On Wednesday, more than 50 members of the Silicon Valley Association of REALTORS® (SILVAR) joined thousands of REALTORS® from across the state in Sacramento for Legislative Day. They met with their legislators and discussed important issues concerning the real estate industry.

At the Sacramento Convention Center, California REALTORS® were greeted in the morning by California Association of REALTORS® President Beth Peerce and then briefed on hot issues by the C.A.R. leadership. Special speakers at this session included Assemblymember John Perez (D-Los Angeles) and State Senator Sam Blaskeslee (R-San Luis Obispo).

Both Perez and Blakeslee pledged their support for REALTORS®, stating housing is key to California’s economy. They also said the state faces a record budget deficit and legislators continue to be embroiled in a battle over cuts and taxes. Perez said the only option to fix the budget crisis is to extend revenues for the duration of the crisis. “The best way is to come together and force a consensus. I’m asking you to go back to your communities and keep the conversation going,” said Perez.

At a joint SILVAR, SAMCAR (San Mateo County Association of REALTORS®) and SCCAOR (Santa Clara County Association of REALTORS®) luncheon, guest speaker Richard Costigan, senior director of state and government affairs for Manatt, Phelps & Phillips, LLP, told REALTORS® the only revenues legislators should be talking about are revenues associated with job growth, because job creation is key to fixing the state’s economy.

SILVAR Members are pictured here before heading to the State Capitol building to meet with legislators.

A number of ideas to close the state’s budget gap have been floating around, some of which would be harmful to real estate and REALTORS®. As “lobbyists for the day,” REALTORS® sought to educate their legislators on these issues and ask for their votes. They urged legislators to oppose the following ideas and explained why:

1. Forced overwitholding on independent contractors.
There is no evidence that independent contractors are failing to pay their income tax obligations. This change would merely create significant administrative burdens for individuals and create more administrative costs to the Franchise Tax Board, since it would have to make refunds to those independent contractors whose withholding amount remitted to the state exceeds their income tax obligation.

2. Tax on services. Over the years, several pieces of legislation have been proposed to impose a sales tax on special services that are currently exempt from taxation. A tax on real estate related services will increase the cost of housing because all services involved in purchasing a home will be taxed (e.g., appraisal, home inspection, structural pest control inspection, escrow services, loan fees, etc.).

3. Changes to the mortgage interest deduction (MID). As state and federal budget deficits have grown, legislative interest has increased at both levels of government in scaling back the cost of the MID. Both state and federal law limit the deduction to the interest paid on a maximum $1 million of mortgage debt (first and second homes), plus $100,000 in home equity debt. The MID encourages home ownership, which promotes community stability and pride, employment, savings and long-term investment – values that have made the U.S. strong and prosperous.

REALTORS® also requested a “No” vote on SB 184 (Leno) – Rent Control. SB 184 will weaken the landmark Costa-Hawkins law limiting rent control, by allowing local jurisdictions to control rents on newly constructed rental housing. This bill will discourage the creation of new rental housing, which is badly needed.

SILVAR members met with State Senator Joe Simitian (D-Palo Alto) and Assembly Members Paul Fong (D-Cupertino), Jim Beall, Jr. (D-San Jose) and Rich Gordon (D-Menlo Park). SILVAR’s leadership also met with the staff of State Senator Elaine Alquist (D-Santa Clara) and State Senator Blakeslee. The legislators listened intently to REALTOR® concerns and pledged their support for issues raised, but it was obvious fixing the budget weighed on their minds and negotiations had clearly taken a toll on them. Fong described the task as a “very trying experience.”

Simitian called the idea of overwitholding on independent contractors a “gimmick.” He also stressed the budget is in crisis and property values could, in the long-run, be affected. He said Silicon Valley is a relatively prosperous area, where the housing crisis may seem remote compared to other areas, but “eventually cuts will affect your property values.” He asked REALTORS® to push people to get the “yes” vote on the tax extension in the June ballot.

Beall said the state lacks infrastructure planning and needs an international trade policy to stimulate jobs. “The state doesn’t look at outcomes enough compared to local governments,” Beall remarked.

Beall also invited members to attend his neighborhood coffees. “This is a very difficult environment to work in,” Beall said. “Keep me connected and invite me to your affairs. I want to make sure I stay grounded with everything.”

Like the other legislators, Gordon professed his support of the mortgage interest deduction. “The strength of democracy is in maintaining a strong middle class. One of the ways we have sustained and maintained a strong middle class is through the deduction. Democracy is also dependent on a strong sense of community. Home ownership is one of the critical factors in the creation and maintenance of community,” said Gordon.

Gordon also noted the importance of REALTORS® and the industry. “Your industry is so important to California not only because of the economy, but because you help build the communities that create the kind California we all want … So the mortgage interest deduction is a critical element in creating the kind of place that we all want.”

See more of our Legislative Day photos here.