Bert Martinez:
Welcome back. Norm Blumenthal here with us today. Norm Blumenthal is an attorney for workers and consumers selected as one of the top attorneys in Southern California. Norm was also inducted and recognized as one of America’s most trusted lawyers in employment law. Norm Blumenthal, welcome back.
Lawyer Norm Blumenthal:
Nice to be here, Bert. And, I thought today, we talk about a little bit of, of derivative, issues. You know, I was thinking when I came in to share a song if you could turn back time. Yeah. You know? And I think that’s the the whole point of the past election was people wanted to turn back time, you know, make America great again. And so this is where we kind of are as a people. You know? And, you know, when I was starting out, you could get yourself a a condominium for a hundred thousand dollars, a nice one. And you could get a house for, you know, a couple hundred thousand dollars.
And so that’s what people grew up. If I can live, you know, make my life better than my kids, then that’s where I’ll be and have a house. But these these right now, living space that you can own, we’re getting a hundred thousand or two hundred thousand or three hundred or four hundred thousand. You know? It just doesn’t exist anymore, and everybody you know, they’re blaming it on, the Democrats because they didn’t come up with the plan because they’re supposed to be the party of the people.
And you know, I expect that you’re not gonna see much better from the Republicans. So as a people, we are, you know, be careful what you wish for. We’re stuck with the Republicans in charge who are notoriously a management group. And, you know, at the end of the day, look look who showed up at the, inauguration.
All the all the oligarchs. I mean, it’s all about the money, and they’re that’s people, and you got, this, Mushead. He he’s, you know, standing around for what per political purpose, nothing, except that he gave the president more money than anybody else, so he gets a bigger voice than anybody else.
Bert Martinez:
Absolutely, I think I think what’s incredible here, we see that with this administration, money is the, no pun intended, is the primary currency. Right? They’re not they don’t they don’t care about, the people. They don’t they they don’t seem to take, they don’t seem to care about somebody’s, background or or or vetting them correctly. If you have money, you can play. Oh, you’re willing to follow me blindly and do what I want you to do? Oh, then let’s put you in charge of a department that you’re not qualified for just because you’re willing to jump when I say jump.
Lawyer Norm Blumenthal:
Yeah. And and that’s that’s who we have now. The question becomes, is there an answer out there that, that all our politicians, are missing? And I I submit there is one, and the answer isn’t build more housing, build more housing, build more housing. They can do that till the end of time, but nobody can afford it. So the the the and this now gets kind of, into the deep bushes, but I’ll give you from my experience of of my clients. There’s a lot of people out there that, own real estate. Mom and pop shops, we’ll call them for lack of a better term. They you know, their family owns an apartment building with 10 units in it.
And, what they end up doing is, for the most part, is you you can’t sell that property because if you did, what would happen is and and now we’re talking about tax issues. What would happen is you do what’s called recapture. Because during the period of time you own the property, the government, when it wanted you to build more housing, gave you accelerated depreciation on what you ended up, buying or building. And so you would, written off, all of your, investment in terms of taxes and more so.
And if you sold the property for the for the value, that you currently have, you’d end up having not only not make any money, but you end up paying taxes on it. So the ability of of an owner of a 10 unit just use that as an example. Apartment building only has a choice of trading it, which we call ten thirty one exchanges, or just letting, grandma and grandpa, run it out and give it to the kids, And that’s a that’s a transfer that’s, free of any tax because they get what’s called a a stepped up basis. So are you with me so far?
Bert Martinez:
And and, you know, to your point, again, places like San Diego, Los Angeles, Phoenix, just about everywhere, there is no longer the starter homes. Right? To you know, when you’re talking about you’re getting a condo for, for a hundred a hundred thousand, sometimes less depending on where you were at, Those things are nonexistent. My son and his and his wife just bought their first home, and, it’s a three bedroom. It and they paid over four hundred thousand dollars for it, and it’s and it’s exceptionally far.
They had they had to move an hour away, just so they can get a house that is somewhat affordable. And then to make it even more shocking to me, Norm, is instead of offering them a thirty year mortgage, they have now a forty year mortgage.
Lawyer Norm Blumenthal:
Yeah. You’re paying more or less less each month, but you pay it for a longer period of time. And and that’s that’s not everything you say is not surprising. I just had a friend that was looking for something between San Diego and Idaho, and they couldn’t find anything that they could afford. They what what they wanted started at a million dollars. And so it was the it was didn’t exist. But let’s let’s say we we had a magic wand, and we could change the federal, tax law. And, we could do it in a way that said, alright, mom and pop.
You have a 10 unit apartment building that’s let’s say, it’s it’s worth a million dollars, okay, just for round numbers. And it’s, be a hundred thousand dollars a unit. And, we don’t wanna wait for you to to die before we get some of that money, and you get some of that money, and we’ll figure out a way with with that tax benefit tax, issue. So what if mom and pop could condomize that building and not suffer any tax consequences?
In other words, they instead of putting the property on the market for one buyer and a million dollars, they could put it on on a, a market for 10 buyers at a hundred thousand dollars each as a as a condo. Those units at a hundred thousand would be readily marketable and salable. And if if the law was such that you’d suffer no tax consequences, well, then that would be the way financial advisers would tell you to go. Take the money, condimize it, sell these units as is, no, construction liability. And, you you you can sell off half.
You can sell off all of them. But the bottom line would be there’d be no federal or state taxes on the income and no recapture. So that would then, with the magic wand, create a tremendous, group of available properties. And it it goes and they these properties exist, you know, up and, you know, like in San Diego, a unit in, a beach area, for round numbers, it would cost you if you had a ten ten unit, property would be five thousand a unit.
It would be five million dollars Well, there’s no one stepping up for five million that’s that’s gonna be someone who would live there. But if you could condomize it and make it five hundred thousand each each, you’d prop you would sell out all the all the units, make the same amount of money without a recapture and you incentivize that, then you have an abundance of affordable housing.
And and that’s really, you know, that’s the the dream. If you wanna make America great again, you gotta change the tax law.
Bert Martinez:
Well, absolutely. And and, specifically, we need to change the tax law for the middle class. It’s it’s you know, here’s one of the things I love about Warren Buffett. Warren Buffett has come out on multiple times and says he doesn’t pay enough taxes. You know, he follows the tax code, follows the law, and he says that if you wanted to make America solvent and basically start making the corporations pay their fair share of taxes.
And I think that’s a very interesting idea coming from one of the wealthiest men in the world who owns multiple companies like, See’s Candy, Dairy Queen. He also owns, GEICO insurance and and just a massive list of companies that he owns. He’s he’s coming out saying, I don’t pay enough taxes, and my companies don’t pay enough taxes.
It’s not my fault. I’m just following the tax code. But right there, you when you’re talking about taxes, that’s a huge thing, especially if you’re living in a place like Phoenix or, or I was I’m sorry, Arizona or California or some of these other places that that charge. Hawaii is another one that has a I think Hawaii has the the the highest state tax. I think they’re at 12 or 13%. But, you know, if you’re living in one of these states that you’re having to pay a state tax, then you pay a federal tax, and you’re being taxed all the time. And and so, yeah, I think that we need to do something with our with with the taxes.
Lawyer Norm Blumenthal:
Yeah. The idea is is that you you want to incentivize the mom and pop that own that, ten unit apartment building, that has a value of five hundred thousand a door, which is, five million dollars. Instead of looking for a buyer at five million, they’re looking for, ten condo owners at five hundred thousand each. And it’s a win win situation as long as the, mom and pop don’t suffer any tax consequences to to the other extreme.
If they incentivize the fact because they if they sell it that way, they’ll they’ll pay no taxes, no recapture, and then they can say it doesn’t have a mortgage and, you know, they just pay the closing cost and and away you go. They make the money. They’ll spend the money. Now instead of, the kids waiting for mom and pop to pass away.
And, there’s ten people that didn’t have affordable housing would have affordable housing. Right. So, you know, that’s the concept is, you know and no one looks at the at these people. No one you know, what can we do to make it better? And, you know, this is just, you know, not a a hard idea to understand. People own it. Yeah. Then you at the same time, the the corporate, world, you can end up with, with charging more corporate taxes. Obviously, there’s plenty of room there.
But what our problem is the oligarchs now control this country.
Bert Martinez:
Well and and and here’s what’s so what I find so interesting, we’re gonna we’ll pick on on Elon Musk because he’s made himself so public. You look at Tesla, and I believe Tesla has roughly a 20,000 to a 50,000 employees, somewhere within that mix. Out of all of those people, none of them have a voice but Elon Musk. Now as an entrepreneur, I get that. That’s you know, he took the big risk. He gets the big reward.
However, a lot of his you know, with a 20 plus employees, I I guarantee you there’s a a large percentage of those guys that even though they’re working and and they got the degree and everything else, they’re struggling. They’re struggling everybody else to make to to to find housing.
They’re struggling like everybody else to to take care of their family. But yet Elon Musk isn’t doing anything for the, again, average working Joe.
Lawyer Norm Blumenthal:
Yeah. It’s it’s and that that’s across the board, and it’s really up to congress to, to come back with a a better solution than what they’ve come back with now. Right now, are are are the Democrats any better than the the Republicans? I don’t think so.
Republicans any better than the Democrats? Certainly not. And so we have a group, both of whom as a group, can, you know, talk about, oh, yeah. We’re gonna help the the, guy that doesn’t have affordable housing. I don’t see any legislation that, helps them. And the and the stuff that was proposed by the, democrats, it was it was a joke. You know, we’re gonna loan you two hundred twenty five dollars as a down payment on what? You can’t get anything if it was a if it for what? A hundred thousand dollars? It it doesn’t work.
Well, it’s, you know, it’s just the inability to understand both sides of the equation. Like, I’m reading, Abundance, you know, the new book that came out, you know, which is a good book, but they don’t get it either. They oh, the answer for to them is the same thing. Build more houses. What do you you know, you’re you’re not gonna solve the problem by building more because it’s gonna sell for more. Right. You gotta turn back time.
Bert Martinez:
And and the other thing regarding the the Democrats and the Republicans, both have put out stuff that is rather silly or, you know, really a joke. I mean, what’s his name? President Trump comes out, and he writes an executive order that is silly on its face saying, I I, you know, order, you know, all departments to find ways to make food and housing cheaper.
Lawyer Norm Blumenthal:
It’s a nice thought.
You can’t turn back time in a song or in an executive order. Right. You’re not gonna do it. You have to think of something new. And so this is what I’ve come back up with, you know, just in my own personal experience of, you know, what would make it in if you condimize these mom and pop shops without any negative tax consequences. You’ll have more units, for sale where people can buy in, you know, a piece of the pie for a much smaller price than would be if you had to buy the whole building, obviously.
Bert Martinez:
Right. And and and interestingly enough, one of the things that came to mind when you when you were talking about this, we have schools and large box, retail places that are closed, that aren’t being used. And it seems to me and, again, I’m I’m not an engineer, and I know that sometimes you cannot retrofit these things. But I know of one documentary where a family bought a a closed, a school.
It might have I think it was a high school, and they bought it, you know, from the state or the city or whatever for, like, a hundred grand, and that’s what they’re doing. They they’re going through there and and turning them into condos. And and they’re they’re doing one at, you know, like, one or two, units at a time because it you gotta retrofit these things. You gotta put closets and bathrooms and plumbing in there.
But bottom line is, to your point, Norm, this could be solved, and it’s gonna take somebody with a little chutzpah and a little creativity. And and the reality is we’re not gonna solve the housing crisis with old ways of thinking. It is gonna have to be creative. It is going to have to be somebody who’s daring to, to go the different route. And so we need some people, some lawmakers, some politicians, to think out of the box.
Lawyer Norm Blumenthal:
That’s the point. Like, I don’t pretend to think that I have all the answers, but at least I throw something out there for people to think about without just dismissing it out of hand. No. If if if this was a good idea, we would have thought about it before. No. Because the the problem we’re facing has never happened before. There’s all these, people out there. They make a decent living.
You know, there’s people out here in San Diego making, you know, a family making five hundred thousand a year, husband and wife working. They can’t afford a house, you know, that that they’d like they’d have to move, as you said, farther out and commute. Don’t what what what’s the point to that? You know, the idea is to bring them in.
This retrofitting of of office buildings, that’s another wonderful idea, and it should be tax credit kazoos for people that, that will, condimize their old office buildings, not to make them apartments because all that’s gonna do is just have the same problem. But to condimize the old office building and and for people to get go and live in, it’s the same idea. And and it’s doesn’t take, you know, that much to do. You you have to get in the plumbing. You know, there’s an issue of getting plumbing, but, you know, exposed pipes are, you know, they’ll they’ll look anyway of today so they can make all of that work.
So, you know, there’s a couple ideas that we talk about. You know, when we talked about I remember, Bert, you know, oh, we we gotta work on raising the minimum wage in this country across the board, and we managed to get 26, 20 eight states, took it up from, $7, and now it’s up to, 20 and $25.
But it still doesn’t, get you into the ownership cycle. Right. That’s what we have to work on. Where’s where’s the carrot at the end of the stick? You know, there is no carrot because all you’re doing is you’re paying a lot of of taxes, and, you’re you’re in there. Supposedly, this new tax bill they put through, there’s not gonna be any taxes on overtime or, Tips. Tips, or Social Security checks.
So see if if that actually made it into the last bill. I I read about it. I’m not saying it’s in there. I’m not saying it isn’t, but I did read that it was supposed to be in there.
Bert Martinez:
Absolutely. Here’s the deal. Look. Here’s the deal. Time and time again, we have seen that when something is absolutely critical, that the powers at be, including the people rally and get it solved. COVID is just another sample of that example of that. They they put together not one, not two, but, like, four different vaccines in a very short amount of time. And, again, I’m not saying that all the vaccines were perfect, but I’m just saying, look.
When when it becomes important and urgent enough, we figure it out. You know, we did the same thing multiple times with gasoline. We’ve done the we’ve done the the same thing when when there was a, a water shortage in different cities or states. It’s just a matter of people giving an caring enough to solve it. And and because we, for the most part, run on money, you know, nobody’s gonna do anything until the masses raise their hand up and say, we’re not gonna take this anymore. This is ridiculous. I don’t wanna pay $500,000 for a one bedroom condo.
Lawyer Norm Blumenthal:
That’s that’s what ends up where where these are at. Unfortunately, those are the valuations that that exist today, and those aren’t even on the market. I mean, you can’t find a $500,000 condo in, in San Diego. You’d have to have some incentive to turn it into, condos because people with with the rental income from it, you keep it as as an apartment building. So there’s there’s a a big problem because that’s where where you’re headed.
And it it’s just at at some point, it becomes out of the reach of of the everyday, person, and there has to be some people with better ideas in our, community and expose if the Republicans are against it, expose them. If the Democrats are against it, expose them. But it’s it has to be universal idea to get people into affordable housing through every tax incentive you can throw at the, owners of the property to put it on the market at a price that’s affordable.
Bert Martinez:
Absolutely. Absolutely. Norm, I think your ideas is good. Guys, let’s get out of our own way and come up with multiple creative ideas. One of them is bound to work.
Lawyer Norm Blumenthal:
You know, it’s the old saying goes, if you bang your head long enough and hard enough against the wall, money will come
Bert Martinez:
We’re gonna end on that note. Norm Blumenthal, thank you so much for stopping by.
Lawyer Norm Blumenthal:
Always a pleasure, Bert. Thank you.
Bert Martinez:
Good stuff there from Norm Blumenthal. Norm Blumenthal. Like I said, he’s a guy who’s got our back. Right? He looks out for the working class stiffs like you and I. If you wanna find out more about Norm, you can go to Bam Law CA. That’s b a m law CA. Check it out. If you agree with us, let us know.
If you disagree with us, let us know. Let’s start the conversation.
Remember, you were created to succeed.
