— from Cindy Wolf —
The idea of a property tax rebate for renting to employees brings a couple of different consequences to mind that would need to be thought about and addressed. I don’t have the data to know how much of a problem these things would be, but I would like to know before supporting such an approach.
1) If a tax break depends on the principal renter being an employee in the county, does that person, and often, their children, have to move in the off season when employment dries up?
2) We have two streams of income for the County Government, sales taxes and property taxes. Would the housing of “employees” create enough sales tax to offset the loss in property tax? Presumably properties with rentable guest housing tend to be worth more and a, say, 1% percent break on such properties would take a bigger than 1% chunk of money out of the county’s revenue.
3) Would this property tax relief be a fair ask of the community or would it exacerbate structural income inequality by creating a situation where those who can afford property with an extra cottage/cottages, in exchange for housing people who can’t afford to buy property, are paying a lower property tax rate than year-round working folk and tradespeople who can’t afford property with a cottage? In the long run, given rising property values, this may exacerbate conditions driving skilled workers off island.
4) Could the very wealthy then claim a tax break for renting to their own groundskeepers, housekeepers and nannies? Wihat happens if the rent gets raised and the employee’s wages do not? Will the employer be required to pay the extra wages that will be paid back to them in rent?
5) Would this policy stimulate development and infill outside of the UGA?
The elephant in the room here is the growing income inequality in our country brought about, in part, by inequitable tax structures that result in the accelerated accumulation of wealth to the already wealthy. What we see on our island with the shortage in availability of housing for the working poor and middle classes is a microsm of a national problem amplified by restrictied land availability and a remote location accessible to non-resident working poor and middle classes only by ferry. I think we need to be very careful with the tool of Property Tax incentive.
Perhaps a better way of approaching tax incentive would be that for any property with one or more buildings permitted suitable for residential occupancy, a higher rate on the property would be paid per building not rented out or owner occupied and a still higher rate per building used for transient rentals. If all buildings are rented out on a yearly lease or owner-occupied, the property tax stays at the base level.
I welcome thoughtful critique of the consequences of this proposal and whether it would be effective in accomplishing the goal of increasing access to housing stock for year-round rental.
Excellent points!
Washington’s tax structure, determined by the state constitution is highly regressive. At the time, land was the source of wealth and so is taxed. The constitution also requires that taxation of all assets of a given class be equal. While businesses and occupations are taxed by income, individuals are not. Ignoring the practical difficulties involved in calculating real estate tax breaks for rental properties whose taxable value are more likely to be increased rather than decreased because of their income-producing capacity, the legal barriers to tax reduction would be considerable.
If there is a solution, I think that it would have to be regulatory in nature and based upon clear findings justifying the regulation as being in the public interest sufficient to justify the further regulation.
As with all personal behavior and land use regulations, there can be unintended consequences. These are best thought out in advance. The writer’s column above is a good start.
This is a great write-up Cindy. Well-written, and well thought out. Thanks for sharing. This is a conversation worth having, and your ideas certainly have merit. I might throw in the possibility that any tax incentives (tax cuts) should play out not just to employers willing to house their work-force, but for those who are willing to rent their properties out as long-term rentals, (thereby creating more housing for workers). Tax increases should be reserved for those who choose to rent their properties out as short-term vacation rentals which come with a host of known associated problems, (among them the affect they have on the value of neighboring properties, and they exacerbate the already existing housing problem).
You ask some excellent questions and points that deserve answers, Cindy. In proposals such as these, the hidden costs are always paid by the people who can least afford to pay them.
One thing among many things wrong with County permit guidelines that needs to change: “Transient” housing is defined as any stay up to 30 days. “Long term” housing is anything over 30 days – 31 days constitutes fitting into the definition of long term housing and it’s a gross fallacy – and a slap in the face to the people who live and work here year-round and can’t find housing, let alone affordable housing, while unlimited permits for vacation rentals are granted in the UGA, forcing out the “54%+ of the population MANDATED by the GMA to live in the UGA” meme. By these definitions of “permanancy,” This is HOW we got to the place of seeing our madrona forests on Haven Road massacred for more vacation rentals that will NEVER provide housing for our workers, and will continue to mar and desecrate our rural character and make us into a desertified Southern California instead of a Pacific NW island. This must stop.
The blatant income disparity and gentrification of selling this place as a vacation paradise is hurting our community.
We must address these things with the county and insist that these definitions and arbitrary guidelines be more fair to the majority and not just represent the wealthy, profiteers, and land peddlers for speculative gain.