Real Estate Round-Up: Recap of LA CAR trip

Last week, I traveled to Los Angeles for a California Association of Realtors state meeting. Traveling to Los Angeles is always an experience. It reflects the image of the state as a whole, in many ways.

Upon arriving to Union Station, yes, I took the train, keeping in mind the smaller carbon footprint and the avoidance of stress being tied up on the freeways for hours, I was immediately impacted by the thousands of homeless encampments that now make up Los Angeles.

People live on the freeway overpasses, in the freeway underpasses, on every conceivable park or open space, and along the aqueduct. It is startling for the first-time visitor, I'm sure.

My meetings were in the LA Live area. This is only 2.5 miles away, but in comparison of lifestyles, light years away. LA Live is home to the Ritz Carlton Hotel, the luxurious J W Marriott, think $1000 a night room. It is also home to the Spectrum, the LA Convention Center and countless incredible restaurants to serve the guests that attend a Lakers game, the Grammy Awards or other high-end entertainment. You get the picture?

This is California in a microcosm. We are quickly becoming a state of "the haves" and the "have nots." And with every new tax, we are heading more and more in this direction.

Next week, I will present some good news on the horizon, but this week, I wanted to lay out the skeleton of some potential ballot initiatives for the November 2020 ballot that will affect all of us. Since the economy is a closed circuit of interactions, every tax, every restrictive law, affects real estate, which affects most all of us.

A proposed 3% service tax is slated for the ballot. Originally this service tax was going to be on every service job. That would mean, when you get your nails done or get your car serviced, you would pay an additional 3% tax on top of the state sales tax, for that service. It has been scaled back to attach only to "business to business" services.

For example, the copier company that I lease my copier from, would have to tack on a 3% service fee because it is for my business. The printer would have to add that tax for the signs we have made. Remember, this is on top of the sales tax, that I already pay for those items.

How about your auto mechanic? When parts are delivered so your car can be repaired, there would be an additional tax. Or what about restaurants? Every food distribution company would have to tack on an additional 3% service fee when meat, produce, beverages, etcetera are delivered. You may think this doesn't impact you, but on a larger scale, that additional tax that every small or large business will have to pay will be passed on to the consumer.

There is also a proposed initiative that would reform Costa-Hawkins. Earlier this month the Legislature passed AB 1482, that is major rent control law. It did, however, carve out an exemption for single family homes and condos. Many of those properties are owned by individuals like you and me, who have incorporated rental property into their retirement portfolio.

This new initiative would reduce that exemption to only two properties, per owner, so if someone has accumulated over the years, three or more rental properties for income, they would be treated the same way as a large apartment owner/investor is.

The split-roll initiative, which I have written about at length, will also be on the November 2020 ballot.

All these initiatives, if passed, will have an impact on the disposable income we all have, whether it is because the new cost will be passed on, or if it directly impacts you because you are an investor or a business owner.

On the face of every good thought, there is almost always a potentially damaging side effect. Too often the Legislative Analyst's Office, only evaluates revenue in, not the extrapolated cost on the other end.

Kim Murphy can be reached at [email protected] or (760) 415-9292 or at 130 N Main Avenue, in Fallbrook. Her broker license is #01229921, and she is on the board of directors for the California Association of Realtors.