Paul serves as an advocate for REALTORS® and their clients on local issues, helping to preserve and protect property rights and the value of homeownership. Working with colleagues at the California Association of REALTORS® and the National Association of REALTORS®, Paul helps members make a difference for their clients at the local, state and federal levels.
His unique experience includes an award-winning journalism career with newspapers in Florida and California where he covered real estate, small business, the aviation business and the confluence of government policy, politics and business. His coverage of real estate and growth in Florida earned him top honors from the Florida Press Club in 2002.
In 2004, he won first place for in depth business writing from the California Newspaper Publishers Association. After journalism, Paul served as communications director for the San Bernardino County Economic Development Agency, coordinating everything from press outreach to speeches and video production. In four years with the agency, he oversaw external communications, managed a communications team and helped publicly position a variety of projects and initiatives.
The combination of mass media experience, local expertise, policy and political background and understanding of real estate issues prepared him to lead IVAR’s government affairs and communications efforts through coalition building, strong messaging and technical understanding.
Paul earned his Bachelor’s of Journalism degree from the University of Missouri-Columbia.
Episode Notes:
Narrator  This is the Norris Group’s real estate investor radio show the award-winning show dedicated to thought leaders shaping the real estate industry and local experts revealing their insider tips to succeed in an ever -changing real estate market hosted by author, investor, and hard money lender, Bruce Norris.
Joey Romero  Thanks for joining us again. Hope you enjoyed part two of our interview with IVAR’s, Paul Herrera.
Bruce Norris  I noticed, I read through some of the legislation that was either signed in 2021 and 2022. And there was one reason I wrote this it shared housing buildings that was AB 682. And it was something that’s, just made a no car post and made some changes and it got signed into law. You remember that law in particular?
Paul Herrera  I’m blanking on now. And I’m looking at…
Bruce Norris  That’s okay…. I could have done better homework on that one. Let’s, let’s talk about the process of getting legislation through because I noticed there were, there were two common areas or responses at the end of it died in committee. Okay, so I gather most legislation dies in committee.
Paul Herrera  Yeah.
Bruce Norris  Didn’t get signed, and then every once in a while vetoed by the governor. So, I was I was really interested in one of them that was vetoed ownership of agricultural land by foreign governments passed and then vetoed by the governor. So, if it’s something that had full support, let’s say it had 100% support.
Paul Herrera  Yeah.
Bruce Norris  There at the end of a veto. Is there a revote that’s possible?
Paul Herrera  It is technically possible. You can override the governor’s veto. It hasn’t happened. I was surprised about as to when I started getting involved and looking at working on state legislation, because I would see these these bills that passed at zero in the assembly…
Bruce Norris  Exactly.
Paul Herrera  38-0in the Senate.
Bruce Norris  Right.
Paul Herrera  Vetoed by the governor, why didn’t they just override? Isn’t that possible? So, I went back and looked at Oh, it is possible. It hasn’t been done since like 1984?
Bruce Norris  Why? Because it would make them unpopular?
Paul Herrera  You know, I’ve asked and nobody really has a very good answer to it. When I, when I asked lawmakers other than you know that the governor is very powerful. And to say California, the governor oversees quite a bit. And I’m not sure if it’s just a we’re not going to get on his nerves, or sometimes they pass legislation and knowing…
Bruce Norris  We have 100% of the legislatures passing it, and then it gets vetoed. Yeah, that’s just that, that was my comment, then what so the vetoed by the governor, that foreign governments can’t own California agricultural land, which does sound like a good idea of not to let them do that. And then it’s vetoed. But it I, think it’s one of those votes that was unanimous. And then they didn’t go after it and say we want it anyway. Okay, well that…
Paul Herrera  Like that, one, my understanding is that there were some real considerations about whether it would stand up legally, and could be enforced by the state of California, as written, that there may have been a different way to approach it, but…
Bruce Norris  Okay.
Paul Herrera  Well isn’t going to work. And so, the state would just be committed to a massive legal bill over something that may not have held up, they can do something along those lines, but maybe they need to sharpen their pencils, a little bit about how they’re going to approach it.
Bruce Norris  You, does all legislation, start with attorneys that know the process, or it can be somebody that just thinks they have a great idea. And they, they’ve put up a page outline and said, Let’s, let’s talk about this.
Joey Romero  Bruce, I was about to ask the along the same line of questions. We’ve interviewed other other folks, you know, Jordan Levine and Robert Kleinfeld, and they’ve mentioned that, you know, a lot of times they’re not working with these legislators directly. It’s their interns, it’s their, you know, their administrative assistants, all those have you. So, who are you directly working with Paul to try to move the needle one way or the other?
Paul Herrera  So, we got the process a little bit, so I’ll come back to that. So, typically, you have a lawmaker that wants to accomplish a goal have some they have some concept of what they want to do. And then their staff will come together and think about what though so we don’t want foreign governments to purchase California agricultural land. We think it’s important. So, the next step is to take the concepts bullet point and send it over to legislative council. And there’s a team of lawyers whose job it is to say, Okay, how does this idea, how do we implement this by making changes to California’s state code, and does have to be added intuitively to delete things do we have to amend things. And that’s where you start the ball rolling on the process and you start going into committees start with this and groups like us, right now, there, there’s going to be three or 4000 bills introduced and starting a few weeks ago and going through the next next month or so. So, then we got to find those things, right, because you have over words, legal staff, trying to take the wishes of the legislature and write it into code. And once we start looking at it, you start to see the problems crop up, you know, you’re trying to solve problem X, but you’re creating problems A, B, and C, on the other side, because it has to be implemented somehow, or you have to create something that is implementable, or you run into constitutional problems and the California State Constitution or the federal, you know, the United States Constitution, or you create, you know, massive problems at some other place. I’ll give an example about that there was a lawmaker in the last session, who introduced a bill to expand capital gains taxes, make them apply to most residential properties, if the property was sold within three years.
Bruce Norris  Okay. Yeah.
Paul Herrera  So, if you sold within three years, you paid cap gains on, on whatever the increase was in the property’s value.
Bruce Norris  Whether you lived in it or not?
Paul Herrera  Whether you lived in it or not.
Bruce Norris  Okay.
Paul Herrera  It would, they would consider you a speculator, on that, on that sense. Now, there’s a lot of people a lot of reasons why someone might have to move within three years, you know, your job changes you’re military and you’re reassigned, there’s, you know, something happens in your life, you get married, you get divorced, etc, etc. So, they really felt strongly about this, because they saw people, they felt that people have profited quite a bit, by purchasing homes in 2019, than they sell in 2020 to significant appreciation.
Bruce Norris  With non taxable income?
Paul Herrera  Non taxable, right. And so they wanted to discourage that, well, here’s the thing, the home, if they’re living in the property, and they’re staying in California, whatever they’re buying also went up by similar amount, right? So, they’re not exactly benefiting entirely from that change. And you know, and secondly, you’re just imagine, you buy a house in Corona in 2019, for $700,000. And you sell it in 2022, because you need a larger space, or, you know, you get divorced and you know, you’re moving to a different place. And now, it’s $400,000 more expensive and your escrow includes now a but $80,000 line item for tax, but you got to pay. That’s not what the code was meant for. And so if, if the problem that the lawmakers trying to address is that people are sitting on housing, speculating on and selling it six months later, or a year later, two years later, that’s a different kind of problem than what he’s attacking is what the problem is, he’s actually addressing is, people are making too much money, owning a house, I guess. But while doing nothing to address actual affordability, because the buyer of that property isn’t going to benefit from the capital gains tax is being assessed to the seller, the buyer is going to pay whatever the price is. So, it doesn’t fix housing affordability, which is what the lawmaker talked about, like, oh, no, this will help make housing more affordable. No, just help California make more money. And you know, and dip a spoon into the flow of cash, you know, and scoop them out of there.
Bruce Norris  Yeah. And sometimes it doesn’t, you know, they had, there was a year, maybe two years where they raised cap gains, all the way to the top tax level federal.
Paul Herrera  Yeah.
Bruce Norris  And then they lost revenue. Because people said, well, heck with that, I’m just gonna sell my stock.
Paul Herrera  Yeah, yeah, exactly. And enjoy to your question about, you know, when do we get involved, we have to read through all this stuff. And there’s many times when bills that aren’t designed to have a whole lot to do with housing. They’re changing part of the code that impact housing in a way that they didn’t see. Because they were focused there. I was on different ball. But we have to read through all this stuff and say, ‘Wait a minute, you know, the thing you just did is going to make it much harder to permit a home’ or you know, so all these bills that you’ll see where, it’ll say it was amended committee or CAR opposed and then changed to neutral after amendments. Oftentimes, it’s because the lawmaker wasn’t trying to target housing, they were trying to do something about, I don’t know, parks or the arts in a in an area. But the way it was written, it was too broad. And it was going to have an impact on on housing. And so once we talked to a lawmaker, they said, Okay, that’s not I’m not trying to hurt housing at all, I’m not trying to make it harder to get a permit to build a house. So, let’s go ahead and write in an amendment that removes that impact. And then we say, okay, you do need to do, or what you you deal with the other interest groups that aren’t that care about the issue, but our issue has been settled, because, you know, we were going to end up being collateral damage for, you know, a parks preservation bill or something.
Joey Romero  So, when it gets to the ballot, is that like, oh, man, we didn’t see this one. And now we have to oppose it. And we have to, like, create, you know, awareness to to oppose this make sure doesn’t happen, or for you, or is it stuff that you catch, and it just, it’s just going to make it because the legislature or, you know, the legislator just wants just is going to make sure that it gets on the ballot.
Paul Herrera  When you say the ballot, you mean the the propositions that come to vote?
Joey Romero  Like once it gets to the voter, but it gives that something that’s oh man we blew it, we missed it. Now, we got to oppose it.
Bruce Norris  That’s, that’s a…
Paul Herrera  Totally different process. Yeah. So, what I’m referring to are bills that the legislature votes on.The initiatives that go to the to the public. I mean, there’s all kinds of reasons why those go on there. Sometimes groups create propositions as a negotiating tool with the state legislature. Or when you look at what’s the one that shows up every every two years, dialysis clinics? That’s a deathmatch?
Joey Romero  Yeah. I didn’t mean to derail the conversation when was that? So, that was just a thought that I had.
Paul Herrera  Yeah, it’s just different.
Bruce Norris  Well, okay. Well, what makes it different? I guess, let’s talk about that. Because a lot of legislation, and when I read through these laws, they have impact on the people of California. We never got to vote on that. So, what is it? What are the, what rules are in place that say, okay, the people of California get to vote on this section of bills, but but not these, but there’s laws passed all the time that we don’t, we don’t get to vote on so what are the two categories? If they’re, if they’re, if you can do that?
Paul Herrera  Yeah, I think there’s three categories that come to voters. Number one is California allows direct democracy. So, voters can sign onto a petition to take a law and put it before a statewide vote as a proposition. So, like, those dialysis laws are Prop 19, on tax transferability. Those are laws where, in our case, Prop 19, we drafted it, we submitted it for review. And then we have a certain amount of time in which to gather, in our case, about a million signatures, valid signatures, verify those and then once that’s done, it is going to be on a bad way into the future. So, you can create laws, which creating laws also includes deleting or amending existing laws. through direct democracy through signature gathering. The state legislature can also vote to place an initiative on the ballot that does the same thing. That happens from time to time, or if something requires a change in the state’s constitution. So, for instance, Prop 13 is written into… Yeah, Prop 13 is written to the California constitution. Lawmakers can’t amend it, voters have to amend it. So, if they want to do for instance, split roll, which they would like to do, which is to remove or significantly weakened Prop 13 protections from commercial property, they have to go to the voters and the voters have to approve that. That legislature has no ability to change that because that was the state constitution that did it.
Bruce Norris  Okay, so how is that different than when we voted, We had on the ballot one year that rent control and we voted against that. So, the people of California voted against rent control. And then we got it.
Paul Herrera  Yeah, voting down a law isn’t the same as approving on by voters.
Bruce Norris  Okay.
Paul Herrera  So, if you if the voters create a law, the legislature can’t change that. If the voters declined to take voting no is the equivalent of taking no action.
Bruce Norris  Well, but voting no was a statement by the public that we don’t want it but then we weren’t asked a second time when we got rent control. So, how did that, how did that take a different path instead of voting in the public? How did it go through the legislature? And why was it, why was it a different approach the second time, okay, let’s pass it and not have the public vote on it, either or.
Paul Herrera  There was different, the law affected things differently. So, the first version was funded by one particular group that was frustrated, the local governments were not allowed to, to do certain things with rent control, such as attach it to new construction, or have what’s called a vacancy control, which means that rent control stays on the unit even after the the occupant leaves.
Bruce Norris  Okay.
Paul Herrera  And the legislature had no and to this point has still not made changes to those to those items. And this group wanted to see those things put on the table so they could expand rent control in Los Angeles and the Bay Area, for instance. And so they were willing to pay to put that on the ballot. And the voters, you know, and we opposed, I think that was Prop 5, and was a Prop 10 in 2018, if not mistaken. The version the past couple years later, AB 1482. That was the rent cap and Just Cause Eviction law still maintained a law those earlier restrictions, local governments and preempted some local governments, to the, to the extent that the I know, the the Cabinet departments Association, for instance, they did not oppose the final version. I think we were the last group standing that was opposed to 1482 at the end. But there might have been, I think there was one rental property group that stayed in opposition. But a number said, Okay, we’ve cut the best deal we can, we’ll go to neutral. We continue to posing and at that stage, but that was approved by the legislature. Now, if we had, you know, any group can take a law that passes and say, we’re going to raise the money and the signatures to run a referendum on this law. And then it goes to voters. That’s very, very expensive.
Bruce Norris  Okay.
Paul Herrera  So, like the bail bond industry did that, you know, the California voted to or the California legislators voted to eliminate cash bail. The bail bond industry put that about as a referendum. You saw that with Uber and Lyft. On the on the independent contracting things, you know, they they put it on the ballot parlays referendum and partly to codify a new way of doing things going forward.
Bruce Norris  Okay.
Paul Herrera  Don’t know if I’m, if I’m clarifying anything.
Bruce Norris  That’s helpful. 2023 what we have any legislation that you’re looking at going, well, we got to, we got to work on that. So, that doesn’t pass or any subjects that are really hot for 2023?
Paul Herrera  We’ve just started. So, the legislative the way the California Legislative cycle works is after the elections, new legislature is sworn in. And anything that was on the table before is wiped off, and we start from scratch.
Bruce Norris  Oh, really? Okay.
Paul Herrera  Yeah. So, we’re there now we’re, we’re everything’s being introduced, you’re seeing a lot of legislation that is almost just an outline of where they want to go. So, clearly, California is still working through housing affordability problems. Clearly the state is trying to figure out just how aggressively depress cities on approving new housing and expanding housing, in their general plans, you know, California’s gotten a lot more aggressive about this than they have in the past, you know, they’re actually enforcing laws have been on the books for 40 years in many cases, but that the state in the past would just kind of let cities get away with. So, you’re seeing a lot more projects getting approved or a lot more opportunities for that to take place. You’re also seeing some backlash in cities, cities that don’t appreciate losing the ability to say no.
Bruce Norris  Exactly.
Paul Herrera  And that’s, you know, there’s gonna be some some challenges to that. You know, we’ve, as an organization, we’ve traditionally been a more local control organization that felt that cities and local governments should be given wide berth to make decisions on what should and shouldn’t be built. We’ve shifted on that question, because over this last generation, there just became a lot of no when it came to housing, absolutely. And that needed to change. You know, you go back into the 40s 50s and 60s into the 70s. And most housing was built by right You had a plot of land, it was zoned residential, you wouldn’t got a permit. You didn’t have to go and present your plans at a public meeting so that the neighbors could come yell at you. And for planning commission to say no, you can’t build that, even though you have a piece of land is residential, you’ve been building code, you’re not like, no, they just don’t want it there.
Bruce Norris  Oh man I’m very familiar with. He sent me the classic email this year. He was so excited, he finally got his land. And I think it was Marietta or Manaphy all of it approved 19 and a half years after he started the process. And…
Paul Herrera  Yeah.
Bruce Norris  …five and a half million dollars out of pocket without touching the land, or putting in a pipe or a road that he went through.
Paul Herrera  Yeah, I mean, the process got insane, you know, this feeling that we had to run to the public for every single thing that happened, and you had a right to say what your neighbors did, when it wasn’t harming you, you know, you have a right to not be harmed by what your neighbors do. You don’t have a right to not be annoyed. If you don’t like it, tough.
Bruce Norris  Noise in construction. Oh, my gosh. Yeah.
Paul Herrera  Yeah.
Joey Romero  Paul, on your opinion, that. So, this, this issue, does it get solved by the legislature, helping the people or helping the industry?
Paul Herrera  I’d say those two things are the same. Because the fact that we have restricted building to the extent that we have mean that the people don’t have place to live, and that the costs are, you know, far exceeding what they would be, if market demand was had been allowed to be satisfied by market supply. As as it had happened for, you know, generations before that, we created these restrictions on building. So, you know, I, I have this, this, this idea that I want to have you have you go to a city council meeting is the speaker card, you know, my name is so and so and I want to speak on this issue, I would like to have a permanent speaker card at the city of Riverside, that just says whatever someone wants to build is fine with me. And just enter that into the record, every time somebody has got something they want to build, it’s fine with me. Because I think if you ask most voters, most voters are at City Hall, you know, so you get 30 or 40 people coming out on an item in a city of 300,000. And those 3040 people scare the, you know, the five or seven people up on the Dyess saying, oh my god, the community is up in arms against this, like, no, it’s like, it’s 30 people, you know.
Joey Romero  So, so you said that that’s kind of the same but the answer that I hear and maybe this is just my perspective, is that you feel like by them helping and make it easier for the market or the you know, the industry to, to do its job and to, you know, perform is going to eventually help the people. So, maybe the loss should be skewed to help, you know, the the industry rather than the people?
Paul Herrera  My view, and I’m a little bit more permissive on it than maybe some people other people would be, my view is that in, in the democracy that we have, you need a very good reason to stop people from exercising basic property rights and the ability to engage in commercial activity. You don’t need a good reason to permit it. You shouldn’t have to justify why you want to do something, you need to justify why you want to, why you want to use government power to stop that thing from happening. And we really move in the other direction, like, well, you know, why should we build like, we should allow the construction of this? Unless you can show me why it’s necessary. Now, you guys tell me why it’s necessary to stop it. You know why it’s a public hazard and real, you know, a real detriment. That’s going to harm individuals. And that just because you don’t like it.
Bruce Norris  Yeah. I think if you if you rated states as far as their opinion of what you’re allowed to do with what you own, Florida and Texas, probably be one and two, in California, the 50th. And that’s, that’s not good. That isn’t good. Last time I interviewed you remember, I remember saying to you that I read the bill of rights. Just before I interviewed you, because it was in my mind that same kind of thing that you just said, is that the local government seems to be able to have a lot of power over what you thought were your property rights.
Paul Herrera  Yeah. Yeah. And I mean, there’s legitimate restrictions that you want to look at, right? I don’t know if you remember. A couple of years ago, Bruce, there was a…
Joey Romero  What’s wrong with lead paint?
Paul Herrera  Sorry?
Joey Romero  What’s wrong with lead paint?
Paul Herrera  Yeah, you know, I remember this explosion, a chemical factory in some community in Texas. And there was like a adjacent school and houses. And I was thinking, why is there a chemical factory next to school and houses there, there are some limits that you do want to look at, you know, you don’t want to permit certain activities over water table. Those are legitimate restrictions, you know. Traffic is too bad already, we shouldn’t build more housing is not a legitimate restriction. And especially since housing doesn’t create people you need, you know, a male and a female to produce human beings. Housing just allows the people who already exist to have a place to live.
Bruce Norris  Paul, thanks for looking out for our industry’s well being all these years, you know, the way you described, all you have to read, are you a speed reader?
Paul Herrera  I’m very good at scanning through and seeing things that don’t interest me. And by extension, probably don’t interest you guys. So, I’m pretty good at scanning. There’s a lot of, there’s a lot of packing peanuts, inside of legislation that you can just, you know, push aside very quickly. So, Bruce, in the next couple of months will have a much better handle on some of the specific bills are coming up. On negotiating, we’ll probably there’s lots of things that will look real scary at first blush, your pricing on social media somewhere. And by the time it comes around a couple weeks later, we’ll we will have negotiated out some of the worst of that. And we’ll start, you know, pinpointing what are the places where we’re going to have a clash, and we have some work to do. So, four to six months from now. If you want to talk some more, I’ll be much more specific than I can be today.
Bruce Norris  It looks like September is a magic month for assigning things. Is that accurate?
Paul Herrera  Typically, September, Yeah. Because the state in even years when there’s election, the state legislature must finish its business at the end of August.
Bruce Norris  Okay.
Paul Herrera  And the governor has next month in order to sign or veto.
Bruce Norris  Almost everything I saw was September 28th, or 29th. For going or agreeing to it. Yeah.
Paul Herrera  Yeah, there was. There’s a lot of bills to get passed in the last two days of session.
Bruce Norris  All right, Paul, thanks. Thanks for taking time out of your day and join us.
Paul Herrera  Of course, anytime, Bruce.
Narrator  For more information on hard money, loans and upcoming events with The Norris Group, check out thenorrisgroup.com. For information on passive investing with trust deeds, visit tngtrustdeeds.com.
Aaron Norris  The Norris Group originates and services loans in California and Florida under California DRE License 01219911, Florida Mortgage Lender License 1577, and NMLS License 1623669. For more information on hard money lending, go www.thenorrisgroup.com and click the Hard Money tab.