California Enacts Building Homes and Jobs Act and Imposes New Fee

The state of California has recently enacted the Building Homes and Jobs Act, effective January 1, 2018. The purpose of the Act is to establish a permanent, ongoing source of funding for affordable housing development.  This funding will go to existing state programs that provide assistance for emergency housing, multifamily housing, farmworker housing, home ownership for very low and low-income households, and down payment assistance for first-time home buyers.

The state legislature has created this new source of funding in response to a severe need in California. The state of California has 12% of the United States population, but 20 percent of its homeless population, and, in addition, California has the highest percentage of unsheltered homeless in the nation at 64%.  Furthermore, California has 24 percent of the nation’s homeless veterans population and one-third of the nation’s chronically homeless population.

In response, as of 2015, the state has financed the construction, rehabilitation, and preservation of over 14,000 shelter spaces and 245,000 affordable homes. State funds have helped tens of thousands of families become and/or remain homeowners.  Previously, the state’s Community Redevelopment Law required that redevelopment agencies set aside significant funds for affordable housing, which generated approximately $1 billion per year.  However, as many of these agencies no longer exist there is a need to replace this funding.

In order to provide a new stream of funding for these programs, beginning on January 1, 2018, a fee of $75 will be paid at the time of recording of every real estate instrument, paper, or notice required or permitted by law to be recorded, except for transfers subject to a transfer tax and/or transfers to an owner-occupier. The aggregate fees for a single transaction will be capped at $225.

“Real estate instrument, paper, or notice” means a document relating to real property, including, but not limited to, a: deed, grant deed, trustee’s deed, deed of trust, reconveyance, quit claim deed, fictitious deed of trust, assignment of deed of trust, request for notice of default, abstract of judgment, subordination agreement, declaration of homestead, abandonment of homestead, notice of default, release or discharge, easement, notice of trustee sale, notice of completion, UCC financing statement, mechanic’s lien, maps, and covenants, conditions, and restrictions.

Each county recorder within the state must then remit quarterly, on or before the last day of the month, these fees (after administrative deductions) to the Controller for deposit in the Building Homes and Jobs Trust Fund, which will then be distributed to a variety of state programs.

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Zachary Pearlstein, JD, is a senior regulatory compliance consultant with Bankers Advisory. He is a graduate of Brandeis University and earned his juris doctor at Suffolk University Law School. He is admitted to the Massachusetts Bar.

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