Mount Rainier City Council has raised taxes on apartments while cutting taxes for single-family home, commercial and industrial property owners. The move came during Council’s June 4, 2019, meeting, when Council members gave final approval for a budget that, for the first time, created separate property tax classes for apartments, single-family homes, townhomes, commercial and industrial properties. Under the approved budget, detached single-family homes saw their tax rate reduced from 83 cents per $100 of assessed value to 81 cents per $100 of assessed value. Meanwhile, taxes for apartments were increased to 86 cents per $100. Apartments were the only class of property to see tax rate increases.
The tax rates were approved by a vote of four-to-one as part of the city’s 2020 budget, which takes effect July 1, 2019. Mayor Malinda Miles, Ward One Councilors Celina Benitez and Luke Chesek and Ward Two Councilor Bryan Knedler, all homeowners, voted in favor. Council’s lone renter, newly-elected Ward Two Councilor Scott Cecil, voted against the measure. He cited concerns about its potential impact on renters, lack of renter protections, and expressed a desire to create a separate tax class for smaller landlords with few units.
“I don’t feel comfortable raising the tax burden on apartment owners…it’s giving them an excuse to raise rents on some of the poorest individuals and families in our community,” said Cecil.
The remaining homeowner-wing of City Council acknowledged issues with the new property tax classes in the budget. Afterward, they voted to approve it.
Concerns considered, discarded
Knedler said the tax split would have issues, but that they could be addressed down the road.
“There are obviously going to be hiccups,” said Knedler – the “hiccups” here refer to the potential impact on city renters — noting Mount Rainier was one of a handful of Maryland municipalities experimenting with splitting its property tax classes. On the upside, though, Knedler said those “hiccups” — again, referring to the potential to increase economic stress on the city’s renters — could help other jurisdictions develop novel tax policies.
“Part of being first is you are going to have problems,” said Knedler, using the word “problems” to mean such things as potential to displace cost-burdened, mostly minority tenants or creating a long-term disincentive for new multi-family development in Mount Rainier.
Benitez said that in hindsight, she would have structured the tax classes differently, perhaps creating a separate class for small landlords. Despite that hindsight, she was in favor of the proposal. Further, Benitez asserted the tax cut for single family homeowners — who, unlike landlords and renters, already have access to property tax relief through Maryland Homstead Tax Credit program — would help Mount Rainier’s homeowners on a fixed-income struggling with housing costs.
Further, Benitez asserted that homeowners have been carrying a disproportionate amount of the property tax burden in relation to multifamily property owners. However, numbers to back up that assertion have been missing from the debate. Initially, Mount Rainier policymakers in favor of the tax class split lobbied for the scheme on the basis that police services were disproportionately rendered at the city’s large apartment complexes. That conclusion has been called into question by this publication, which found in separate analyses that most police incident responses in Mount Rainier occur in commercial areas with few residential units. Indeed, some of the most-common calls-for-service — such as suspicious person and noise complaints — come from single-family neighborhoods.
“I don’t think people should leave with the notion that if you own a home in town you are rich. It’s not true,” said Benitez. “In hindsight, we could have potentially done the smaller apartments at a different weight.”
Mayor Miles said she also would have preferred to keep the tax rate unified for another year to work out the bugs. This preference didn’t get in the way of her vote in favor of the budget. She also emphasized that not all homeowners in Mount Rainier are rich.
“Just because people own homes does not mean that they are in the middle class average, getting along very well,” said Miles. “We have a lot of seniors in homes they are barely holding on to. They are not making income. They are stuck in their incomes, stuck in their pensions.”
Homeowners are [, indeed, much] rich[er]
While it’s true Mount Rainier homeowners include some who are elderly and struggling with housing costs, their numbers pale in comparison to the numbers of cost-burdened renters in the city.
In other words, Mount Rainier’s homeowners are significantly wealthier than their renter neighbors in all demographic categories. For starters, they own a home in Mount Rainier, which has an average value of $293,000, according to data from the U.S. Census’ American Community Survey. By those same numbers, nearly 84 percent of Mount Rainier’s owner-occupied households earn more than $75,000 per year. 56 percent of Mount Rainier’s owner-occupied households earn more than $100,000 per year. Only 4 percent of Mount Rainier’s owner-occupied households – about 30 households — earn less than the federally-defined poverty level of $25,750 for a family of four.
Inversely, only 15 percent of Mount Rainier’s renter-occupied households earn more than $75,000 per year. Only 6.4 percent of Mount Rainier’s renter-occupied households earn more than $100,000 per year. And 24 percent of Mount Rainier’s renter-occupied households – about 645 households – earn less than the federally-defined family poverty level.
The tax cut for single-family homeowners will disproportionately benefit Mount Rainier’s white homeowners. Whites make up 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, 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 new apartment tax rate affects 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 — about 1,400 households — 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 — equivalent to 175 households — with a mortgage pay more than 30 percent of their income toward housing.