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To fund a tax cut for owners of single-family homes and commercial properties, Mount Rainier City Council wants to raise taxes on apartments and industrial properties. City officials argue the tax hike for apartments is needed to cover the costs of policing Mount Rainier’s larger apartment complexes, such as Kaywood Gardens on Eastern Avenue and Queens Chapel Manor apartments. Landlords and tenants have objected to the proposal, arguing the tax burden would be passed onto the city’s low-income renters.
“Because the large apartment complexes take up a lot of our resources, particularly our police resources, it was important that we right-size that tax burden, and that maybe tax them according to the resources they are using,” said Mount Rainier City Manager Miranda Braatz in an interview, noting that police services were the city’s biggest budget line-item. “Most of our police calls, a lot of them are in the multi-family apartments. You have a dense amount of people in a small area, so there are going to be more calls for service for police.”
The tax tweaks are part of the city’s budget proposal for the next fiscal year. Under the proposal, Mount Rainier would split its property tax rate into different categories based on land-use. Currently, the city taxes all property at 83 cents per $100 of assessed value. Next year’s planned budget would create five property tax categories, one for single-family homes, one for apartments and multi-family buildings, one for townhomes, one for commercial property and another for industrial property. The proposed budget would cut the single-family, townhome and commercial property tax rates to 79 cents per $100. It would raise the property tax rates on apartments from 83 cents to 97 cents per $100 of assessed value. That’s an increase of 16 percent. The proposal would also raise the industrial rate from 83 cents to 87 cents per $100 of assessed value, an increase of roughly four percent.
Landlords, tenants push back
The proposal was discussed during a day-long public-hearing on Mount Rainier’s proposed budget, held April 27, 2019. During a public comment period on the tax rates held early in the day, several city landlords said the tax hike on apartments would force them to raise rents, while also discouraging investment and mixed-use development activity in the city.
“This will kill me. It is fundamentally wrong,” said Joel Kelty, who owns a small apartment building at 3108 Varnum Street in Mount Rainier. “I typically don’t raise my rents between vacancies. I treat my tenants like my clients. But I cannot absorb this cost. I will have to raise rents if it comes to pass.”
Likewise, two apartment tenants spoke during the meeting against the proposal, worrying it would cause their rent to spike. Ben King, a resident at Kaywood Gardens, said he just learned his rent would be going up five percent, and wondered how the tax proposal would affect future rent increases.
Similarly, Angelia Clarke, a disabled retiree living in an affordable housing unit in the Queens Manor apartments, was certain the proposed tax hike for apartments would impact her.
“It would mean my rent will go up. It would possibly affect the quantity and quality of services I receive, and, it would be another meal missed for me,” said Clarke. “I’m on a restricted income as it is, and I don’t really get enough money to eat healthy already.”
Tony Ross, a representative of Queens Manor apartments, implored city officials to scrap the tax hike on apartments. He noted Queens Manor is required to provide long-term below-market-rate affordable housing per a tax-credit agreement with Prince George’s County. He said the tax increase would be especially painful for his low-income residents.
“It is unfair to ask the city’s least-affluent residents to pay higher taxes to fund a tax cut for single-family homeowners,” said Ross. “The better approach is to increase Mount Rainier’s tax base by encouraging more multifamily development.”
Ron Wineholt, a lobbyist with the Apartment and Office Building Association of Metropolitan Washington, also spoke against the proposal at the meeting.
“It would ultimately impact our residents. It’s the equivalent of about $15 per month in rent increases if it all flows through,” said Wineholt. “You are asking that of the residents of Mount Rainier who can least afford it.”
Mount Rainier Ward One Councilor and homeowner Celina Benitez, running for re-election, pushed back against those opposed to the apartment tax hike. In cross examining landlords, Benitez repeatedly asked if they had reduced rents since 2016 in response to successive cuts of the property tax rate in Mount Rainier from 86 cents per $100 to today’s 83 cent rate. None did, to which Benitez took umbrage.
However, Benitez’s argument is based on flawed reasoning. Despite Mount Rainier’ efforts to reduce its property tax rates over the past three years, property owners in the city still saw their tax bills grow each year in real dollars. In other words: minor cuts to the tax rate have not reduced the overall tax bills for property owners in Mount Rainier over the past three years. How Benitez could have overlooked this fact is odd. After all, the four-cent cut to the single-family tax rate in the proposed budget is still expected to result in a 1.1 percent increase in property tax revenue from the city’s single-family homes. It’s even more odd considering that Benitez and every other Council member has made some variation of that same point, repeatedly, when faced with homeowner complaints about the city’s property tax rates over the past year.
Who this affects
The tax cut for single-family homeowners would overwhelmingly benefit Mount Rainier’s white homeowners. Whites account for only 24.5 percent of the city’s population, according to 2017 U.S. Census Data. However, whites own nearly 54 percent of the roughly 760 owner-occupied housing units in the city, according to the Census, 743 of which are one-unit, detached single-family homes. African Americans, who account for 46.8 percent of the city’s population (down from 50 percent in 2012), own only 30.3 percent of the owner-occupied housing units in the city. Only 14 percent of the city’s owner-occupied homes are owned by Hispanics, who make up 33 percent of the city’s population.
The increase in taxes for apartments would affect properties mostly occupied by minorities. There are 2,620 renter-occupied housing units in the city, according to the Census. 61 percent of those have an African American head-of-household. 26 percent of those units are occupied by a hispanic head-of-household. Only 14 percent of the city’s rental units have a white head-of-household.
Mount Rainier’s renters are also extremely cost-burdened when it comes to housing. According to Census data, 54 percent of the city’s renters spend more than 30 percent of their income on housing costs, and 45 percent of the city’s renters spend more than 35 percent of their income on housing. The federal government considers housing to be unaffordable if it costs more than 30 percent of your income.
Mount Rainier’s homeowners are much-less cost-burdened when it comes to housing. Nearly 46 percent of the city’s homeowners with a mortgage pay less than 20 percent of their income to housing, the lowest-bracket the Census tracks in this area. Only 23 percent of the city’s homeowners with a mortgage pay more than 30 percent of their income toward housing.
Candidates on fence
Charnette Robinson, a homeowner running against Benitez in the upcoming City Council election, said she was not supportive of the tax proposal as written, but said her mind could be changed if she saw some justification for it, such as hard numbers on police calls for response.
Scott Cecil, running unopposed for Ward Two, also seemed to walk a line during his remarks about the proposal, noting it was wrong to ask apartment dwellers to pay more, but asserting that the landlords would not be required to pass those costs on to their tenants.
What the experts say
A 2005 study by Jack Goodman from the Harvard University Joint Center for Housing Studies found that higher property taxes for multifamily buildings “promotes low-density development, disproportionately burdens lower-valued properties and may impose higher taxes on apartment residents than on homeowners of identical incomes.”
Only one other city in Maryland, Cheverly, taxes apartments at a different rate than other residential properties.
Dan Reed, an urban planner, real estate professional and influential writer on land-use topics in the Washington, D.C., area, said this is a challenge faced by a lot of small communities in Prince George’s County.
“They have a small tax base and limited sources for much-needed tax revenue, and I’m sure City Council has heard from many homeowners concerned about their rising property tax bills,” said Reed. “However, looking at the other towns along Route 1, it’s likely that Mount Rainier may see more intense development, including multi-family buildings, in the near future. That could be a big opportunity for additional revenue, and a less painful choice than having to raise taxes on some, or all, existing property owners.”