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The pros and cons of a recording fee for real estate documents

 A sold sign is posted in front of a home for sale on July 30, 2013 in San Francisco, California. The report notes that people in California spend more of their income on housing than anywhere else in the country.
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A sold sign is posted in front of a home for sale on July 30, 2013 in San Francisco, California.

As the state of California works to mitigate a crippling housing crisis, a package of bills is working its way through the legislature that aims to move forward on several solutions to the problem.

When California's crippling affordable housing crisis comes up, two problems that should surprise no one often emerge among the biggest hurdles to get past: funding and supply. In order to build up the supply, you've first got to have funding, which is the aim of one affordable housing bill that's part of a larger package currently making its way through the legislature.

Senate Bill 2, also known as the Building Homes and Jobs Act, would impose a fee ranging from $75 to $225 “to be paid at the time of the recording of every real estate instrument, paper, or notice required or permitted by law to be recorded.”

That money would be deposited into a new fund the bill would create within the State Treasury, and a board comprised of members of both the public and private sectors would ultimately decide how those funds are spent. However, they are required to spend 20 percent of the money in the fund on affordable owner-occupied workforce housing and 10 percent for housing purposes related to agricultural workers and their families.

The bill is sponsored by San Diego Democratic Senator Toni Atkins and has received support across the state from housing advocacy groups, various chambers of commerce and a number of local governments. Here's what they see as the biggest upsides to the legislation:

  1. Establishes a permanent, ongoing source of funding for affordable housing that will bring in $200-$300 million a year in revenue.

  2. Has potential to leverage millions more in private funding as well as funding from local and state government.

  3. Deployment of the funds through public-private partnership, as it is set up, will generate revenue and create jobs for local governments who use these funds to build affordable housing.

Despite receiving support from the California Association of Realtors, not all real estate professionals are on board with the bill. The California Mortgage Association and California Escrow Association both oppose the bill. Here's why:

  1. SB 2 picks winners and losers in terms of who will pay. A working person facing foreclosure will have to pay the fee on those documents and if they decide to refinance their mortgage, they'll pay fees on those too. You've got a strange situation where working class people who are trying to keep their own house will pay the fee so someone else can have a house.

  2. There are 600 documents in California that are eligible for recording, so it goes well beyond just refinancing.

  3. We should be wary of any law that chills or discourages recording. 

The bill will need a ⅔ majority to pass the Assembly, and there is concern that some Democrats will be wary of voting in favor of the bill after having supported two other tax hikes this year – an increase on vehicle registration fees and the gas tax increase. As of Tuesday afternoon, SB 2 and the other bills in the package were still being discussed in the legislature, though the L.A. Times reported Monday that changes to SB 2 are expected. 

We reached out Senator Atkins as well as the bill’s co-sponsors, California Housing and the California Housing Consortium, but no one was able to accommodate our request.

For more on KPCC's coverage of the affordable housing crisis, click here.


Ben Adler, capitol bureau chief for Capital Public Radio in Sacramento, who’s been following the negotiations over the housing bills; he tweets

Jason Rhine, legislative representative for the League of California Cities, which supports SB 2

Mike Belote, contract lobbyist representing a variety of real estate interests, including the California Mortgage Association and California Escrow Association, which oppose SB 2

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