California homeowners have been getting a vacation from certain taxes on their second or third (or more) homes, but now SF-based Assemblymember David Chiu wants to shutter that shelter and use the money to establish a permanent state homeless relief fund, something California presently lacks.
In 2017, out of approximately 100,000 vacant homes in the combined SF-Peninsula-East Bay metro region, some 20,000 were “occasional use” homes—vacation homes, pieds-a-terre, Airbnbs, and any other sort of housing unit from which the owner is absent most of the year.
Under California law, homeowners are allowed to deduct interest on a mortgage from their tax debt, up to $1 million every year (the “mortgage interest deduction,” or MID).
Chiu’s new plan, laid out in his Assembly Bill 1905 bill, limits the MID to one primary residence, completely doing away with tax breaks on usually-vacant secondary or tertiary homes. He also wants to cap deductions on a first home at $750K.
With the tax money, Chiu plans to establish a permanent fund to finance homeless relief programs in California. Right now the state has no single program dedicated to funding anti-homeless campaigns, relying instead on emergency allocations.
“While thousands of Californians sleep on our streets every night, it makes little sense for the state to subsidize the wealthy’s ability to own two homes,” Chiu said Thursday in an email announcing the new legislation.
The Franchise Tax Board estimates that 175,000 Californians employ the MID every year—note that not every person who owns more than one home employs this particular tax break, although most accountants would probably recommend it—and usually save an average of $1,000 per year on second homes.
Chiu, however, projects a larger $400 million yield from all of the provisions in the bill. That may sound like a lot, but San Francisco alone budgeted $364 million for homeless services for the 2019-2020 fiscal year.
Still, the lawmaker emphasizes the fact that the new homeless fund would create reliability in funding that the state presently lacks—and argues that homeless relief is more important than tax breaks on homes that are empty most of the time anyway.
This is not the first time Chiu hsd tried to spike this particular tax break; a similar effort in 2017 died in committee.