Friday, February 24, 2006

The cost of housing.

I like Carol Lloyd's writing about real estate for the San Francisco Chronicle and have posted about here on several occasions. But not so much today's column, about protected tenants -- tenants who cannot be evicted, because of the length of their tenancy or other circumstances, such as age or disability.

Landlords often want to find a way to force these tenants out, since their rent is below market rates:
"Essentially, it's a transfer of wealth," says Joe Bravo, a San Francisco attorney who represents both landlords and tenants. "The basic question is, Can the city impose on property owners to give up part of their wealth in order to accommodate seniors and disabled people? And my answer is, How else are you going to keep people who are old and disabled in the city?"
The obvious answer that doesn't seem to have occurred to Bravo, and -- unfortunately -- cannot be found in Lloyd's column: The city could pay for it. These laws are designed to find a solution to a societal problem -- how to take care of the old and disabled -- without society having to share the costs. If San Francisco wants to keep old and disabled tenants in the city -- a great idea, if you ask me -- then it could give them money to pay market rates, or build city-owned housing for them. Instead, landlords get the bill. Actually, all San Franciscans end up paying more: everyone else pays more to rent or to buy because the housing shortage is exacerbated that much more, but those costs are hidden in other bills, meaning that the city government does not have to take the heat for passing the buck. This lets everyone blame landlords for being greedy -- so greedy that they would gladly evict a grandmother who "always pays her rent on time."

And then there are the tenants who are protected simply because they've been living in the same place for a while.
[O]ne tenant whose wife is protected and who also happens to have worked as a tenants' rights lawyer, argues that protected tenants laws shouldn't just be for society's most vulnerable groups. "It should be extended to any tenant who has been renting somewhere for five years," he says. "Housing is a basic human right."
I agree that everyone should have a roof over their head, but this guy is talking about a right to pay the same rent in perpetuity. That's just loopy.

Warring tenants and landlords makes a great story, and many a San Francisco politician can sing from the tenants' hymnal. But if you think rents are too high, then you need to find a way to build more housing.

Comments:
I don't think your idea about the city paying for it is necessarily wrong - but I think the city government has concluded that it's not practical. There are all sorts of costs involved in establishing what would essential be a rent control bureau, and deciding what landlords to pay - whereas here, the onus is on landlords to challenge tenants who they believe are taking a free ride. The five year idea is just ridiculous though.

A better way, in my opinion, would be to allow landlords in certain areas of the city to take a tax deduction (call it charity) for housing seniors and the disabled. This would reduce the incentive for landlords to try and drive out the elderly, while spreading the cost more fairly.
 
I don't think it's practicality -- it's far more attractive to hide the costs by sticking landlords with them than it is to tax city residents to the same ends. You have practicality problems with the current regime -- e.g., the people Lloyd knows who are feigning depression and psychosis to stay on SSI and remain as protected tenants -- but those costs are effectively shifted to other people (e.g., to federal taxpayers, who pay for the government admininstration that has to determine whether these people are disabled).

The tax deduction is not a bad idea -- presumably a deduction on property taxes. This works in San Francisco, where the city and county happen to coincide, but not in, say, Oakland, where the property taxes go to the county but the landlord-tenant law is the city's.
 
Point of clarification: the property taxes don't "go to the county" -- they go to the state even though they are collected by a county offical. Actually, property tax is assessed and collected by two separate elected officials with jurisdictions coextensive with county borders, and certain miscellaneous taxation functions (such as assessment appeals) fall to county boards of supervisors or their delegates, but the county is not the taxing agency; the State of California is. The county is a functionary of the process. I suspect that a county would be without the power unilaterally to grant property tax "deductions" not provided or permitted by state law. This would be the Legislature's way of preventing a race to the bottom wherein counties would compete to have a business-beneficial tax policy to the detriment of state coffers, but the same goes for the tenant-beneficial policies you propose. Even the conditions for granting charitable organizations tax-exempt status is controlled by the R&T code, not county ordinances.

Which isn't to say that elected officials of the CCSF couldn't find enough ambiguity or chutzpah to engage in institutional civil disobedience, but the Tax Collector will eventually get a nastygram from the State Board of Equalization saying their assessment practices are non-conforming. The point of the R&T code is to have the tax burden "equalized" among property owners subject to taxation, with the exceptions being those peculiar tax policies enshrined in California law as opposed to local policies. Local tax policy innovation is definitely discouraged. See, e.g., Prop 13.
 
A-ha.

Are there taxes collected by the city that it could forego to encourage landlords to keep protected tenants?

Where do cities and towns get their revenue, anyway?
 
As a result of Prop 13, most of a municipality's leeway to impose taxes is outside the realm of real ppt, which is obviously where the rational relationship to low-income housing would be. Basically, a city can impose any tax not expressly preempted by state law, although all such taxes require a ballot measure and certain types require a 2/3 vote. Sales tax (which was hovering around 5% before Prop 13) is now more like 8.5% in the tax-tolerating polities like CCSF. This was the municipalities' way to recapture lost ppt tax revenue, and it's arguably more regressive than the ppt tax it replaces.

I suppose a municipality could rebate some of its non-ppt tax revenue to certain taxpayers, although the mechanics of this are unclear to me. Some unscrupulous municipalities negotiate sales tax rebates to certain high-revenue businesses in return for relocation -- there's a big fight statewide over sales tax revenue for commercial jet fuel sales.

The answer to your other question is long and complicated. Basically, local jurisdictions (cities, counties, school districts) are allowed to keep a portion of the total assessed ppt tax revenue within their jurisdictions. The amount they keep varies between them in odd ways; for example, if there's a spike in property tax revenue, this will benefit the city and county, but in almost all cases it provides no increase to the school district. (It's a long, sad story.) So ppt tax is one revenue source for cities. Service fees (sewage, building permit, planning permit) are another, but these are strictly limited by constitutional amendments to compensate only the cost of providing the service, lest it become a backdoor tax or control on development. Business license taxes, hotel taxes, franchise fees (cable and other utility) and vehicle license fees also go to cities. Block grants from the state and federal governments are another revenue source, but these are unpredictable.

My answers are specific to California. Other states may have come up with something approaching rationality.
 
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