Homestead exemption: Homeowners get another subsidy from renters

Weird. The last time Council raised the homestead exemption (from 6% to 8%), Ora Houston and Pio Renteria joined the three adamant opponents (Kathie Tovo, Greg Casar, Delia Garza) in opposition. Yesterday, however, Renteria quietly voted in favor and Houston was even a sponsor of the ordinance raising it to 10%.

It’s incredible that a Council with only one Republican is able to push through such a regressive measure. CM Alison Alter has specifically denounced increases in market-rate housing as “trickle down.” But I’m hard-pressed to think of a better illustration of trickle-down economics than a tax cut that only benefits the 45% of people with the means to own homes and gives nothing to the majority who don’t.


Somewhat ironically, it was Jimmy Flannigan, one of the most tax-averse members the dais, who provided the strongest denunciation. He reminded his colleagues that he was the only renter on the dais:

“This action would literally ask me to subsidize all of your homes: me, personally – because the taxes would be shifted from homeowners to multifamily owners. Those tax increases get passed down to the renters. I don’t think it makes a strong statement to give somebody a $20 tax cut, when you consider that it is very likely … that that $20 tax cut to an average homeowner represents a $10 tax increase to two renters.”

The mayor tried to downplay that dynamic:

“The impact of a 2 percent increase in the property tax exemption, when it’s applied to a multifamily building, when it’s applied on a per-unit basis, is so small that I have never seen data that would suggest that it would result in an increase in rent.

It might not result in a rent increase immediately, but it does raise costs on the landlord and will eventually contribute to a rent increase.

A more progressive way to offer tax relief is pretty simple: spend less money and don’t raise the tax rate as much every year. That means a lower tax rate for everybody: homeowners and commercial properties.

The homestead exemption is part of a long tradition of rewarding those with the means to own homes with tax breaks. The U.S. spends 2.5 times as much subsidizing wealthy homeowners via the mortgage interest deduction than it does on subsidies for those who need it most: low-income renters.

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