Home Opinion Opinion: The Antioch “Landlord Tax” May Not Work

Opinion: The Antioch “Landlord Tax” May Not Work

by ECT


The following was submitted by John Case, a Realtor/Broker who shares that while the City of Antioch is hoping to increase city revenue through a “Landlord Tax” that the policy may actually hurt Antioch in the long run. He shares his analysis of why the policy may not work.

The Antioch Landlord Tax May Not Work 

At the city council meeting of May 27th, the Antioch City Council has begun, for a 2nd time in the past year, a proposal to institute a ‘Landlord Tax’ to all owners of rental properties in the city to be placed on the ballot as a ‘business fee’. Their expectations are to raise sufficient money to fund various expenditures that they feel are required.

No matter what it is called; a business fee, a landlord tax, or a rental property fee, the effect is the same. While on the face of it, this seems like a reasonable action, it is in fact not going to produce the returns that they expect. There are several likely reactions to this proposal.

First and the one most hoped for by those who support the tax, is that the landlords will just absorb the tax into their models and accept their lower incomes as a result. I find this to be highly unlikely as people who make investments look to maximize their return. Investors in real estate, just as investors in other asset classes, will look toward the total income and make decisions to maximize their return. It is more likely that many of the investors in single family homes will do one of the following options.

The second possible reaction is that cost of this new tax will be passed on to tenants probably as an increase in rent. History shows that taxes are generally paid by consumers of goods, not the owners of the taxed entity.

Looking at most goods and services, you will see the costs of goods paid for includes the taxes that have been imposed on the producer. Over time, tenants who cannot afford the increased rent will move, causing a reduction in income to the landlord. Even if the tax on the tenant is $250 per year, given a rent of $1500 per month is a tax rate of just under 1.4%. One can assume that the $250 that was once used to buy other goods and services at a tax rate of over 9% will longer occur.

This result actually reduces the amount of tax revenue from tenants who are subjected to the landlord tax and decide to stay. Those that decide to move will no longer provide any tax revenue if they move outside the city. Additionally, landlords that ‘eat’ the tax will also decrease their discretionary spending as they are similarly impacted by the cost of the tax.

The third possible reaction of the tax is that the landlord may decide to sell the property. Given that the potential for new landlord to purchase in the city is decreased due to the tax, it is reasonable to assume that the landlord will sell to a homeowner. The end result is a loss of the tax to the city as the property which was expected to produce is now no longer a rental unit and the cities projected income will not be obtained.

Other impacts will be fairly obvious. Units that were once rentals often sell for less than market values, due to the potential deferred maintenance that often is present in rentals. This may mean in any transfer, a lower property tax than once was received by the city. Lower price level now may occur across the board for all sales giving the city a lower property tax base in the long run.

The city has already experienced this effect during the 2007-2011 price declines and can barely be satisfied with the potential for further price declines. In December of 2013 the average price of a single family home in Antioch was $322,430. In April the average price was $309,544. To add additional costs while prices are declined will not aid in property value recovery. While there are several factors that contribute to the decline in prices, adding another is not advised.

It is an economic fact that when something is taxed, there will be less of it. This may also be true of a landlord tax. Rental properties are an important part of any economy. To declare all of them a business, seems unfair to the concept of those people who invest in real estate as part of their investment portfolio.

An argument has been made that businesses pay a business tax to operate in the city. As a rule, most businesses lease their space and it is the tenants that pay the business tax, not the landlord. While there are businesses, for example large REITs or businesses whose primary endeavor is to purchase and lease apartments and homes, there may be a case for a ‘business’ tax. But to the single party who is using real estate as part of their investment portfolio, often as part of their retirement, it seems unfair.

We have many options to invest in things, stocks, bonds, gold, and of course, real estate. The taxation to an investor for an asset that produced income for a retirement or investment portfolio is not a ‘business’. Additionally, like any investment, the income produced from real estate is taxed by the federal and state government. There is one other impact on real estate investing as well; the investor cannot declare a capital loss, although a capital gain is readily taxed.

As to fairness, it seems blatantly unfair to tax all landlords for the transgressions of others. Assuming that the increased police and code enforcement costs are due to only a few, by percentage, landlords who do not actively manage their property and end up with a situation that causes excessive police involvement or code enforcement costs, if would seem reasonable to pass those cost onto the owners of properties where the transgressors claim to be renting (either legally or illegally). Charges for city services over the base contract are often done for events where extra security or traffic control is required. It is easy to extend the charges for this activity. In fact many cities and towns now charge for fire services when there is a need for fire services at properties that have caught flame.

Of course, working the details for this would take a little time but once implemented, there would be an immediate positive effect. Property owners would take better care in vetting their potential and existing tenants, perhaps by doing a full background search rather than just a credit report.

In this way it would be more likely that problems properties would be reduced in number and the cost of enforcement for this would also be reduced, allowing the police force to work on other important duties.

Side effects of this would be an improved status of the properties in the city, raising property values and revenues through increased property taxes. The reduction in property taxes is the main cause of the revenue shortfall is recent years. This approach may stem further reduction, while the landlord tax would more probably extend the loss in property values over time.

To sum up this long analysis; the expectation of increased revenues coming to the city may be overly optimistic, as the revenue expected from the landlord tax will bring less than is expected, sales tax revenue will be reduced, and property tax revenues will probably continue to fall. Costs for law enforcement, fire, and code enforcement will not be reduced but more likely remain the same or go up over time.

The implementation of the landlord tax is an exceptionally bad idea.

Written by John Case

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Vince Augusta May 29, 2014 - 5:33 am

“Investors” are the ones who caused the problems in the first place. They are the ones who barely know where or what Antioch is, living somewhere like Los Gatos, etc. and hiring a property management company to collect the rent from tenants who basically don’t give a #$%@ about their house (it don’t belong to me), neighbors or neighborhood.

It is the same investors who gripe about the loss of their investment when it comes time to sell the place, because they chose to be “absentee slumlords” failing to maintain their properties in the first place, or do what they should have done in the beginning SCREEN THEIR TENANTS.

Gee John, part of running a business is taking care of what you have, and putting money back into it to make it more valuable, I guess owning rental properties is the exception to that rule …. If you can’t afford to go into the “slumlord business” maybe perhaps because one cannot afford the $250 per year tax (which by the way is $20.83 per month) — simply raise the rent to cover the $20.83 per month tax, or choose another “investment”, perhaps hold off on “investing” all together if you balk at a $20.83 per month tax ….. Okay, so the tax causes less single family rental properties being available, and has the opposite effect of causing people to buy and LIVE in their homes, what’s the problem here ??

Julio May 29, 2014 - 6:33 am

Thank you Vince. Knowing many Realtor’s in Antioch who support this because they know it will help increase the value of their property not decrease it I will vote for it.

bepah May 29, 2014 - 5:52 pm

Vince, if absentee owners en masse sell properties, the increased supply of properties available will not be able to hold value in the absence of a stable demand of Buyers. It would be expected that any Buyers would be homeowners, rather than absentee owners, thus lowering the return on what the city may receive in tax revenues and increase rents as the availability goes down. There has been a hue and cry for lower rents. This proposal does nothing to lower rents. Polices that foster investment in the city will cause more investment and a chance for lower rents. The proposal for the Landlord tax is to increase monies coming into the city,. The point of the article is that it doesn’t appear to work out when looking at the unintended consequences.

Arne May 29, 2014 - 6:46 am

I wonder if the landlords and apartment complexes passed along to their renters or if they absorbed the two AUSD bond measure payments? Or if they will absorb or pass along the upcoming Delta Diablo Sewer taxes (which will appear on their property tax bill)?

John May 29, 2014 - 8:28 am

So if this fee increases the percentage of owner occupied property in Antioch, I am all for it. In general owners take better care of their property than renters or landlords. And that increases property value and quality of life. Perhaps the tax should be even more than $250.

John Case May 30, 2014 - 9:41 am

John, your analysis is correct. However, there are calls for more rental housing in Antioch in order to handle the current demand. If the city taxes out investment in property in the city, tenants who have a need to live here will be unable to, do you not think?

Reginald Jamal Brown May 29, 2014 - 9:53 am

@ John Case
What baffles me about your article is that you make many flawed arguments in the beginning then towards the end you make realistic counter-arguments against yourself. Essentially, you are arguing with yourself.

You counter all of your arguments with things such as:
“Property owners would take better care in vetting their potential and existing tenants, perhaps by doing a full background search rather than just a credit report….In this way it would be more likely that problems properties would be reduced in number and the cost of enforcement for this would also be reduced, allowing the police force to work on other important duties.. Side effects of this would be an improved status of the properties in the city, raising property values and revenues through increased property taxes. The reduction in property taxes is the main cause of the revenue shortfall is recent years. This approach may stem further reduction, while the landlord tax would more probably extend the loss in property values over time.”

Yes, this won’t solve all the problems in Antioch, but it is another step in the right direction to improve this city.

Furthermore, I am confused as to whether or not you want increased home values or not, because you say it won’t increase values due to landlords selling below market value, then you say it will increase market value.
A mere $20 something dollars a month will have a much more positive ROI if the city is SAFER, thus increasing the property value. As a Broker/ Realtor you should be very familiar with how you are paid. The higher the selling price of the home, the higher your commission, the other salesperson’s commission, and the ROI of the investor. How can you argue against this? As a person in business why would you think that a selling price giving you a lower commission would equal a higher ROI?

Also your statement about what the city experienced in 2007-2011 is flat out ridiculous. Well it’s 2014. You above all people, should be familiar with the rise and fall of prices according to demand. Furthermore, real estate is a CYCLICAL industry when every year is different from the last. Things can even change from a month to month basis. Shocking isn’t it?

Moreover, John, when making a stance on something controversial, take a stand and stick with it. Don’t be an F’n wimp. Say the Landlord Tax will NOT work instead of using “may not work”. Geez, you salespeople are so afraid to lose the sale you always want to leave yourself a backdoor just in case you find yourself in a tough spot.

Julio May 29, 2014 - 2:06 pm

There are many Realtor’s in Antioch who completely support this because it will RAISE property values. That is a fact. These property managers don’t want their bottom line affected. It shouldn’t be since the money will be written off on the income tax as a business expense. I believe Mr. Case manages the welfare apartments on Gentrytown by Lopez Dr. That property is a piece of trash and they are letting it go down hill even further. The police are there all the time also.

Reginald Jamal Brown May 29, 2014 - 3:17 pm

Interesting info about the author

EastCountyToday May 29, 2014 - 3:21 pm

Reginald, keep it about the opinions and ideas, do not make it about the author.

Reginald Jamal Brown May 29, 2014 - 8:14 pm


John Case May 30, 2014 - 9:51 am

Julio, it appears that the record is not clear. I do not now nor ever have managed investment property for another party in any city at any time. Please forward me the source of your information so I can make the appropriate corrections. Next, any Realtor that subscribes to a philosophy of higher taxes mean higher prices I would debate at any time. Higher prices will result in higher taxes but not the other way around. As to your analysis that the tax will increase ‘the bottom line’, I beg to differ. There is a clear difference between increased rents and increased profits. Potentially, a landlord will be able to raise rents to cover costs, but only that much. None of the increase will go into his pocket. Finally, I am in agreement with you on the condition of rental properties, primarily apartments, in the City of Antioch. This is where the focus of any penalties imposed by governmental agencies should be focused, not on people who have chosen to include real estate as part of their investment portfolio.
You do not have to agree with me but I am glad that you responded to my opinion piece.

Mauler May 29, 2014 - 3:22 pm

A renters tax is not going to increase property value. The renters don’t become better tenants because the landlords have been taxed. It will just be a cost that is passed on to every renter. Renters will pay it because they have few other options.

Scarcity, not surplus, is a cause of prices to increase. If the landlords going to stop being landlords then rent prices will also go up because the number of possible rental properties decrease. At best, the property value will remain the same. But, more than likely, with motivated sellers, the prices will drop. With the additional surplus of these former rental properties the price will also decline.

Higher rents, lower property value. That is the outcome of a renters tax.

Reginald Jamal Brown May 29, 2014 - 6:08 pm

Sorry Mauler, but you’re completely missing the end result of increased prices of rent. You need to consider why places like Danville, San Ramon, and Orinda have an incredibly high rent for a very small amount of real estate.

Guess what? only productive, employed, generally well behaved, good Samaritans can afford such high rents in these places. Hence, should I say it? oh my god…. LESS CRIME!!

That is why a 2 bedroom condo in San Ramon costs over $500k, when you can get a mini mansion in Antioch for less than that.

Concerned Antioch resident May 29, 2014 - 6:15 pm

As previously mentioned in other posts, many cities (including Brentwood) already have in place a landlord tax/business fee. Those fees haven’t seemed to deter investors from doing business in these cities, so I don’t buy into the argument that the landlord tax (all of $20.83 a month on single residences) is going to have investors selling their properties causing property values to drop. What causes property values to drop are unmaintained properties and criminal activity associated with rentals. If this tax encourages investors to sell to local homeowners, I’m all for it!

John Case May 30, 2014 - 9:37 am

Concerned Antioch Resident, my article proposed a focus on problem properties and absentee landlords just as you suggest. The tax, which penalizes all landlords, does not one thing to deal with the problem you point out. More money may come into the city (although I truly doubt it) but based on the way the funds are collected, they will not be spent on the problems you point out. It makes little sense to tax all of the landlords and then spend the money on other things.

Chuck May 29, 2014 - 7:12 pm

Great observation. I think an investment sell off would be a windfall and reduce crime in a big way. Here is how and why. Investors will sell to owner occupied of whom take much more pride in the place they live. Lazy section 8 abusers of government dependency would leave with their crime habit of praying off of others. Of course not all section 8 people are bad. Its just that the government makes it too easy to get free stuff forever without accountability. So the low life section 8 move out because investors are selling out. The result, just like RJB states is lower crime. Next is the positive side of proposition 13. When homes sell they are automatically reassessed. This brings huge increases of property tax revenue. The result, better city services because of more revenue, less crime because low life criminals living off the government must move, and finally a better community where most people own their property and take pride in their community. So, tax the holly hell out of landlords. You are a winner either way. Note that I am also a landlord and refuse to rent to scumbags.

Reginald Jamal Brown May 29, 2014 - 8:41 pm


Your logic and sound reasoning is so refreshing! Glad to know there are smart people like you can reasonably think things through.

John Case May 30, 2014 - 2:17 pm

Chuck, I am curious. If this tax assessment passes, will you pass it on to your tenants or cover it with your profits?
Your post confirms what I think will happen as well with reference to your Section 8 tenants. Section 8 is not a city program, but a federal program that is managed by the county. Landlords using the program get their income directly from the county and a small portion of it from the tenant. Landlord behavior runs with a lack of accountability. I have several clients that own Section 8 approved properties. In most case, they have not been inspected by the county personnel in some case for well over a year. They glad to get their check directly deposited with no risk of default. The rent they get is generally over market rates. Given that, why would anyone not consider Section 8 tenants. Of course, the responsible ones do their own inspections and if the tenant is in violation, their vouched is not renewed for that property. There are others, I am certain, that ‘take the money and run’, even if the tenant does not pay their portion.

But back on the point of the article; the topic of money that the city will receive in the years to come. I still contend that they will receive less and the problem that is being solved…..well, I am not sure that the actual problem has been addressed….can anyone state with knowledge and authority that if there are increases in revenues how they will be spent. What is Plan B if the revenues do not materialize?

Arne, do you have any insight in this?

Many people on this comment board bring up the problem of crime and its relationship to absentee landlords and I agree with them. The tax is not a solution to this, in my opinion.

Mauler May 29, 2014 - 7:45 pm

While a rent increase of 21 dollars a month isn’t going to prevent anyone from renting, it’s also not going to be the panacea that Reginald, and others, are shamelessly promoting. This renters tax also isn’t going to magically turn Antioch into San Ramon.

It is an artificial increase on rent prices. The effects on this are generally not positive on the people who are renting. While some might want to automatically shun those living on the lower rung of societies ladder, I’m not seeing an increase to their basic living expenses as a positive step.

If tax increases on renters somehow increase the quality of renters, why wouldn’t an increase on property taxes of homeowners accomplish the same goal? Think of the rise in property value if only homeowners were taxed more! This is an issue of class-ism, which has been made abundantly clear in the comments above.

Reginald Jamal Brown May 29, 2014 - 8:38 pm

I never said it would turn Antioch into San Ramon. No wonder why you don’t understand the proposed ordinance. You magically make things up.

Melissa May 30, 2014 - 5:26 am

You did infer it Reginald, and the main reason those cities have higher rent is proximity to jobs. I agree with Mauler on most his comments do I won’t repeat them. One point of the article around charging those who use the service I am hesitant to agree with because alot of our policemen need education on law’s. From personal experience I had a tenant move out, then on the weekend visiting my property caught someone in the middle of moving in, I called the police who actually suggested I let them stay there 2 days thus letting them establish residency. Idiocy.

Reginald Jamal Brown May 30, 2014 - 7:01 am

Sounds like you have way more issues than reading comprehension

Reginald Jamal Brown May 29, 2014 - 8:44 pm

Classism? Wake up Mauler. Go take your issues up with all of the surrounding cities of Antioch. They have rental fees 2-5 times higher than the proposed $20.

At this point I’m starting to wonder about what class you’re in and why you’re so sensitive about a measly $20. Everyone here wants a safer city, seems like all you want is to save $20 on your rent.

Arne May 30, 2014 - 5:45 pm

The homes that have been purchased since the 2008 recession were picked up at below market prices (foreclosures and short sales). So if these landlords (most of which do not live in Antioch or even California) do decide to sell their holdings, they would be sold at a higher price which means more property tax revenue for the city and county.

Keep in mind that landlords depreciate those properties while they hold them as rentals each year which lowers their income taxes, while the properties have actually be increasing in value.

The way the Council has staff drafting a resolution and ballot measure, it is a Business License Tax on a business that had previously not been taxed. It has nothing to do with Housing Choice Vouchers.

The house next to me was bought on a short sale by an out-of-state investment firm and they do not accept Housing Choice Vouchers – and they own a lot of homes in Antioch.

Get the accurate information of what the Council is proposing (and what the Friday Morning Breakfast Club is proposing in their initiative) from the city council staff reports that are available on the city website.

Chuck May 31, 2014 - 7:54 pm

Absolutely, and tack on a little extra for the paperwork.

John Case Jun 1, 2014 - 9:24 am

Chuck, This is what I believe most landlords will do. The question is stilled begged though, what problem is solved with any extra revenues that may be obtained by this tax? Also, we will need to see if there is an increase in vacancies due to the higher rents imposed by the landlords.

Reginald Jamal Brown Jun 1, 2014 - 11:05 am

Really John, what’s your true agenda? I made several valid arguments yet you choose not to address them. Your actions profoundly mimic the same politicians in this city who cherry pick their battles.

Anyone within ounce of common sense can see through your article and line of queries you posted.

Chuck May 31, 2014 - 7:56 pm

John Case,
Your answer is Absolutely ! I would tack on a little extra for the paperwork too.

Comments are closed.