course, this doesn’t prove that buyers want more outdoor space and home amenities, but it does say that’s what agents think buyers are looking for. The same is true of multipurpose spaces. The ideal kitchen now includes a kitchen island, which has the flexibility to be used as a dining area, workspace, or entertainment table. It’s even extending to the way the home is organized — open-concept living had been popular for a while, but it’s now fallen out of favor as people realized they had no private or quiet spaces with everyone at home at the same time. The motivation for this shift is no longer present, but the experience seems to have changed peoples’ minds about open-concept living.

Photo by Alen Rojnic on Unsplash

More: https://zillow.mediaroom.com/2022-12-19-Backyards-are-Zillows-must-have-home-feature-for-2023

Conservation Efforts Hope To Restore Endangered Salmon

In the last 80 years, a particular species of salmon, the Chinook salmon, has not been found in the wild in one of its previously most important areas, the McCloud River in northern California. The Chinook salmon has been endangered since 1994, possibly as a result of dam construction, but it’s gotten worse in recent years. They’re also dying off in the Sacramento River, which is becoming too warm for many young salmon to survive. Now, a joint conservation effort between the State of California, the federal government, and the Winnemem Wintu Tribe of Native Americans is looking to reintroduce Chinook salmon to the McCloud River.

There isn’t anything wrong with the McCloud River itself. It’s still a good spawning point for Chinook salmon, even with climate change threatening young salmon in the Sacramento River. The problem is that they can’t actually get out because of the dams. This new conservation effort seeks to aid them with human intervention. They transported 40,000 Chinook salmon eggs to the McCloud River and measured how many spawned. About 90% of the eggs hatched. The next step was to help them along their migratory route when it came time. In order to do this, they’ve recaptured the salmon along their migration, bypassed the upper Sacramento River, and redeposited them in the lower Sacramento River. This has been successful, but the next step is still a work in progress. The group hasn’t quite decided the optimal way to get the adult salmon to return. Options include an additional recapture and redeposit, the construction of a fish ladder, or the demolition of some dams. The first two options would use a route across the Shasta Dam, while the last would involve smaller dams and a new route.

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More: https://calmatters.org/environment/2022/12/chinook-salmon-california-mccloud-river/

California Pay Transparency Law Takes Effect

In recent years, a few states have created laws regarding pay transparency in an effort to reduce discriminatory wage gaps. Colorado was the first to introduce a statewide law in 2019, though it didn’t take effect until 2021. New York City’s law will soon expand to all of New York. A new law just took effect in Washington as well as our own state, California, on January 1st. California’s law requires that companies with at least 15 employees post pay ranges in their job listings, as well as requiring that current employees have access to the pay range for their current position. The penalty for violating this requirement is between $100 and $10,000 per violation. The first violation only gets a warning as long as the information is added. Some companies also don’t currently have pay bands — the new law requires them. Companies with at least 100 employees will need to provide more detailed information.

Unfortunately, the new law may have to contend with some resistance. In New York City, employers chose to display incredibly wide price ranges. This doesn’t help prospective employees at all to figure out how much they would actually be getting. In one extreme example, Citigroup claimed a range of $0-$2 million, though they later said this was a computer glitch and changed it to something more reasonable. In Colorado, employers created remote job openings — with the stipulation that they could not be in Colorado, so the state requirement didn’t apply to that listing. Colorado’s method probably wouldn’t work in California, since California has such a large population that employers would miss out on a huge segment of potential employees. But New York City’s method is actually already in use in California, even without a requirement to list pay ranges at all. This is because prospective employees tend to disregard a listing entirely if there’s no pay range provided.

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More: https://calmatters.org/economy/2022/12/california-pay-transparency-law/

Eviction Protections In Los Angeles To End In February

The country’s longest-lasting eviction protections are due to end February 1, 2023, at least in Los Angeles, as confirmed by the City Council. The protections have been in place since March 2020, as a response to COVID-19. Despite federal and many local protections ending much earlier, the city’s tenant protections have remained in place the entire time.

The eviction moratorium was certainly financially beneficial for many people who were unable to work during lockdowns, but might otherwise have been expected to continue to pay rent. However, the actual reason for that particular moratorium was fear of the spread of the virus. The economically-motivated tenant protection is currently slated to remain in place until February 2024. This is the prohibition on raising rent for rent-controlled units, of which there are over 650,000 in Los Angeles. Some things are still in a bit of a limbo, though. There are still eviction proceedings going on as tenants are, in fact, still expected to pay at least a portion of their rent, despite the eviction moratorium. Some landlords don’t even want tenants anymore, but can’t find a legal reason to evict them, as their tenants haven’t done anything wrong. The end of the moratorium will erase some confusion. Some City Councilmembers are looking to re-implement some specific protections, but haven’t come to a consensus.

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More: https://www.latimes.com/homeless-housing/story/2022-12-16/la-finalizes-end-of-eviction-protections

New 2023 Real Estate Laws

Six new laws affecting real estate are coming next year, and two more in 2024. The six coming next year go into effect January 1, 2023. SB 1495, going into effect January 1, 2024, modifies real estate licensing requirements. AB 2503, with a compliance date of December 31, 2024, requires a revision of the terminology used in real estate contract law to ensure consistency. In addition, SB 1005 and SB 1017 both clarify existing law, SB 1005 regarding probate code and SB 1017 regarding tenant protections against domestic violence.

AB 1410 requires homeowner’s associations (HOAs) to allow members and residents to discuss their common interest development (CID) on social media, as well as allow them to rent out a portion of owner-occupied space. HOAs also may not pursue enforcement for violations during an emergency if it is unsafe to fix it. AB 1837 and AB 2170 both modify existing laws regarding eligible bidders for foreclosed properties, making it easier for tenants, owner occupants, nonprofits, and governmental organizations to win a bid. AB 2559 defines a reusable tenant screening report, which landlords may choose to use, and which they must allow tenants free access to if they choose to use it. AB 2745 requires that experience used for a real estate broker exam be within the prior five years. AB 2960 states that disclosure requirements are set at the date of the contract, even if disclosure requirements change.

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Income Tax Adjustments Give a Break in Light of High Inflation

The Internal Revenue Service (IRS) has announced its new income tax brackets for 2023. There are some shifts designed to address the issue of bracket creep, which is when people move into a higher tax bracket despite no increase in income after accounting for inflation. The new tax brackets won’t completely solve the problem, and don’t address root causes of heavy inflation, but can provide some relief.

The IRS has done away with the 37% bracket entirely, so the most you’ll pay is 35%. For that, you’ll need a joint income of over $462,500, which is about 6.5 times the median household income in the US. Not only that, the minimum threshold has increased for every bracket, except the lowest 10% bracket which always has a minimum of $0.

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For the new tax brackets plus additional information, see here: https://journal.firsttuesday.us/will-high-inflation-help-you-pay-less-tax-for-2023/
You can also compare to 2022’s tax brackets here: https://www.nerdwallet.com/article/taxes/federal-income-tax-brackets

Some Areas Now Classify Mobile Homes As Permanent Dwellings

Because of rising housing costs, even starter homes are becoming more and more inaccessible. Recent legislation aimed at streamlining processes for accessory dwelling units (ADUs) has turned ADUs into the new starter home. ADUs typically need to be permanent structures to qualify. Some cities and counties are trying to change that.

Mobile homes are often put into the category of tiny homes rather than ADUs. There is no restriction on whether or not tiny homes need to be permanent, or whether anything else needs to be on the lot. They just need to be 400 square feet or less. However, the definition of a tiny home varies, so they can be considered ADUs in some jurisdictions. And now, seven cities and three counties have decided that any tiny home that is on wheels is considered a permanent dwelling, and therefore can also qualify as an ADU. These seven cities are Fresno, San Luis Obispo, California City, Los Angeles, Richmond, San Diego, and San Jose. The three counties are Placer County, Humboldt County, and Santa Clara County.

Photo by Michal Balog on Unsplash

More: https://journal.firsttuesday.us/tiny-homes-join-adus-in-the-housing-shortage-fight/

Newsom Signed Two More Housing Bills in September

Two more bills aimed at increasing multi-family construction go into effect July 1, 2023 after Governor Newsom signed them into law in September. These are AB 2011, called the Affordable Housing and High Road Jobs Act of 2022, and SB 6, the Middle Class Housing Act of 2022. Both laws sunset nine and a half years later, on January 1, 2033.

AB 2011 adds a secondary review pathway for some multi-family construction projects. If the project meets affordability standards and site criteria, the review will not take into account conditional use permits or environmental impact reports. The site must be primarily commercial, and unless it’s a commercial corridor, 100% of the units must be below market rate. Even if it is on a commercial corridor, 15% of the units must be below market rate. AB 2011 also includes provisions for fair pay and additional training for construction workers. SB 6 expands the types of buildings that can be constructed in areas zoned for office, retail or parking. These buildings may be residential if they meet certain other criteria, many of which are similar to the requirements set forth in AB 2011.

Photo by Mikhail Pavstyuk on Unsplash

More: https://journal.firsttuesday.us/governor-newsom-opens-up-commercial-zoning-for-residential-use/86680/

California Cities Scramble to Avoid “Builder’s Remedy”

The State of California sets housing goals for every city in the state. Many cities, particularly more affluent ones, frequently decide to simply not meet these goals, as it doesn’t really benefit them to do so. Their only incentive to follow through has been what is termed the “builder’s remedy, ” which requires cities with no plan submitted, or that fail to meet their goal, to permit any and all housing as long as at least 20% of it is affordable housing.

This law has actually been in place for about a decade, but it hasn’t been easily enforceable. Recent changes have made it more enforceable, so now cities have to start thinking about it. Not all cities have the same deadline for submitting plans, but there are already 124 cities in Southern California that are out of compliance. Northern California has until January to submit plans.

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More: https://calmatters.org/newsletters/whatmatters/2022/10/california-housing-crisis-nimby/

Opendoor Owes $62 Million For Unsubstantiated Claims

Opendoor is an online real estate business based in Arizona that buys directly from sellers instead of going through the market process. While nothing about skipping the open market is illegal, the problem comes from Opendoor’s claim that its service saves sellers money. As it turns out, this claim is entirely false.

Opendoor claimed that those who use their service save money because they will be selling at market value with reduced transaction costs. There’s no evidence whatsoever that these claims are true. In fact, there is evidence that many sellers who go through Opendoor actually net thousands of dollars less than they would on the open market, despite cutting out the middleman. As such, the Federal Trade Commission voted unanimously, 4-0, to approve a final order against Opendoor. The final order requires Opendoor to pay $62 million in consumer redress, prohibits them from making deceptive, false, or unsubstantiated claims, and requires them to provide evidence of their claims.

Photo by Conny Schneider on Unsplash

More: https://www.ftc.gov/news-events/news/press-releases/2022/10/ftc-approves-final-order-against-opendoor-labs-preventing-company-misleading-consumers-about-cost

Hold Off on Investments in the Near Future

Investors are frequently asking whether the current investment market is better for stocks or real estate. Usually, there’s a correct answer. Right now, the best answer is probably not to invest at all. When this happens, it’s called a hold phase. Real estate being both a less volatile and more long-term investment makes it a slightly better method of investment during a hold phase, but it’s still likely better to hold off until home prices reach a bottom, which is likely to be around 2025.

Stock price movement is a bit harder to generalize since it changes so much more frequently than real estate prices. This is mostly because stock trades can be initiated and completed near instantaneously, while home sales typically take a few weeks between listing and accepting an offer. That said, it’s clearly evident that stock prices are on a downward trend right now, with an annual change of -17%. Until this bottoms out, it may be too risky to invest. Home prices, on the other hand, increased 12% in the past year. Normally this would make it an absolutely terrible time to invest in real estate, and it’s certainly not a good time to do so, but home prices are now decreasing. Better investment opportunities in real estate will crop up in a few years.

Photo by Giovanni Gagliardi on Unsplash

More: https://journal.firsttuesday.us/investing-stocks-or-real-estate/43709/

Unlawful Evictions on the Rise

Much of the danger to tenants is being unable to pay rent, as both rental prices and cost of living continue to increase while the job market is still in recovery. However, that isn’t the only way tenants can get evicted. There are even a few ways landlords can legally evict tenants that haven’t done anything wrong. That isn’t enough for some landlords though, who are actually resorting to illegal methods of eviction instead of notifying the tenant and potentially going through the court process.

Though both are legal, the court process distinguishes at-fault and no-fault evictions. At-fault evictions are the category where failure to pay rent lies, and this category also includes various contract violations and criminal activity while on the premises. The no-fault category includes landlord’s intent to occupy the property, withdrawal from the rental market, property being deemed unfit for habitation, or landlord’s intent to demolish or substantially renovate the property. Some of these can be used misleadingly as the landlord can simply change their mind later, but the real problem is unlawful evictions. The Office of the Attorney General (OAG) is particularly concerned with the type known as self-help evictions. This includes the landlord shutting off utilities, changing locks, or removing the tenant’s personal belongings in order to force them out of the property. Landlords initiating a self-help eviction can get charged with a misdemeanor, and the sentence is either a fine or a jail term of a maximum of one year.

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More: https://journal.firsttuesday.us/self-help-evictions-the-new-forbidden-fruit-for-california-landlords/86458/