25% tax on sales of recently purchased property: Proposed Bill AB 1771
“Investors who purchase rental housing and sell it within seven years would pay a hefty new tax under anti-house flipping legislation proposed in the California Assembly.
AB 1771 by Assemblyman Chris Ward, D-San Diego, would create a 25% tax on the capital gain produced by selling a residential property within three years of buying it. The tax rate would then decline by 5 percentage points each year until reaching zero after seven years.
The bill would exempt apartments when at least 15% of units are considered affordable.
Tax revenue collected through AB 1771 would go to a newly created “Speculation Recapture Community Reinvestment Fund” and be disbursed to local governments for schools, affordable housing, infrastructure, and transportation.
Ward sees the new tax as a disincentive for the type of rapid buying and selling of homes made possible through programs such as the short-lived Zillow Offers. Under that program, homeowners could instantly sell their homes to Zillow for cash, eliminating the regular bidding, sales, and closing processes.
In November of 2021, however, Zillow announced it would close its online sales operation. The author doesn’t distinguish between programs like Zillow’s and small-scale investors who buy a property, make improvements, and then sell it.”
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