Editorial: Tougher Rent Control Could Mean Millions in Tax Losses


Editorial: Tougher Rent Control Could Mean Millions in Tax Losses

2018-07-27T22:01:07+00:00July 27th, 2018|Advocacy, Local Updates|

“A November ballot measure to allow more rent control of California’s housing market could cost local and state tax coffers hundreds of millions of dollars. That’s the sobering bill for Proposition 10, billed as a tenant-pleasing antidote to the state’s critical housing ills. The figure comes from the state Legislative Analyst’s Office, an independent voice in what’s shaping up as one of the most costly and emotional ballot fights in memory. Landlords are ready to plow millions into blocking the initiative, which would do away with a restrictive law known as the Costa-Hawkins Act that limits local rent control measures. Tenants groups are just as motivated, hoping to loosen the rules in the most costly housing market in the nation.

The state analysis homes in on one aspect of Prop. 10: a likely drop in rental housing values if strict rent limits swing into place. Real estate won’t be worth as much if there’s a cap on rental income. That, in turn, leads to lower tax valuations when apartments and homes are sold. The measure “likely would reduce state and local revenues in the long run,” the report said.

The analysis hedged its prediction. Guessing future losses is a wildcard since it hinges on what counties and cities will do about imposing rent control. If only a few communities expand their laws, then the tax loss could be “in the tens of millions of dollars.” But if there’s a rush to rope in more housing and impose strict limits, then “revenue losses could be in the hundreds of millions.” Several of the state’s biggest cities such as Los Angeles, San Francisco and Oakland have varying rent control laws, which could be toughened if Prop. 10 wins.

If housing valuations drop and cities and Sacramento suffer a significant tax hit, it won’t be the end of it. Losses could be made up by gap-filling new taxes. Tenants would enjoy the comfort of protected rent, but they could face new bills to keep public services running.”

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