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Real Estate

Flush that Bill Down the Toilet

El Cajon City Council plans on passing a bill that would automatically add sewage costs to property taxes. The Pacific Southwest Association of Realtors plans on protesting this bill. PSAR is San Diego’s largest real estate association. They say this proposed bill would place undue burden on property owners while alleviating the bureaucratic stress from municipal shoulders.

The Pacific Southwest Association of Realtors will voice their frustration at the next city council meeting scheduled for Tuesday, Marcy 10, 2020 at 3PM. This meeting is open to the public. Anyone who would like to attend or voice their opinion may do so at 200 Civic Center Way, El Cajon.

On its surface, this bill seems innocuous. PSAR contends that it will have far reaching effects. For one, future home owners will need to qualify for a higher mortgage. They say, increased property taxes always result in decreased borrowing capacity.

Members of PSAR argue that adding sewage costs to property taxes will lower property values throughout the city. A higher tax bill will shrink the amount of money future homeowners have to purchase homes. It will also result in lost equity.

Ultimately, if property taxes increase it will negatively effect the buying power of most homebuyers. In their well crafted list of arguments, they fail to mention that it will also make their jobs more difficult. By their estimation, potential homeowners will need an additional 2% to qualify for a home loan. This decreases their pool of customers, thereby lowering their revenue.

It is expected that the City Council will consider PSAR’s rebuttals seriously. They have over 3,100 members represented in El Cajon, Chula Vista and Clairemont. While it is advantageous for the municipality to cut through the red tape, they don’t want to be responsible for a slump in the local real estate market. A shortage of home buyers means a smaller tax base from which to fund its infrastructural projects and upgrades.

The typical home in El Cajon costs $400,000. With a 20% down payment, a 30-year mortgage of 5.5% can cover the remaining 80 percent. Based on this model, the current monthly mortgage payment is $2251. This includes $800 for insurance broken up into 12 monthly payments of $67. Property taxes assessed at 1.1% amount to $367. Monthly sewage charges are $45. That would increase a homeowner’s monthly mortgage from $2251 to $2296.

To qualify for a mortgage, homeowners need a 40% minimum income. Instead of having an annual income of $67,530 an individual would need $68,880 to qualify. A homebuyer’s purchasing power is reduced by $8000 when sewer charges are added to the property tax bill.

El Cajon City Council attempted the same measure in July 2013. It was flushed down the proverbial toilet.