On Feb. 9, the California Legislature passed AB 5, the so-called California Vacation Rent Tax, which would increase the statewide rental tax by about 2% to 8.75%.
The tax increase would cover about $1.3 billion of the estimated $2.2 billion in revenue lost annually to the tax in the first three years.
That’s about one-fifth of the statewide budget, which was $5.7 billion last year.
The measure was part of an effort to make the state more attractive to homebuyers, many of whom would rather pay a higher tax rate than the 1.5% rate that’s levied in other states.
But the measure failed to pass, despite having more than a million signatures.
“This is just a first step to make it happen,” said Dan Reiss, director of the California Legislative Analyst’s Office.
“We want to make sure that we get this done, that we don’t fall behind on revenue.”
California already has one of the lowest rates in the country for vacation rentals.
In 2016, the state had the second lowest rate at 7.3%.
The next highest rate, at 12.8%, was for rentals in San Diego.
California, which ranks 31st in the nation for vacation rental availability, has about one in every 16 rental properties.
The state is also among the least affordable states for vacationers, according to the American Association of Retired Persons.
In 2018, California’s average cost of a vacation rental was $2,086, compared to $5,081 in New York, New Jersey, New Mexico, Illinois, California and Texas, according the AARP.
Rental prices in California are higher than in some other states, like Colorado, Nevada, Utah and Utah, but those prices are often far below the national average.
In 2020, the average rental price in California was $3,569, according a report from the National Association of Realtors.
While the state does have a low vacancy rate, the vacancy rate has been in decline since 2009, when it was 12.9%, according to real estate research firm Trulia.
For many homebuyer types, it can be hard to find a home.
“The problem is not the tax, it’s the quality of the housing,” said Michael G. DeCaro, president of Home Capital Partners, which represents investors.
“If the prices are too high, it makes it hard to sell.
If they’re too low, it hurts the rental market.
We need to look at that.
The supply is there, the demand is there.
And that is a problem.
I think that we need to do something to help the rental economy.”
California has the fifth-highest vacancy rate in the U.S., at 12%, according the Real Estate Institute of Greater Los Angeles.
Homeowners in the state have been struggling to find affordable housing in recent years as the price of land has gone up and as builders have scaled back their projects in order to keep costs down.
A shortage of affordable housing has also fueled rising rents.
According to the U-T San Diego, California has the third-highest foreclosure rate in America.
In the first quarter of 2018, more than 6,000 California homes were foreclosed on, which equated to about 1.4 per day.
In 2018, nearly 40% of Californians were still living in their parents’ home.
That rate was higher than the national rate, according an analysis by the California Association of Counties.
San Diego has one-third the home foreclosure rate of San Francisco and one-quarter of Oakland.
California has also become one of America’s fastest-growing cities in the past few years, with an average of more than 13,000 new jobs created in the last three years, according Toilolo Associates.
Home prices are rising faster than wages and incomes, and that’s a problem for many working-class Californians.
More than a quarter of the state’s renters earn less than $25,000 a year, according Reiss.
But for some, the cost of living in California is getting out of hand.
The average price of a home in California in 2018 was $737,000, according Trulia, up from $663,000 in 2017.
In June, the median price for a two-bedroom apartment in the Bay Area was $1,700, according Zillow.