Your Senior Editorial Board’s position on the competing rental housing taxes on the Berkeley ballot Nov. 8 is perplexing.
Your editorial on Measures U1 and Measure DD argues in favor of shifting more tax burden to “landlords who most aggressively exacerbate the housing-affordability crisis for their own benefit.” But then you endorse Measure U1 — the rental housing tax increase that does exactly the opposite.
For readers just getting up to speed, Measure U1 and DD are both ordinances proposing to increase the gross receipts tax that owners of three or more residential rental units in Berkeley are required to pay on the rent they collect from tenants. Only the measure receiving the greatest total number of affirmative votes can become law. Measure U1 would increase the tax from 1.081 percent of gross receipts on residential rent payments to 2.88 percent of gross receipts. That equates to a substantial 166 percent increase in the tax rate. Measure DD would increase the tax from 1.081 percent of gross receipts on residential rent payments to 1.5 percent of gross receipts. That equates to a not insignificant 40 percent increase in the tax rate. In both cases, revenue raised from the rental housing tax would continue to flow into the city’s General Fund, where it can be used for any lawful municipal purpose, though both U1 and DD were placed on the ballot with the intention of increasing city funding of affordable housing creation and preservation.
But here is what is so perplexing about your endorsement of Measure U1: While Measure DD is an across-the-board tax increase, Measure U1 increases the rental housing tax almost exclusively on property already regulated by the city’s Rent Stabilization Ordinance. These privately owned rent-controlled units are the primary source of affordable and below-market-rate rental housing in Berkeley. At the same time, Measure U1 exempts from the higher tax rate big, new, high-end apartment complexes for the first 12 years of occupancy. Mind you, these luxury properties are already exempted from rent control and are charging far and away the highest rents. This exemption is a massive giveaway to big developers and the big out-of-town investors who finance these projects — frequently Wall Street-traded real estate investment trusts, or REITs, and offshore sovereign wealth funds.
So, how exactly does a vote for Measure U1 shift tax burden to landlords who are most responsible for skyrocketing rental rates? Measure U1 actually shifts tax burden onto the owners and operators of most of Berkeley’s affordable and below-market-rate housing and rent-controlled housing and away from developers and owners of luxury apartment complexes charging $3,000 and $4,000 per unit — entirely unregulated projects that are free to keep jacking up rents so long as the market will bear it.
To distract attention from this giveaway to developers and their financiers, the authors of Measure U1 also exempt from the higher tax rate the smallest of Berkeley landlords who are already required to pay the city’s rental housing tax — those who own just three or four units. These owners will continue to pay the existing rate of 1.081 percent of gross receipts. That’s called putting lipstick on a pig. It is too bad a majority of your Senior Editorial Board fell for it. Hopefully Berkeley voters won’t. Hopefully, they will reject Measure U1 and vote “yes” on Measure DD.