Measures U1, DD would each raise taxes for Berkeley landlords

news.taxes.hjeong-02-01
Heyun Jeong/Staff

Related Posts

If passed, Measures U1 and DD, one of which voters will choose on the Nov. 8 ballot, would each raise the business license tax on Berkeley landlords, but the proponents of each measure — and their spending — differ greatly.

Measure U1, which was placed on the ballot unanimously by the Berkeley City Council, has raised over $43,000 in 2016 and has spent less than $2,000 of that in the same time frame. Measure DD, sponsored by the Berkeley Rental Housing Coalition — or BRHC, the legal and political arm of the Berkeley Property Owner’s Association — has raised over $400,000 this year, spent just under $500,000 on their campaign and had over $33,000 in outstanding debts as of Sept. 24.

“When you know the landlord lobby is going to spend … a half-million dollars attacking you, you want to know that — left, right and center — everyone on the City Council is in favor of U1,” said City Councilmember Kriss Worthington. “In order to get the unanimous vote of the City Council, we had to water it down. It’s not a visionary, progressive policy. It’s the best we could do.”

Measure U1 would raise the business license tax on landlords with five or more units to 2.88 percent from the current rate of 1.081 percent, with exemptions for nonprofit organizations that provide affordable housing units and newly developed units, which would be taxed at the current rate for their first 12 years as residential rental units.

According to City Councilmember Jesse Arreguin, the city measure exempts new units because they do not want to discourage the construction of new housing. City Council, however, could pass a law to remove the exemption if the measure passes.

Measure DD would raise the business license tax on all landlords with three or more units to 1.5 percent and does not include the exemptions that Measure U1 includes.

“Why should the rent-controlled owner pay 166 percent increase and the new guy pays zero percent increase? We would really like to see everyone contributing,” said Krista Gulbransen, the executive director of BRHC.

According to Tim Frank, a co-chair of the campaign for Measure U1, any new housing developments pay $28,000 up front per market-rate unit, which goes to the city’s Housing Trust Fund for affordable housing.

“We urgently need to build more housing, and if the measure didn’t have an exemption for new construction, then they would be attacking us on that,” Worthington said. “Whether we give them the exemption or we don’t give them the exemption, the landlord lobby will be attacking us.”

Measure DD prohibits landlords from passing the tax onto sitting tenants except when legally permitted, whereas Measure U1 prohibits passing the tax onto tenants regardless.

Both of the measures direct the tax revenue to the city’s general fund and could be used for any governmental purpose. Accounting for the administrative costs listed in the two measures, Measure U1 would add between $2.63 million and $3.1 million annually to the general fund, and Measure DD would add over $1 million in the first year and between $1.13 and $1.15 million annually thereafter.

“(Measure U1) would be a significant boost to opportunities to make Berkeley a place that we can all call home,” said Igor Tregub, vice chair of the Housing Advisory Commission.

Each measure stipulates that the City Council could adopt criteria for hardship exemptions for property owners. Each measure also directs a group to make non-binding recommendations to the City Council on how to fund programs that increase affordable housing and protect Berkeley residents from homelessness.

“(BRHC) literally spent as much money as possible to put the measure on the ballot,” Arreguin said. “I hope that the voters of Berkeley follow the money.”

Contact Aleah Jennings-Newhouse at [email protected] and follow her on Twitter at @ajn_dc.

Correction(s):
A previous version of this article incorrectly stated that Measure U1, if passed, would apply to landlords with more than five units. In fact, it applies to landlords with five or more units.

A previous version of the same article incorrectly stated that Measure DD, if passed, would apply to landlords with more than three units. In fact, it applies to landlords with three or more units.