‘Empty house tax’: less regressive than what we have now

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There’s a lot of talk these days about our state’s regressive tax structure. In fact, we have the most regressive tax structure of all 50 states (https://itep.org/whopays/). Because we don’t have a state or local income tax, we must support our government services with the least progressive of taxes: property taxes, excise and sales taxes.  One of the outcomes of our state tax structure is that the 20% of folks with the lowest income pay 16.8% of their income in state and local taxes while the 1% of highest income folks pay only 2.4% of their income in state and local taxes. One recurring suggestion is to impose a state income tax, but we have to change our state law in order to be able to do so because state law currently prohibits a tax on net income (RCW 36.65.030).

At the same time, we face an exceptional housing disconnect in our city and county. There are few rentals available in the city or county and virtually no affordable housing available. Further complicating the issue is the advent of such services as Airbnb or VRBO, which were intended to allow people with an extra room to be able to rent it short term for some extra income. But the consequence of the ‘sharing economy’ has led to folks who are just wealthy enough to own more than one home to use that second (or third or more) home as an Airbnb when they aren’t in it. Housing was being purchased by folks who live elsewhere and the mortgages were being covered by a few brief Airbnb rentals rather than long-term rentals for residents who desperately need housing and have the income to pay rent if rentals existed. Renters in existing housing were being booted so that the property could be used for Airbnb rentals.

Many large cities (search for Anaheim Ordinance 6374 for one example) have either banned such Airbnb rentals outright or require the owner to be in residence, as large cities are also losing their rental stock to a tourist market. And it’s a tourist market with many problems, not the least of which shoehorns an unregulated commercial enterprise into a residential zone without commercial building codes or protections. Port Townsend’s Planning Commission and City Council recognized that we were losing much of our rental market to this phenomenon, and put a damper on that trend by requiring that Airbnb-type rentals by and large need an owner to be living in and present in a primary residence to use it for short-term rentals (http://weblink.cityofpt.us/weblink/0/doc/152117/Page1.aspx; Ordinance 3152). Jefferson County has not apparently taken any such steps to protect their rental stock.

The US Census American Community Survey (ACS; https://factfinder.census.gov/) refers to three kinds of housing vacancy: owner, renter and ‘seasonal or other’ vacancies. Owner vacancy rate was 1.5% for PT and 3.6% for the county in the 2015 ACS. Rental vacancy rate was 3.5% for PT and 6.7% for the county. But ‘vacant’ housing percentages were 13% in Port Townsend and 25% in Jefferson County. Think about that - 25% of houses in the county were ‘vacant’. Those numbers indicate that a whole lot of housing falls into the ‘seasonal occupancy’ category, particularly in the county. How many of these homes are second-home Airbnbs?

Some jurisdictions are looking at ways to address the effect of ‘seasonal’ vacancy on housing affordability and depletion of available stock. Vancouver BC recently established an ‘empty house tax’ if housing is empty more than 180 days annually. They set an annual tax of 1% of home value for such housing (https://www.theguardian.com/world/2018/mar/08/vancouver-declares-5-of-homes-empty-and-liable-for-new-tax).

Note that the numbers quoted above for PT and the county are from 2015. The newest ACS numbers are for 2016 and a quick look suggests that the issue has not improved. So, for the folks who are wealthy enough to own more than one home and are only paying 2.4% of their income in state and local taxes in our state, perhaps it is a reasonable approach to level the playing field a little. Those folks hanging on by their fingernails to one home are paying 16.8% of their income in state and local taxes. In considering an ‘empty house’ tax, we would finally have a progressive tax that doesn’t require a change in state law.

Let the outrage begin.

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