Simple majority vote required: if both measures pass, the measure with the most votes goes into effect.
There are two competing measures on the ballot to increase the business license tax on owners of rental units to help pay for affordable housing. Measure U1 is a city-sponsored measure; Measure DD is an initiative proposal. Revenues from either measure would accrue annually to the general fund, with direction to the Housing Advisory Commission to recommend affordable housing projects.
The Question: Shall an ordinance permanently increasing the gross receipts tax on owners of residential rental units be increased, prohibiting landlords from passing the tax on to sitting tenants, and directing the Housing Advisory Commission to make recommendations on funding and programs to increase affordable housing be adopted?
The Situation: While rental rates have recently been increasing, the City of Berkeley has not increased the business license tax rates charged to landlords. Other cities’ rates are higher.
Measure U1: Rental Unit Business License Tax—City Sponsored
The Proposal: Measure U1 raises the rate from 1.081% to 2.880% on landlords who own 5 or more rental units. Newly built units are excluded for the first 12 years they are in the rental market, and there are a number of other exclusions for rent-controlled, sect. 8, and other “affordable housing” units. Revenues accrue to the general fund with direction to the Housing Advisory Commission to recommend projects.
Fiscal Effect: Measure U1 is estimated to bring in approximately an additional $3 million per year in the first year, climbing to $3.5M as units lose their 12-year exemption. Additional costs for collection could be as much as $350,000. There is some dispute over the actual amount of revenue this measure would bring in, as well as the cost for collection.
- Landlords’ profits have been growing due to rental shortages, so they should pay more to support city services and subsidize housing. In the past year Berkeley landlords collected $82 million more in rents than they did five years ago.
- The taxes generated by this measure will go toward acquiring additional affordable housing.
Opponents Say: No argument opposing Measure U1 was filed. Measure DD proposes an alternative.
Supporters: Fund Affordable Housing (www.fundaffordablehousing.org)
Opponents: Real Affordable Housing (www.realaffordablehousing.com)
A “Yes” vote means: The business license tax rate on rental property will increase to 2.88%
A “No” vote means: The business license tax rate on rental property will not change
Measure DD: Rental Unit Business License Tax—Initiative Proposal
The Proposal: Measure DD raises the rate from 1.081% to 1.50% on landlords who own 3 or more rental units. Newly built units are not exempted. Measure DD authorizes the creation of a new “Citizens Advisory Panel” to make recommendations to City Council.
Fiscal Effect: Measure DD is estimated to bring in about an additional $1.4 million per year, increasing with rents. Costs of administering and collecting the tax are estimated to be approximately $175,000 annually. Expenses related to the new Panel, if established, would be approximately $150,000 in the first year and $75,000–$90,000 annually thereafter.
- Measure DD contains an assurance that the extra revenue goes to its intended purposes, by authorizing creation of a Citizen Advisory Panel to make recommendations to Council.
- Measure DD, unlike Measure U1, doesn’t play favorites by exempting big developers and owners of new apartment complexes.
- Measure DD will raise only about one-third as much as Measure U1 and also taxes the small landlords with fewer than five units so the big guys can pay less.
- Measure DD does not provide exclusions for rent controlled, section 8, and other “affordable housing” units.
Opponents: Fund Affordable Housing (www.fundaffordablehousing.org)
A “Yes” vote means: The business license tax rate on rental property will increase to 1.5%.
A “No” vote means: The business license tax rate on rental property will not change.