The Norris Group proudly presents it’s 13th annual, award-winning black-tie event, “I Survived Real Estate”. Industry experts join Bruce and Aaron Norris to discuss perplexing industry trends, head-scratching legislation, and opportunities emerging for real estate professionals headed into 2021. All proceeds from the event benefit Make-A-Wish and St. Jude Children’s Research Hospital.
Platinum Partners:
• Norada Real Estate Investments
• San Diego Creative Investors Association
• The Outspoken Investor, Tony Alvarez
• Think Realty Magazine
• And Realty 411
Gold Sponsors:
7 Figure Flipping
Inland Valley Association of Realtors
Keller Williams Corona Keystone CPA, Inc.
Las Brisas Escrow
Leivas Tax Wealth Management
NorCal REIA NSDREI Pasadena FIBI
Real Wealth Network
In A Day Development
Spinnaker Loans
uDirect IRA
Wilson Investment Properties
See below for full video and resources.
Episode Notes:
Narrator The Norris Group proudly presents our 13th annual award winning black tie event. “I Survived Real Estate”. Industry experts join Bruce and Aaron Norris to discuss perplexing industry trends head scratching legislation and opportunities emerging for real estate professionals headed into 2021. All proceeds from the event benefit Make-a-Wish and St. Jude Children’s Research Hospital. We want to thank our Platinum Partners,Norada Real Estate Investments, San Diego Creative Investors Association, The Outspoken Investor,Tony Alvarez, Think Realty Magazine and Realty 411. We’d also like to thank our Gold Sponsors: Seven Figure Flipping, Inland Valley Association of Realtors, Keller Williams Corona, Keystone CPA, Inc., Las Brisas, Escrow, Leivas Tax Wealth Management, In A Day Development, , NorCal REIA, NSDREI, Pasadena FIBI, Real Wealth Network, So Cal cash [ ] flow, Spinnaker Loans, and uDirect IRA.
Aaron Norris Good evening, everybody and welcome to the 13th annual I Survived Real Estate. My name is Aaron Norris, and I’d like to welcome you to this evening and thank you for being here tonight. Typically, we’d be seeing you all in person dressed to the nines at the Nixon Presidential Library, White House catering would have wined and dined us MTV would have produced a glorious event at the East Room replica of the White House and a lineup of National Speakers would be sharing the night, giving us their insights and joining us on stage live. Well, early summer, it was clear that we had to make a shift. We started I Survived Real Estate in 2008, during the peak of the financial fallout to celebrate an industry that was going through a lot of change, and to celebrate an industry in decline and a lot of change. And it felt like 2020 this was needed more than ever. There’s lots of risks. There’s lots of uncertainty, and our industry is thriving when a lot of other sectors in the economy are really faltering and struggling. So I survived real estate this time is in two sessions. Next, this week is California’s residential townhall. We’ve brought together some of our biggest supporters and experts from all over the state of California to discuss what’s at risk for industry disruptions that is changing our work and how politics at the local state and national levels could impact what we do. Next week after the presidential election, we bring back our national commercial and townhall not bring back we introduce it. So two nights. We purposely planned it after the election because depending on who becomes president could change a lot of things in our industry. And we thought that that was really important. And everybody on that panel participates in a different real estate sector. All are involved in very different states all over the country. Some are involved in commercial, some are wholesalers and do volume flipping should be very interesting. So there’ll be sharing with us a lot of information and what they see coming up for 2021 with the knowledge of who is going to be hopefully, hopefully, we’ll know who’s president at that point with that information. So, next week, we will announce our grand total, we are extremely close to the $1 million dollar mark raised for charity since we started this event in 2008. And I would just sincerely like to thank everybody who’s been part of this event, whether you’ve been in the audience, a long time sponsor, when we produce the video, it will be the grand deep voice gentlemen who produces that sound for us to give them proper celebration, because we really appreciate your help 100% of what we raise actually goes to Make-a -Wish and St. Jude Children’s Research Hospital. If you’ve been invited by one of our generous sponsors tonight and you feel inspired, please go to ISurviveRealEstate.com and hit that video button and you’ll be able to find out how you can give later, if you’re watching this on Amazon Prime,YouTube or listening to this on the podcast, please do the same, ISurvivedReallEstate.com and you can find out how you can give but you can also find out how you can watch the video, you can find out we’ll be producing some kind of program like we usually do. And you can find all that there and of course the donations this year are tax deductible as always. First bid [ ] of business tonight, I will show a brief clip of what brings us all together. And then I’m going to introduce you to Gloria Crockett with Make-a-wish. Give me just a second. It’ll be wonderful to edit this out later.
Narrator Your wish to have a gaming computer was granted? What do you think? Fireman is dropping a package from way up high
Aaron Norris Gloria, thank you so much for being here today. And for being such an incredible partner, your team has been so awesome. What some people don’t realize is that you work so closely with The Norris Group making sure that 100% of all the money raised actually goes directly to charity. So just, thank you very much, you’re in your first year as being CEO, you’re going into your second year and a pandemic, this must be a challenging time. So thank you for being here. And we’d love to hear more about Make -a-wish.
Gloria Crockett Yeah, thank you so so very much, Aaron. Excuse me, I just got a little bit of a frog [ ] in my throat right then. So you guys saw that amazing video, and I want to share with you guys how important it is to have hope, because hope is truly essential. And what we’ve been doing with COVID. With our children that are critically ill between the ages of ages of two and a half and 18 has been different, this last, you know, six or seven months, and it’s going to continue to be different for the next six or seven months. But what I can say is that we are doing everything in our power to make sure that wishes come true. And I want to say first of all, thank you to each and every one of you, for all that you’re doing to make sure that these wishes come true because it’s so vital, and part of the recovery for those those children that are sick. So, we’ve been around since 1983, our chapter here in Orange County and the Inland Empire, and the different types of wishes that we’ve provided our wish I wish to have, I wish to give, I wish to meet, I wish to go, I wish to be. And I want you guys to take a moment, I know that we’re trying to be as interactive as possible, where we’re having different types of zoom meetings. So I want you guys to close your eyes. I want to tell you about a wish that recently happened. So think about this, there’s a little boy who’s really really sick. He’s on his way to have his wish, but he doesn’t know it. His wish is to have a blue Lamborghini and to have his dad driving it. So they pull up to the montage, the little boys asleep in the back of their van. Now I want you to open your eyes and he opens his eyes to a blue Lamborghini. How amazing is that? So open your eyes. Imagine that you’re seeing a blue Lamborghini and that’s exactly what Omar got to see. And it’s because of individuals like you that wishes are able to come true. So a huge thank you to The Norris Group, you guys are absolutely amazing. I’d love to getting to know you over the year. I think I may have been on a whole three weeks the last time last year’s event. But Bruce, Aaron, Joey, the whole team, thank you for all that you do. I Survived Real Estate it’s a phenomenal event, and I want to say that we’ve been together working in partnership since 2008. And you guys, it’s amazing. It’s almost a million dollars to support our community. And make a wish just wants to say a huge thank you for our partnership since 2012. In receiving almost $400,000 in support of making wishes come true. So thank you, you guys have a fabulous event. And I appreciate you inviting us in to share a little bit more about our mission to treat those individuals, those kids between the ages of two and a half and 18 with a wish of a lifetime who are dealing with a critical illness. So have a great event.
Aaron Norris Thanks, Gloria. Oh, if you are in Riverside and would ever like to stop by the Norris group office, we have hallways of all the plaques that we typically have and I would love you to come and take pictures with them. It’s a lifelong work. It’s been an honor and just just been really fun. So the sponsors here tonight. I just really appreciate you and your continued support for this event. It’s just not possible. This our community has just been really awesome over the years and I appreciate it. With that, I am going to officially hand the reins over to somebody that has been in the business for almost 40 years. As a real estate investor, builder, a hard money lender. He hosts are The Norris group’s weekly award winning podcast, and takes great joy and charts, yellow lining real estate research papers and legislation regulation and does his very best to advocate for an industry, he loves very much. Joining us all the way from Florida tonight. Three hours later, Bruce Norris. Hey, Dad.
Bruce Norris Hey, Aaron, how are you?
Aaron Norris I am good at the Norris Group hanging out. I think there’s some people who think I’ve I’ve gone away now that I’m full time with PropertyRadar, but I’m just undercover in the background at The Norris Group. So I’m still here. Yes, full time PropertyRadar during the day, and we’re about to go national. It’s very exciting, living my best life. But over the last few weeks, you’ve been interviewing the past Rohny winners. If you could sum up some of the advice and some of the things that they’ve been saying over the last couple weeks, I would just say.
Bruce Norris I think it’s what’s common to all of those people was their reputation is spotless, that they conduct their business in an honest manner. And that allows them to do multiple transactions with the same families for decades. And that’s that’s why we created the The award was to honor those people in our industry that not only had the ability to do the business, but did it in such a way that it was honorable to such a great extent that when they taught people, they also taught that piece of it and that that’s awesome.
Aaron Norris We’ve, we’ve even had some of the longtime favorite guests, Doug Duncan’s been on the radio show, Sean O’Toole, real estate seems to be faring pretty well, considering all things being considered. How are you feeling about real estate now that you’re parked in Florida?
Bruce Norris Well, as you know, we’re building homes, andI would say the average length of time for us to sell a home was about 20 hours. I mean, honestly, it’s so fast. So did I think this would occur? No. And so there’s going to be very interesting to hear the comments tonight of all these different people from different areas. Because in 2019, you know, at the end of 2019, we had the best set of charts, and no movement in price. Three months later, we started a pandemic. And now we’re off to the races. So if I’m the only one scratching my head, then that’s okay. I’ll learn from the rest of them. But I am. I’m surprised at. I’m surprised at what’s going on. And I think I was thinking about it today. Of course I knew we were gonna talk about it a little bit. I think some of it might be you have reduced inventory because somebody just refi their house at two and a half. And they say I’m staying. So I think you might have reduced inventory for that reason. What was really interesting is when the pandemic started listings got pulled off the MLS, because I think everyone thought, Okay, well, this is going to be a price damage, and I’m not going to participate in it. So you had a lot of listings come off. I don’t know that they’ve ever gone back on. But certainly you have I think California has about two months supply, which is for California, about as low as it gets. And so we have off to the races pricing, very affordable. affordability, if you will, I think it’s 32 or 33%. But all that was in place in 2019 with no results. So I’m excited to hear all these smart people. Help me understand what the heck’s going on.
Aaron Norris You’ve been threatening to move to Florida for years, and in July, you took all of 30 days to pick up and just leave us behind. What made you finally decide to pull that trigger?
Bruce Norris You know, I think honestly, I think it was something that my wife was concerned about California. And so I took that to heart. As you know, that’s one of my main things in life is to put a smile on my wife’s face. So as far as the economics of it, I full. I was fully involved in saying that was a great idea. Because I I’ve already invested most of my money in Florida. And so I was already happily there. I like the product that I had and all that of course. Very big thing saying goodbye to friends and family but there’s a plane I’ll be there next week. And we can do you know we can end [ ] The Norris group is still thriving and still doing fine and now we’re doing business on the east coast.
Aaron Norris I’m going to ask you one question because I think it’s important to frame tonight. I get most of this questions from realtors. But I think we should cover it. Would you buy a piece of real estate in California today?
Bruce Norris Sure. If If I was going to live in California, I’d rather own a home. And if I was going to borrow money, I think I’d rather borrow it in this in this year than any other year.
Aaron Norris So you still believe in homeownership?
Bruce Norris Absolutely. That’s a very, very important thing to me, as you know.
Aaron Norris I do and it’s important to cover we’re all in we love this industry. And it’s important. And I know we’re going to be talking a lot about how crazy it is right now. What are some things that you would love to hear tonight?
Bruce Norris One thing I’d like to bat around, and I’m glad you brought brought it up, and how important real estate ownership is, is that I think our industry has to figure away how to reach across the aisle to the have nots. And one of the ways you can do that, and you know, we have a voice, you have a voice. Sean O’Toole has a voice. And nothing down loan program would probably make a ton of sense right now, we always talk about affordable housing. We don’t need to lose 100 grand a house. We have two and a half percent interest rates, that’s affordable housing, all across the country, you know, they don’t have 700 grand median house price. They have 250 grand median house price, match it two and a half mortgage with that, put it put nothing down mortgage on whatever your failure rate. Here’s the big problem. Everyone says okay, well, that’s going to create tons of foreclosures. Well just have a different foreclosure process for that loan program period. One foreclosure process for all 50 states. If you’re delinquent on your payment for six months, it goes to Trustee Sale. The opening bid is the interest payment never becomes an REO. Somebody buys it for six payments. If the overbid comes, then they the people that were in it, get it fine. But I think we have to have real estate be part of the solution. Aaron, as you know, ownership was a big deal to me. Really big deal. I raised, I still remember the emotion I felt when I was 21 years old, mowing my grass on a Saturday. And I actually teared up while I was doing it, because I realized I owned a house and I I felt like a man for the first time. That’s how impactful that was to me. And so I think way society is right now, I think we better reach across the, the the aisle and let people have a chance. Because once you have equity, because this stuff starts, you know, as your loan starts paying down, as your payment is less than rent, you have spendable money, and eventually you get some equity and you can start being entrepreneurial, And that’s I think that’s what people need that aren’t there. So I think our industry, collectively, autos, maybe break some rules and say, You know what, we’re going to take a risk and let people in that we haven’t before.
Aaron Norris Amen to that one. Well, Shall we get started?
Bruce Norris Absolutely.
Aaron Norris Let’s do this. All right. First up in the hot seat, Paul Herrera, in the Inland Empire, how you doing?
Paul Herrera Hi, Aaron? Good. How are you doing?
Aaron Norris I am so grateful you’re here. You do a lot of work in the Inland Empire. In the real estate advocacy and Governmental Affairs. You’ve been in the industry in the Public Relations industry for a really long time. And I’m very interested to hear what’s going on. We’re going into an election. There’s quite a few things that state a stake here in California. The mic is yours.
Paul Herrera Thanks, Aaron. You know, this is this is just been a year that if you gave me all of the factors that went into this year and said not tell me what’s going to happen. I couldn’t put together the outcome of the last of the last 10 months. I think Bruce is right on with this, this uncertainty. And because of how different this year is turned out from what you might have guessed by seeing what’s there. It’s very difficult to Google [ ] out six or eight months with a lot of confidence to say I know what’s going to happen going forward. Even for I think all of us are not just living this a professional manner. We’re living in a personal manner and seeing how it impacts our day to day lives. I’m actually right now standing in a home we bought in San Diego, that we’re starting to move into. I’ve got a place in Riverside still so well. I’ll probably just be a little underdressed. All of my dress clothes are back in Riverside, the closet and the only button up shirt I found my closet here is a silk burgundy shirt that I’m forbidden from putting on and showing to anybody apparently, Theresa won’t let me I’m so proud of it though. So we actually bought this house we went to the contract buyers house [ ] on March the 6th. And a week later,we, COVID hits in a way that we find that the recognize and I think I had my last in person meeting, business meeting on Friday, March 13. Friday the 13th of March was my last in person meeting. And we didn’t know whether we should go through with purchasing this house in San Diego or not, we didn’t know was going to happen. But there was this blip of interest rates in which that weekend we got a 2.85% interest rate. And few days later was at 3.4%. And the owner essentially said, I wanted to get this done. So we got we get the deal done. And we couldn’t turn away that 2.85. Given that this is a house, we plan on being forever. And, you know, we went through the whole process, we close in 30 days, as we watched, so many items of uncertainty start to hit the industry. When you look at this year, when January comes around, we have a very strong economy, the state budget is 20 $30 billion in surplus. The governor and legislature is trying to figure out where to spend all this extra money that they hadn’t planned on collecting. We’re looking at trying to tackle some big problems and housing affordability. And they’re trying to figure out, you know, how many things can we get done with a strong economy at our back. And then by the end of March, we’re just trying to figure out the depth of the fall, and what that’s going to mean to to the economy and to our ability to maintain basic things that are going to have to have to take place. Ben and I- Ben Benoit and I, starting out probably March 20 are starting to field all kinds of issues that we had never dealt with before in the Old Empire, rent control initiatives, eviction moratoriums. Aaron, you’re part of many of those discussions and some of the cities in our area. Cities, I had never, you know, raise a thought about placing burdensome restrictions on landlords saw massive need, and you know, you can or some reason because you have, you know, COVID forcing people home and away from their jobs away from their incomes. At the same time, that, you know, landlords are in the very same place where you know, their incomes threatened and this, possibly this might be their income that threatens so much that they’ve worked for over the years. On my side, we didn’t know at the end of March, how real estate transactions were going to happen. There was no exclusion that allowed real estate practitioners to go out and do anything, put up a yard signs, show of potential buyers through a home,draw title documents, I mean, home inspections, repairs, and I had to map out the entire process from listing appointment to final closing documents, and try to figure out a way to, to put together a solution for each piece of it. And then mid April, we got essential industry designation that worked out a lot of those issues. But for a month there, we just didn’t know how it’s gonna work. We had to troubleshoot so many things that I had never even thought about before. I do work in the Coachella Valley with the California Association of Realtors. There’s a lot of foreign buyers and owners that are there. And I got a call one day saying, hey, how do we get documents notarized. I’ve got a Canadian seller, they can’t cross the border, the embassy is closed, they normally would get notarized at the at the embassy but this is closed. So what now and we we found a couple of ways to work through that we found that you could you could put it together with Canadian notaries to some ratio process and in the mail, we found a way of using online notaries in Texas, I mean, we just had to figure out some way of getting through, it may have to be that would be acceptable to the recorders office, or to whatever agency we’re trying to work with. That was that that’s been 2020 It’s been a year of adapting to a very difficult circumstances that we have to find a way to address. But in the middle of all that as this is taking place. And as we’re trying to, you know, get through the week and get through the month. There are systemic problems that were there when the year started. That will be with us when the year ends. And I think the most powerful one is what Bruce was talking about, with respect to the haves and have nots and housing and how that’s changing the politics and our ability to do simple problem solving. And people look at polarization. And they you know, the the rightly very worried about, you know how much we’ve turned into left’s and rights, you know, clash as a country. And that has really undermined our ability to do basic problem solving on things that we work on. There are a number of issues where we can’t get either side to come together to some kind of practical agreement, because both sides believe that they don’t have to do anything. When you get to the extremes, and unfortunately, extremes on the extreme anymore, they’re closer to the mainstream of the parties. Well, the samplerization in California is really affecting the debate over housing, you have a median home price in California that’s pushing $700,000. And the average California, you know, which think of, I can think of myself, you know, going back 15 years, when I was renting, I could not have imagined how I go from there to homeownership in this environment with these costs, even with a very good income, it would have been so hard to think of where that’s going to go. So you have the average California renter who doesn’t see a path to homeownership doesn’t, doesn’t even believe it’s going to be possible. And that changes the mindset of how they see homeownership. And now, you have folks who look at just about anybody who can afford a home as somebody who is wealthy enough to not need any more breaks. So that brings more challenges to tax breaks that traditionally like Prop 13, like the mortgage interest [ ] deduction, like, you know, other items that were created as as a way of extending a step ladder, to equity, to homeownership, to building family wealth, and now are seen as tax breaks for the wealthy, because a homeowner is now a wealthy person in California. And that’s poisoning our ability to problem solve, and try to bring up that that next generation of homeowners who are invested in a neighborhood investment community, and you’ve seen what’s happened with, you know, Ben, Ben, in particular, you know, in the rental industry, has had to work on some very difficult issues, trying to figure out how to how does rental industry function in a world where they’re seen as almost vultures to the comedy [ ] when they’re the ones actually, you know, who own the housing that is being used by much of California where they need to be. And meanwhile, we’re here with the supply demand problem, which is the real culprit, the fact that California put so many restrictions on the ability to build, there’s a reason why you can build a home profitably in Texas, where much of the country sell for $200,000 $300,000, and be just fine as a builder, and you can’t get anywhere near that in huge parts of California. If that was possible here, then our affordability problem goes away a lot faster. But we’ve built, you know, a series of gates to basic production of housing that for a generation has caused us to under produce. And now we’re here in a position where you know, we’re much more difficult spot. So we find ourselves going into this election, and into next year, in a role of strategic retreat, trying to figure out what parts you know, where we have to take a few steps back in order to protect some essential parts of the policy that even allows profitable building profitable, landlord activity to take place. And it’s not easy. And it’s really, it results in a lot of difficult conversations that we have with folks in our own industry. When we try to explain why we have to use give this piece over here in order to protect this essential section over there. I’ll give you an example of something that’s on the ballot next week. realtors have put together a proposition called Prop 19. And Prop 19 doesn’t think we’ve been trying to get done for a very long time. It allows seniors 55 and older disabled homeowners and this case victims of natural disaster to make their property benefits affordable [ ] and very easily move around the state anywhere in the state without seeing that tax increase associated with you know selling a home that you’ve been in for a long time and moving to another. But it also does something that some of our own members I’m sure some folks listening to this won’t like. And that is it changes. The rules around when homes are reassessed when they pass from parent or grandparent to child to grandchild. So it says that if the if the inherited home, if the child or grandchild moves into it makes it a primary residence in the first year, then to keep their parents or grandparents tax bases if they don’t, so if it’s a rental or otherwise not primary residence, then is reassessed the current market value. That change results in basically offsetting the tax revenue losses that are done through through the portability side and actually results in a little bit of extra revenue for the states. It’s a net tax increase. So the question is, why are we doing that? One big reason is because we’re convinced that the State Legislature and voters will do that to us in two years. And they would have that to us this year. If we hadn’t come together on a deal that at least allow the money to stay within within housing. The polling that we have on Prop 19 says that the removal and the changes to the inheritance tax side of it is far more popular than the portability part. And you think that you know, our members feel that Okay, so we get the, you know, the nice sugar coating of tax portability that helps so many Californians move without, you know, facing tax increase. And we’re gonna that wraps the bitter pill of this, of changing the rules on inheritances. The voters have exactly the opposite. The voters don’t want the tax portability, because they don’t want to grant another tax break to what they see us people don’t need them, folks who own houses, wealthy people and their view. But they’re willing to hand that over. If we reassess rental properties if we reassess these uh, you know, wealthy family inheritances that are, that gets pointed out in the press regular basis. That’s, you know, but that’s a real challenge. Because, you know, by the way, I haven’t convinced my sister on this yet. She’s going to inherit some some, some real property from her husband side of things. And I tell her Listen, it’s not that this is the best way. We tried it the other way two years ago, we tried it without making any compromise. And the voter said No way, not just done with 20 points. Is that a question? Or a timer? timer. Okay, gotcha. So that that’s, that’s the, that’s the background of the walking into and what’s going to frame so many of our debates, legislature will find out who’s in the legislature in five more days, it’s not going to change a whole lot in California, the outcome of, of these legislative elections aren’t going to shift many of the debates going on. But I haven’t seen a moment of uncertainty as to what will be on the agenda for Sacramento to discuss at this level, at any point that I can recall, you know, we know that housing affordability has been top of mind of voters last couple years, Governor Newsom ran on a pledge of, we need to build a lot more housing, he seemed to understand the problem, diagnose it, right, and says we’re gonna, you know, pull all the stops so that we can catch up and build I think, 3.5 million units in eight years. We’re nowhere near that. And we haven’t passed anything on the housing production side, just a couple of little things around the edges. And honestly, the governor hasn’t engaged on a level so that we can move some of those things. There’s been nothing governor, but sort of legislature, some game playing around, you know, what can and can’t be done. And in the end, the only thing that’s passed has been additional restrictions on landlords that make you know, making a living quite a bit more difficult. You know, we’ve created new pitfalls have created new ways to get in trouble. And we’ve particularly targeted this deeming regulations on small landlords, which, you know, which is really, really unfortunate. You look at prop 21. On about next week. Prop 21 is laser targeted at trying to make life more difficult on small landlords. So you have will probably want to do is remove some guardrails around what cities and counties and local governments can do with rent control. So counties and cities can enact rent control. But what they can’t do a few things, they cannot attach it to single family housing, or one to four units or individually total condos. They can’t have what’s called vacancy control, which means it cannot, you know, when the unit’s vacated, you can’t keep keep a rent controlled waiting for the next town to come in. Well, who does this really attached to small landlords are much more likely to have those, you know, single family one to four units. Small landlords are the ones who know their tenants for 20 years and will be more likely to be generous with the rents and not raise it enough to keep up even with their own costs at times. That’s who’s primarily impact. Now fortunately, and I hope and, you know, has great news on the news I’ve seen has been pretty positive that I don’t think the voters are going for it. And again, next week, we have Prop 15, which aims to undo essentially half of Prop 13, from 1978 to remove property protections from commercial real estate, enacting the largest tax increase in California’s history. And if you read any thread discussing this policy folks that are are working on 15 you very quickly get into. So when do we go after residential, and then say, well, let’s, let’s wait until we get this part done because undo prop 13, residential, they only kept it out of this one because they want to keep it as lean as possible while still enacting this large tax increase. So I’m I’m very interested in what this next year is going to mean for our local market in particular. And I’m looking at, look at the words don’t make any sense. based on where we started the year, the median home price in the western Empire, which essentially all the two counties other than the high desert to Coachella Valley, habitat center area is 460 is a figure I just got a little while ago. The we have inventory up, we have sales activity up year over year. And we have a job losses exploding. Even a Coachella Valley is doing very well a place where they lost a lot of their economic drivers in the spring when COVID forced them to cancel major events, everything from the concerts to test tournaments, and they’re quite sure that 2021 is going to be worse as far as not allowing those things to come back. And despite all that, you don’t see any lead up in housing in the cost of housing or the amount of activity the agents so the real estate offices seem to be doing quite well. And and I can’t help but have this feeling of, you know, the the coyote running off the cliff. And, you know, for some reason gravity isn’t taking hold. But you can see the fundamentals when you when you run back to tape, you know, rewind and look at what’s happened. You can you can piece together the story. But where does this take us at this point? And how do we keep a functioning problem solving approach in City Hall in Sacramento in Washington, DC, or try to bring one back in many cases, when so much of this is going to be dependent on what you know how we can solve some of those debates and policy circles. Aaron, can I tell one last anecdote?
Aaron Norris Please.
Paul Herrera This, this is an example. And I want to say let’s say this occurred in but Ben and I were both involved in this as the as the pandemic was, was taking hold. And there was a lot of worry about what happened to tenants who have lost their jobs. There was a city that sought to enact rent control. But a couple of council members that wanted to bring it forward one in particular. And one as they studied it, they realized, okay, the only version of rent control they can bring forward is one that would do almost nothing for anybody. It would have very little actual impact, because of restrictions from the governor’s office because of restrictions placed earlier in the year. It was just symbolic at that point. And so it got to a point where we said, our association said, we’re not even going to bother to pose this, because it doesn’t do anything doesn’t help anybody. It doesn’t hurt anybody either hardly at all. So we don’t want to be set up as a pinata to be railed on. When, when, when they decide, you know to find an enemy to go after and say these are the people who are opposing, helping, helping tenants. But what we were going to do is remember that in the middle of a health crisis, in which so much uncertainty was putting people at least mentally on the brink, if not actually on the brink, that someone was choosing to take that moment to grandstand and put forward take actual debate time take actual staff time to put forward some bypass legislation. And that’s the kind of, of activity in politics that drives me nuts. And I think makes a lot of people crazy as what we hope will not be what reigns as we go forward.
Aaron Norris I don’t know I hate getting into politics, but I really thought the pandemic was going to be this generation’s 911 I’ve been overwhelmingly disappointed by politicians that continue to debate help that our current sitting President wanted to launch in summer. And it got political and part of the reason is states like Texas and Florida. Why should they make up for states like California that have mismanaged a pension system? Of course, it gets political but the media isn’t picking up that and it’s so nuanced. Good housing policy takes a decade. It doesn’t fit nicely in election cycles two to four years and the builders unfortunately aren’t represented online today. But there’s they have to say that saying, forget nimbyism. It’s bananas build absolutely nothing near anything, build absolutely nothing anywhere near anything-ers. I’m on several, you know, housing initiatives. I’m on a Housing Task Force and, of course, two months ago, they’re like, well, we’re just going to create a new fee. I’m like, do you guys hear yourselves? You’re creating a new fee. I was like, are you shooting yourself in the foot against economic development, because you’re trying to charge more, I think we only have to look at LA’s HHH fund $1.2 billion to build, I think they wanted to build 6000 units, they are on track of a median unit price of 530,000, with some affordable units and quotes, going as much as $730,000 here in LA for affordable units. If they would just work with real estate investors and give us a chance. I think we would do far more with far less money, but that’s just me. So yeah, we’re a little bit ahead of schedule. Let’s get Ben involved. Ben is with the Cal California Apartment Association. He was with us with turmoil. And I begged him to come back because landlords are just nervous before COVID even started, we were having conversations half we’re worried about this economy doesn’t make sense. I’m out of dodge. Half was like I’m tired of the political nonsense in California and then COVID head and now it’s just a free for all everybody’s like later. So, I can’t wait, what to what you have to say the mic is yours.
Ben Benoit Thank you. And thank you, Paul, what an excellent, excellent lead in and, you know, Paul mentioned tactical retreat. And I couldn’t agree more It feels like as policymakers or policy wonks that are trying to help create good policy or see good policy created the state. We’re constantly in a tactical retreat. You know, I’m sure a lot of you right now are very frustrated with AB 3088, the COVID Protection Act or Eviction Protection Act, it’s currently in place that came out of this summer’s legislative cycle. And you probably think that this is such a horrible policy, and it’s just how can we have ever gotten here, but I want to go back for a second and recognize where we were just about 15 days before that bill was passed. Because I think a lot of people don’t know how far worse it could have been. the legislatures on the assembly side, and through the Senate Judiciary Committee and Appropriations Committee, had passed a completely separate bill AB 1436 by Sen. Chiu or assembly member two Chiu. And this Tenant Protection Bill went far beyond what finally came out with AB3088. That had tenant protections in place, basically, without having required anyone paying any rent until 2021. It had other financial pieces to it as far as the landlord couldn’t actually go after the tenant until 2022. For those missed payments, so that entire time, it also permitted the landlord from applying any security deposit money, they already had to satisfy rent even after that tenant left. And also, did not include some tax credits. They were part of the mix of what was going on in the legislature maybe a week before that there was a separate bill, AB 1410. So those are the things we were hearing in the media. And when everything sort of fell apart, we we his association really had to go into attack because we recognize that that bill was one vote away in the Senate, to going into being law. So, we fell back and we started negotiating with the with the Governor’s Office. And basically, that’s what came out of AB3088. Now at AB3038, we recognize is very onerous, it’s all about going after and making it very difficult for landlords, just like Paul mentioned, it does give some protections to the tenants, it gives some protections for evictions, but it truly puts the burden of all that on landlords. It makes it very difficult for small landlords that are frankly, not used to this used to being a legislative like this because for a long time, there have been protections for both some eviction, but mostly for rent control and other pieces of the puzzle that were there for those small, small homeowners or single-family homeowners that aren’t there anymore. You know, this bill does bring into an effect where you cannot sell your home without a 60-day notice, but only then can you sell it for. If it’s, you’re gonna be selling that home, you have to already be in a contract. So how do you get into a 60 day contract then give notice and then hope and pray that your tenants gonna move out. So I recognize that we have just many folks that are very frustrated by this. And we see that every day. You know, we have a 1-800 number a hotline that for anyone that wants to reach out to our groups in Sacramento. And we get these calls all day and all night regarding how they get out of their current rental situation. They want to know with this protection that the tenants have when can they finally sell when can they give notice. So when can they finally get out of this rental that they have and move on to something else. I find that very, very disturbing, and I think it’s that’s, uh, you know, when Paul and I talk about various things that we see on the horizon, we both worry about the potential that there’s just a fleeing of Sacramento or fleeing of California, with so many people. So that’s something that, you know, I recognize that, you know, it’s just such a difficult situation, how we got to this at AB3088. But again, we were in such a bad shape. And Paul nails on the head, it’s Sacramento, and it’s this the politics of trying to make a headline, you know, politicians used to try and plant trees, they wanted to plant ideas and policies that would hopefully carry our country forward into the future. And so often now, all we see out of Sacramento is folks trying to create a headline. So, the headline thing gets re-elected or a headline so they can show their constituents, they’re fighting for them, not a headline to show that they’re trying to actually make our state that we rarely see that. And so, I find it very disconcerting over this legislative session. And just like Paul said, this tactical retreat we sort of find yourselves in in California, for anyone that wants to hopefully have investments and move forward investing it’s very difficult situation. So, I was asked to sort of look forward what we see coming in 2021. And well, that’s a it’s a tough crystal ball to look through. It’s about as foggy as it gets right now, especially looking forward to Tuesday with our election. But on the state side, we pretty much know what we’re going to have in Sacramento, we’re going to have a sort of the same legislative session, we think with the very, very same characters for the most part, except for probably anticipating losing a few more Republicans. And as hard as that sounds is, you know, further falling further the left and our largest both legislative houses. And with that, we’re Our group is expecting that we’d be more work on COVID protections for evictions, even though we feel we’ve got a pretty good setup right now. Yeah, and of course, the tenant protection group, so want to have more. We’re also seeing right now that the tenant protection groups already talking about making the current 15-day notice that’s required under AB 3088 permanent. So right now, if you, you’re used to doing a 3-day notice, now you have to give a 15-day notice, of course, that’s 15 days without including weekends or holidays. So almost a month, could be a long time, sometimes when, as opposed to your regular 3-day notice. So that makes it very difficult for those folks that are you know, struggling or they’ve already got someone that’s behind in rent. And Paul mentioned, those, the small landlords, so often I see the small landlords being kind and forgiving, and finally get to the point where they finally feel that they have to serve a notice. And they’re now so far, maybe months behind. But yet they still have to wait another 15 days and makes it so difficult. So, you know, again, administration is trying to make things so much harder on the big landlords, but really, the small landlords really take it very hard. You know, of course, the legislature there, they do have extra budget money, as Paul mentioned, but we they seem to be operating in it, where they feel that they’re going to go into a deficit that they feel like that Road Runner two, or the gravity hasn’t hit him yet. So as much as the last couple of headlines about Sacramento having extra billions of dollars, we know that right now, the Governor’s Office is putting it out that they don’t want to see any bills moving forward that have a cost. So, what does that mean to you and I is, maybe there are other folks, that means that we’re all gonna have to pay for it. So again, they’re going to put that burden on the landlords and on the folks that are, you know, the owners of the houses as opposed to trying to find any meaningful fix that might have some finance behind it. We’re also anticipating the attempts to provide legal representation for tenants facing eviction. We’ve heard of this before, but we’re expecting those bills to come back again. And I care of course, again, the only way to pay for this then would it be to show that up increasing fees on landlords or increasing fees on transactions or some other way to create that legal representation funding. We’ve seen various ideas come up over the last couple years in the legislature, but we’re anticipating more next year. Of course, we’re also hoping for renewed attempts for expediting housing production. As a CA we were supportive of a couple different bills. Of course, those bills didn’t get very far this legislative year. But we’re hopeful that next year, maybe it might be different. But we recognize that, you know, the true meaningful fixes as far as for changes to our entire setup, or how we go about, you know, producing houses and how we’re doing that as far as California and how we’re stopping that need some serious overhaul. And I’m convinced that this governor just does not seem to be like Paul said, really getting engaged on that. So with that we’ll see anything like that meaningful coming forward? I don’t know. Of course, there also be some bills, I’m sure to address our homeless crisis that continues to go on, although I hear from different areas that the homeless seems to be better, although I hear like San Diego here that is much worse than downtown. So, I’m not sure where that’s going to go. But we do know that we expect to see some of that. So that’s sort of where we’re at and where we see ourselves. From the Apartment Association side. We recognize that there’s just so many questions and so much difficulty with the New Legislation. Of course, I don’t want to, you know, sound like a record. But we do have a lot of this on our website. So, if anyone needs that it’s out there. But of course, we weren’t Association, we’d love to see you join. But most importantly, we all know we all need to get through this together. So quite a bit of it was actually free for a long time on our website during the beginning part of this COVID disaster. But more and more and more of it now is behind a paywall. My apologies for that. But that’s just how we have to have to move forward.
Aaron Norris No, understand. And, Paul, we’ll bring you back, we’ve got a little bit of time for questions, because I know Ben, you can’t stay the entire time. I would like to point out here in the Inland Empire 211, I happen to be on the board. I know the landlord in the Inland Empire who got $500,000 to help over 120 families that were behind on rent. This was a grant; our local United Way has gotten over $30 million in funding via government grants from the Cares Act as well as private donations. A lot of I have known a lot of people online, you invest in other counties besides your own two and one as a health and human services hotline, the number one reason people call the hotline over the years even before COVID it was real estate related. When you have tenants or you call them, you’ll be given a laundry list of government programs for everything from food stamps, to utility assistance to potential, potentially understanding what kind of resources are available to you as a landlord. And you might have to get a little bit more involved and help your tenants to get through the process. But please, please, please call your local 211 go on the website. Some of these grants are available and people just don’t know they’re not. They’re not looking. So, you’ve got national state and local resources that some people just don’t even know about. Ben, at some point, it makes me feel a little uncomfortable, like taxation without representation. Is there any lawsuits going on from the perspective of the landlord? Because the legislature has gone a little bit too far. And it’s feeling we’re getting feed to death? At what point do we get to have a say?
Ben Benoit Couldn’t agree more? I’ll tell you our Association. To be quite frank, we’re looking for that that perfect plaintiff you know, recognize that right now, a lot of people are afraid to step forward and be that plaintiff. You know, when we do sit down with our attorneys, we explain to them that look, your your name will be known someone might find your address. How well known is that? You know, if you google yourself, can you find your own address? And that’s a yes, well, then, okay, willing to go along with this and be our plan to recognize you might have these tenant rights groups on your doorstep any morning that you might not know of. So that’s frankly, where we’re at right now, we do recognize that this is right in path of a takings lawsuit, but trying to find that perfect plaintiff, if any of you folks know that person, please give me a jingle. My phone number is on our website. But we are looking and I truly believe that at some point, this will come back. But you know, what’s interesting is Sacramento recognizes some of that, which is why a lot of this legislation does expire at a certain time. You have to be someone that definitely is had some loss, and you can show that loss. And we’ll have to be able to prove it, of course and how we assign that to the state. There’s lots of questions, but we are looking at that direction.
Aaron Norris I would just encourage everybody, depending on what kind of industry work you’re doing, if you build a lot, please join the Builders Association. If you’re doing a lot of landlording, please join the State Organization. And if you’re a realtor, just participate. I always encourage people to get on boards become a trusted expert. The only reason I got to sit on the Housing Council and they trust me, I come with a data approach. It’s realistic. They know that I’m not there. I’m being genuine trying to help I don’t believe in some of the things that they’re trying to do is going to work. We just got our updated affordable housing numbers here in Riverside, we have to build 13,000. How do we get to that number if we don’t get creative? I showed the housing council included the county in the city and I said there’s over 10,000, lots over 10,000 square feet in the city of Riverside, half of those are owned by landlords, half of those are further out of the area. They live in another county. So they’re not paying attention to you. They don’t know that accessory dwelling units are possible. These are people that have the properties. They have the experience to have access to private financing. They’re already landlords, tell them that you need affordable housing and put some money behind it. And they looked at me like I was crazy. But with our voices at that local level with the City Government, if we’re trusted, it’s they’re doing the best that they can you have to understand that the other side of the coin, they’ve got people who are really struggling near homelessness can’t eat. You’ve got kids that typically rely on the school system for almost, you know, 90% of their meals stuck at home with parents that can’t get to work. It’s complicated. So thank you for all the work that you and Paul do. I understand how difficult and frustrating it is. I don’t know how you do it. Paul, if you’re moving to San Diego, does this mean that we’re losing you in Inland Empire.
Paul Herrera No I’m not moving San Diego. I’ll be staying in Riverside, but I’m here quite a bit. So right now my since I have no meetings in the Inland Empire, I just come here on Thursday night, and go back to Riverside on Monday night.
Aaron Norris All right. When it comes to practical ways that local real estate professionals can be involved. What would you suggest?
Paul Herrera Um, you know, first and foremost is just to keep an eye on the materials that we put out, either locally or for the state level, just know what’s happening. Because just staying up to date, even on new laws, like every year, there’s a compendium of your, all the new laws are gonna affect you come January 1, that should be coming out any day now, actually. So things like that are the prime, the primary benefit, just to stay abreast of what’s going on the Association. In the past, it was in person meetings, but now it’s all zoom. So it becomes a lot easier to join a educational session or listen to the speaker online, put on the background and make some breakfast, and you pick up a lot of what’s going on, you know, at the end of the day, if the members are able to lend their time to communicate with us. I mean, this is this, the role that Ben and I have is really to find out precisely what is happening to impact a business of our members. And then translate that into some kind of troubleshooting or fix when we need to do that or find opportunities where we can make make it better. So the more our members, engage with us, contact us talk to us, you know, my cell phones freely available out there, I’ll give it to you right now 951-500-1222. I love hearing from from the members. And even if you’re not sure whether the issue you’re dealing with has any kind of basis in some kind of public policy, I want to hear about it because it may chances are it has something and we can try to find a way to address it. But we only know the things that people talk to us about or that we encounter personally. So that’s that’s it, just make sure you talk to us so that we have a chance to fix the things you see going on out there.
Aaron Norris Benson same question for you. What would you like to see? Maybe mom and pop landlords do that you think might be practical and helpful?
Ben Benoit Sure. Yeah. Just like Paul says, just trying. It’s so difficult every it seems like every couple of weeks, we got something new coming from Sacramento or local jurisdiction. Our organizations really had been trying lately to try and break down by jurisdiction, the compliance materials that are required by each city. We’re trying to get that out there to our members. So, if you’re looking to, you know, make an investment in another jurisdiction, we’re hopefully already have some of that data. Frankly, we’re only probably at the top 25 cities right now we’re trying to drill down further, you know, California being such a diverse area, it’s very difficult to do that. We’re working on that very strongly to basically create a compliance database for all of our members. Because we recognize that most people can’t keep up on all this. You know, it’s very difficult to as we’re going through the legislative cycle, there’s sometimes just to make contact, like Paul said, I’m the same way please, if you have a thought or a need affecting you, if you’ve got a story about how you’re being financially impacted, I’d love to hear it. And I put you on my list to make sure when we do have an opportunity to make contact in Sacramento. And just like Paul said, the meetings are on zoom was so are the state capitol meetings. We did have some success with the Senate Judiciary Committee we had over I want to say was close to 250, a small mom and pop landlords calling in a district committee and of course, Judiciary Committee does not like your local city, they’re not required to give a three minutes like we are in local jurisdictions, they limited it down to you have to say if you’re for or against, so, but for a lot of our local or smaller landlords, they were able to sneak in a few words of cautionary tales of Hey, this is my only income and I’m losing my my own home over this. And that that did weigh on some of the Senate Judiciary Committee members. Unfortunately, they still voted across across party lines. And in fact, someone asked in the chat, what do these legislators say when we when we tell them you’re putting all this on the landlord’s and this is supposed to is because you get to a takings? Well, they not only that they don’t care. They feel that their constituents feel that this is the only thing that will save them from what Aaron put out there. This, this Diconian situation that they find themselves in where they’re unfortunately, you know, in their last meals, it seems like some of these renters so we hear it coming from the other side, too, and that’s the tough part these legislators have. But for the most part, it’s these party line votes that really make it difficult over the years and get us some really horrible legislation at the end of the day.
Aaron Norris Some of the bills that passed in September that Newsom signed SB 1079. A trust Trustee Sale Investors I called some of the largest ones in Southern California, it was not on their radar. starting in January, the state of California has a 45-day redemption period. So, if you as an investor buy something at the courthouse steps, and within 15 days, an eligible buyer has the opportunity to raise their hand with the intent to buy. What’s that means is they have a full 45 days, sorry, 30 days after that, to make good on that they have to have a cashier’s check. However, you as the investor are still going to be responsible for things like insurance. Just all the things that could cost you along the way. And the bill does not have a provision of you making up for that the eligible buyer which could be a government entity, a new owner occupant, or a nonprofit could buy that for at the same price or $1 more, and you are going to be stuck with the joy of the expenses for holding for 45 days, including potentially unrecorded city liens. Hilarious. It would have been much more effective if they dealt with this in sort of like a short sale process sort of before it went to trustee sale. This is probably going to actually increase foreclosures in the state of California, because a lot of the trustee sale buyers was like why would I take that risk? I’ll wait for it to go back as an REO. Do you really think the new tenant buyer is going to be prepared to deal with homeowners that are holdovers? Probably not. It’s a it’s just a mess. And Skinner the legislator who did it, it was well meaning but it was frustrating to hear the process that attorneys and our professional associations tried to do. Holy cow. My other favorite one that had to do with accessory dwelling units. One of the tricks that HOA is we’re trying to do is just like hey, you know what, no at us is going to bring you over this 25% threshold as a rental in our HOA. So yeah, you can’t build on Newsome signed a bill in September that basically doesn’t allow HOA is to consider accessory dwelling units as well as Junior accessory dwelling units as part of that equation. So, if you’ve got a, you know, condos like me, you could conventionally eventually turn those garages into extra units. And there’s really nothing at this point that an HOA can do. The state’s trying, they’re doing some very weird things. It’s been unusual to see the state put the smack down and take away local rights. So even the state is fighting back a little bit understanding that they’re part of the problem. But any Paul, Ben, any last words, any favorite bills that you just shook your head and laughed at and said, how did this pass?
Paul Herrera We had one that didn’t pass. But what I’ve had a lot of impact on the folks listening to this call. There was piece of legislation that said that anytime a property with a tenant in it would be offered for sale, it first had to be offered to eligible nonprofits who had the first right to to bid on the property and to try to close a sale on it. And only after that process was completed and no sale was done, could they move on to actually market the property to the full market, you know, for for whatever fair price they could get? That was in process back in August. Fortunately, didn’t get through it. But that doesn’t mean it’s not coming back in January.
Aaron Norris Yep. Then any favorites?
Ben Benoit Uh, no, that was definitely Paul hit that one. But there’s just so many, it’s hard to keep track. I mean, it’s just amazing what Sacramento can put out. But a lot of it though, is a bit of a shell game. And we’ll see some of these bills that we pull and I say shake our heads, we go home and cry into our whiskey. But you know, the reality is, we realize that some of these are a shell game to get up through these different committees, get it out, and then get into the other house, even through a couple those committees, knowing that the this would be a horrible upset to the economy, everything else, but they get it that far. So, they then can start negotiating and what comes out of negotiations are not much better. So, it’s just been a struggling couple of years. And we’ve been seeing this tactic and it’s just it’s so frustrating, but it’s the state we live in. And, you know, I think that you do see finally some opportunities for people fighting back. One other piece of thing we’ve been sort of looking at or dwelling on is maybe we do a proposition as a tenant landlords and how do we do that? And what would that look like and what protections we want to try and get in there that but then you have to balance that out. Just like Paul’s organization had to balance out their proposition that we know what what do you give up? What’s that tactical retreat that you’re going to give up so you can get your your piece of legislation through? And maybe have everybody vote on the state of California. But you know, at the end of the day, it’s just such a difficult situation we find ourselves in not only with COVID but just with the ongoing drama of Sacramento politics. It really is affecting everybody right now. And you nail on the head earliest the has versus have nots, and how do we fix that? How do we change that dichotomy and I strongly agree with you, I think there’s got to be some opportunity to bring people into the into the mix of homeownership? I recommend, I recognize my first day I had that feeling to mowing that lawn is something special and we just need to help bring people into that fold. And I think then people recognize that that’s what they’ve been missing out on for a long time and and then we can all Start moving forward and all start investing together, investing in our communities, investing in all of our neighborhoods. And I think that’s probably the most, one of the most special things I’ve seen come out of COVID. My own city is driving our neighborhoods and looking at all these homes that people are finally investing in, you know, the folks that especially my or their longtime commuters, they’re finally looking at the front of the house paint boy, it really needs a paint job. And they’re doing it. And that’s something I think is special and one of those positive things that have come out of COVID. But we need more of that we need to bring more people into that fold.
Aaron Norris Very good. I really appreciate you to setting the stage for this first part of the residential Town Hall. What one question how do you see the new California homestead exemption impacting the market?
Ben Benoit Which exemption?
Aaron Norris The California homestead exemption to where the if the bill passes that you’d be able to move as a 50 Sr. Or backed by.
Ben Benoit The realtors? Uh, oh, yeah. Oh, wait, take that Paul
Paul Herrera Yeah, I thought that was referring to the legislation just passed changing the homestead exemption when you’re a debtor you can protect. But as far as that the one that we’re that we’re due doing. The estimate from the state legislature house office, as well as our own market research is that it’ll increase transaction statewide by between 65,000 and 80,000 statewide, which is actually quite a change, we that’s on the basis of about 400,000. Transaction state wise, looking at 15 to 20%. Additional inventory that’s actually producing both sides of the equation. One is seniors, and we did a lot of market research on this. Seniors who are staying in their home would like to move but don’t because they fear the tax increase. A lot of them we’ve freed up to make that move. And then on the rental side, there’ll be some additional incentive for some people inherited property to put in the market and sell because they’re not getting that additional tax benefit from from keeping the old, the old basis. So, on that side of things, you know that there’s there’s a there’s a piece of benefit.
Aaron Norris If you’re thinking about heading out of town, I talked to an investor last month who moved to Arizona, he recommends that everybody change your license plate as soon as possible. He was chased down on more than one occasion, and harassed for his California license plates. Florida last year, I was told three times in one trip to keep my California politics at home. Just tell them you’re Canadian. I don’t know what to tell you. Right. Dad, any last questions for our legislative panel? You’re on mute pops. And by the way, it was a question. Daniela was asking about the bill that passed the $300,000 but complicated evaluation. Paul, can you speak to the homestead exemption, I think is the one that you were mentioning.
Paul Herrera Okay. So, I’m not so familiar with it, because we’ve had this antiquated homestead exemption that is used to protect, it’s meant if you’re a debtor or if you’re in a lawsuit, you can protect X amount of your home’s valuation. And I think it was stuck at like $30,000. For a long time, it wasn’t just it upwards. And now it’s that $300,000 or the average of the homes in your area, whichever is highest. Something along those lines, it shouldn’t have any real impacts on in a significant way on the on the real estate market. But individuals find themselves in financial trouble can protect more of their of their home.
Aaron Norris Okay.
Bruce Norris I do have. I do have a question. There’s there’s three rules in real estate, that if if I were on the other side of the table, that I would be able to argue against them existing. And I of course, I’m on the real estate side. But I want to know if there’s any consideration about doing away with depreciation. And I’ll just give you an example. I’ve been able to depreciate a house that I am now in escrow in that as the according to tax laws has gone down in value and it’s gone up about 500%. Since I’ve owned it, I just sold a residence and that’s tax-free gain because I’ve lived there for more than two years, or whatever the new rule is I live there for a longer time. And I have another exchange that’s going on that I’ve owned a commercial property. So, the three holy grails of real estate the 500 grand tax free when you own a residence, is that going to be under attack is depreciation going to be under attack because this stuff doesn’t go down? It goes up and 1031 exchanges.
Paul Herrera So, the capital gains exclusion $200,000. It’s bandied about and it was part of a of a version of the tax, Tax Law from 2018. Right. It was part of the of the initial passage. So when it passed the House Representatives, it had a reduction in the capital gains exclusion that was later removed by the Senate and the Concurrence Bill 1031, has not been under serious challenge in in Congress. But that could change this coming year. There’s definitely talk about about changing 1031 exchange usage. It’s pretty well defended by Republicans in Congress. We’ve never seen a serious threat to it from Democrats in Congress. But you know, the tides are changing out there. The depreciation piece of it. I haven’t seen any talk about that. And some of these things, some of these exclusions aren’t exactly fitting with the populist revolts that we’ve seen, really in both parties and across the country. And so we usually sneak them into a giant Omnibus, omnibus bill sometime in December each year, you know, when we have like a week to go in, before the government shuts down. I don’t know that I’m just gonna be with us. You know, we usually have what’s called like a tax extenders bill, which we take all the little tax loopholes that we want to pass in the public wouldn’t want to know about, and we stuffed it into this giant document so that you, no one gets tagged for it. We’ll see if we can do that going forward.
Bruce Norris Okay, I’m just curious because I mean that those three are big deal for real estate, and just the mood of the, of the people that have wealth and how to how to make it look unfair. That would be three things that I would mention, I hope they don’t change. I’m a real estate investor, but I could I am concerned about them being seriously looked at.
Paul Herrera My senses, there’s bigger fish to fry, but those could get fried along with a bigger fish. Yeah, sometimes we get caught in the net.
Bruce Norris Okay.
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