High Rents Are Not Economically Necessary
Non-profit housing typically costs $550 to $750 per unit per month for operating expenses, reserve set-aside and resident services.
Bay Area rents are far above what is necessary for older housing where construction costs were paid off years ago.
In a fully competitive market, rents are minimum necessary to profitably operate and maintain rental housing. This is not the case in the San Francisco Bay Area.
A Massive Transfer of Income
from Tenants to Real Estate Investors
Berkeley rents now $100 million a year above the level needed for a fair return.
The total value of rental properties increased by over $1 billion.
If the government proposed to tax all tenants $5,000 a year and give the money to landlords everyone would be outraged.
Instead, government creates property rights that give landlords the power to charge land rent, we call it “the market”, people accept this as normal.
Keeping Publicly Created Value for the Public
We, the public, are morally and legally entitled to regulate or recapture the value the public has created instead of allowing real estate investors to take it all for private profit.
Regulate with rent control.
Exactions from new development.
Taxes on existing rental housing.
Own the land: community land trusts, coops, non-profit housing orgs, government.
Increase Berkeley’s Business Tax on Landlords to Fund Affordable Housing
Berkeley has a business license tax of 1.08% of the gross rent for residential rental properties with 3+ units.
A 1.8% increase (average cost $30 per unit per month) to a total of 2.88% would bring in $4 million annually with exemptions, rising as rents increase.
The tax increase could not be passed on to tenants.
Not subject to pass-through in rent stabilized units.
Owners of uncontrolled rents may claim would pass it on, but they will raise rents anyway if market allows.
Tax would come out of the windfall profits from rising land rents.
No matter how high the rent…Landlords argue that raising the tax on rents is unfair, singles out landlords, some barely making it.
Some buyers pay so much for a rental property they have a low or negative cash flow after paying the mortgage.
Some long-term owners take profits from the increased value of a property by borrowing so much that they have a low or no cash flow after paying the mortgage, often to buy more properties.
Then they complain they’re hardly making any money but no matter how high the rent, cycle continues.
Tax the rent, create social housing, esp. land trusts and take housing out of this vicious cycle.