The California Apartment Association, working with the California Association of Realtors, has derailed legislation that would have levied a heavy tax on individuals who purchase rental housing and sell it within seven years.

The anti-house flipping legislation from Assemblyman Chris Ward, D-San Diego, failed to advance from the Assembly Revenue and Taxation Committee last week.

AB 1771 would have created a 25% tax on the capital gain produced by selling a residential property within three years of buying it. The tax rate would then have declined by 5 percentage points each year until reaching zero after seven years.

The bill would have exempted apartments when at least 15% of units were considered affordable.

Tax revenue collected through AB 1771 would have gone to a newly created “Speculation Recapture Community Reinvestment Fund” and be disbursed to local governments for schools, affordable housing, infrastructure, and transportation.