---
# System prepended metadata

title: Income-Linked Property Tax Adjustment for Housing Affordability

---

# Income-Linked Property Tax Adjustment for Housing Affordability

## A Comprehensive Policy Proposal

---

**Prepared by:** Renter in Debt

**Date:** 2026, 01-06

**Version:** 1.0

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## Table of Contents

1. Executive Summary
2. The Problem: Housing Affordability Crisis
3. The Solution: Income-Linked Property Tax Adjustment
4. How the Policy Works
5. Economic Analysis and Modeling
6. Addressing Counterarguments
7. Legal Framework and Model Ordinance
8. Short-Term Rental Anti-Evasion Provisions
9. Implementation Roadmap
10. Target Jurisdictions
11. Coalition Building Strategy
12. Evaluation Framework
13. Appendices

---

## 1. Executive Summary

### The Crisis

Renters in major American cities now spend 40-60% of their income on housing—far exceeding the 30% threshold that financial experts consider sustainable. This burden cascades through the economy: renters accumulate credit card debt, local businesses lose customers who have no discretionary income, employers struggle to recruit workers who cannot afford to live near their jobs, and communities lose the economic diversity that makes them vibrant.

### The Limitation of Current Approaches

Traditional rent control, while well-intentioned, has documented negative effects on housing supply. Studies show that strict rent control reduces rental housing stock by 15-25% over time as landlords convert units to condos, allow buildings to deteriorate, or exit the rental market entirely. Meanwhile, housing voucher programs serve only a fraction of eligible households due to funding constraints, and supply-side approaches take years to produce results.

### A Market-Based Alternative

This proposal introduces an income-linked property tax adjustment that aligns landlord incentives with community affordability goals without the supply destruction associated with rent control. The mechanism is simple:

- Landlords who maintain rents at or below 27% of the community's median income receive property tax reductions
- Landlords who charge rents above 30% of median income face escalating property tax increases
- A neutral zone between 27-30% creates a buffer that avoids penalizing landlords near the threshold

This approach preserves landlord choice—they can charge any rent they want—while ensuring that the social costs of housing unaffordability are reflected in their private calculations. It generates revenue rather than requiring government spending, and it creates ongoing incentives rather than one-time mandates.

### Key Features

**Market-based mechanism:** No price caps; landlords retain full discretion over rent-setting

**Revenue-generating:** Net tax increases fund affordable housing, down payment assistance, and program administration

**Locally calibrated:** Threshold tied to community median income, automatically adjusting to local conditions

**Supply-preserving:** New construction exempted for 15 years; condo conversions permitted and encouraged as pathway to homeownership

**Administratively feasible:** Builds on existing rental registries and tax assessor infrastructure

**Legally defensible:** Tax policy mechanism likely avoids state rent control preemption statutes

### Coalition Potential

This proposal unites stakeholders who rarely work together:

- Tenant advocates seeking rent relief
- Affordable housing nonprofits seeking resources for their mission
- Local businesses seeking customers with discretionary income
- Employers seeking workforce housing solutions
- Hotel and lodging industry seeking level playing field with short-term rentals
- Labor unions seeking affordable housing for members and protection of hospitality jobs
- Municipal budget officers seeking revenue

### The Path Forward

This document provides everything needed to advance this proposal: detailed policy mechanisms, model ordinance language, economic modeling frameworks, counterargument responses, implementation timelines, target jurisdiction analysis, and coalition-building strategies. The goal is a pilot program in one or more jurisdictions, with rigorous evaluation to build the evidence base for broader adoption.

---

## 2. The Problem: Housing Affordability Crisis

### The Scope of the Crisis

Housing affordability has reached crisis levels across the United States. According to the National Low Income Housing Coalition, there is no state, metropolitan area, or county in the United States where a worker earning the federal minimum wage can afford a modest two-bedroom rental home at fair market rent working a standard 40-hour week.

The standard benchmark for housing affordability—spending no more than 30% of income on housing—was established by the federal government in 1981. Today, nearly half of all renters exceed this threshold, and one in four renters spend more than 50% of their income on housing, qualifying as "severely cost-burdened."

### Geographic Variation

While the crisis is national, it is most acute in major metropolitan areas:

| Metropolitan Area | Median Rent (1BR) | Median Income | Rent as % of Income |
|-------------------|-------------------|---------------|---------------------|
| San Francisco | $2,800 | $126,000 | 27% |
| New York City | $3,200 | $70,000 | 55% |
| Los Angeles | $2,400 | $69,000 | 42% |
| Boston | $2,800 | $81,000 | 41% |
| Miami | $2,200 | $55,000 | 48% |
| Denver | $1,700 | $78,000 | 26% |
| Seattle | $1,900 | $110,000 | 21% |
| Austin | $1,600 | $75,000 | 26% |
| Portland | $1,500 | $76,000 | 24% |
| Minneapolis | $1,400 | $68,000 | 25% |

These metropolitan-level figures mask significant variation within cities. In many urban cores, lower-income neighborhoods experience affordability ratios exceeding 50-60%, while wealthier neighborhoods remain below 25%.

### Economic Consequences

The housing affordability crisis produces cascading economic effects:

**For individuals and families:**

- Reduced savings and wealth accumulation
- Increased credit card debt and financial fragility
- Housing instability and displacement
- Longer commutes when priced out of job-proximate housing
- Reduced investment in education, healthcare, and retirement
- Increased stress and associated health impacts

**For local economies:**

- Reduced consumer spending at local businesses
- Difficulty recruiting and retaining workforce
- Increased demand for social services
- Reduced economic mobility and dynamism
- Concentration of poverty and associated challenges

**For municipalities:**

- Increased homelessness and associated costs
- Increased demand for housing subsidies and assistance
- Reduced sales tax revenue from lower consumer spending
- Workforce challenges for public sector employers

### The 25-30% Sweet Spot

Research suggests that households spending 25-30% of income on housing achieve optimal outcomes across multiple dimensions:

**Financial stability:** Sufficient remaining income to cover other necessities, build emergency savings, and avoid debt

**Wealth building:** Ability to save for down payment, retirement, and other investments

**Consumer spending:** Discretionary income available for local businesses, entertainment, and quality of life

**Housing quality:** Sufficient rent payment to maintain property conditions and landlord investment

Below 25%, households may be underconsuming housing (living in inadequate conditions or suboptimal locations). Above 30%, financial stress increases significantly. The 27% target in this proposal represents the midpoint of this optimal range.

### Why Rents Have Outpaced Incomes

Housing costs have risen faster than incomes for several decades due to multiple factors:

**Supply constraints:**

- Restrictive zoning limits housing construction
- NIMBY opposition blocks new development
- Construction costs have increased
- Available land in desirable areas is limited

**Demand pressures:**

- Population growth in economically dynamic regions
- Household size decrease (more households competing for units)
- Investment capital flowing into real estate
- Short-term rental conversion removing long-term supply

**Market structure:**

- Consolidation of rental property ownership
- Information asymmetries favoring landlords
- Search costs and moving costs reduce tenant bargaining power
- Inelastic short-term demand (people need to live somewhere)

**Policy failures:**

- Insufficient investment in affordable housing
- Tax policies favoring homeownership over rental
- Exclusionary zoning in high-opportunity areas
- Inadequate tenant protections

### Limitations of Current Policy Approaches

**Traditional rent control:**

Rent control programs cap rent increases, typically to a percentage tied to inflation. While these programs provide stability for incumbent tenants, research documents significant negative effects:

- Diamond, McQuade, and Qian (2019) found that San Francisco's rent control reduced rental housing supply by 15% as landlords converted to condos, renovated to exempt categories, or redeveloped properties
- The net effect was a 5% increase in citywide rents due to supply reduction
- Incumbent tenants benefited while future renters were harmed

**Housing vouchers:**

Section 8 Housing Choice Vouchers allow low-income families to rent in the private market with government subsidy. While effective for recipients, the program faces critical limitations:

- Funding serves only about one in four eligible households
- Waiting lists in many cities stretch 5-10+ years
- Many landlords refuse to accept vouchers
- Vouchers don't address market-wide affordability

**Inclusionary zoning:**

Inclusionary zoning requires new developments to include affordable units. While valuable, it:

- Applies only to new construction (small share of housing stock)
- Takes years to produce results
- May reduce overall housing production in some contexts
- Defines affordability by fixed percentage of AMI rather than dynamic relationship to income

**Upzoning and supply-side approaches:**

Removing zoning barriers to increase housing supply is necessary but insufficient:

- Construction takes years from approval to occupancy
- Supply increases may not translate to affordability in tight markets
- Market power can maintain high prices despite adequate supply
- Benefits accrue slowly and unevenly

This proposal complements these existing approaches by addressing the existing housing stock, operating through tax incentives rather than mandates, and creating ongoing dynamic adjustments rather than fixed requirements.

## 3. The Solution: Income-Linked Property Tax Adjustment

### Core Concept

The income-linked property tax adjustment creates a direct financial incentive for landlords to maintain affordable rents by linking their property tax burden to the affordability of their units relative to community income.

**The mechanism:**

1. Calculate the "affordability ratio" for each rental property—the rent charged as a percentage of the community's median income
2. Compare this ratio to a target threshold (27% of median income)
3. Adjust property taxes based on whether rents are above, below, or at the target:
   - Below target: Property tax reduction (reward)
   - At target: No change (neutral zone)
   - Above target: Property tax increase (penalty)

**Key insight:** This approach does not cap rents. Landlords can charge any rent they choose. But the tax consequences of that choice are now visible in their financial calculations. A landlord considering a rent increase must weigh the additional revenue against the additional tax cost.

### Why Tax Incentives Work

Tax-based behavioral incentives are well-established in policy:

**Pigouvian taxation:** Named after economist Arthur Pigou, this approach taxes activities that create negative externalities (costs borne by society rather than the actor). Carbon taxes, tobacco taxes, and congestion pricing all follow this model. High rents create externalities—displacement, reduced local spending, increased homelessness—and this policy internalizes those costs to the landlord.

**Behavioral economics:** Research shows that salient, visible costs affect behavior more than equivalent hidden costs. By providing landlords with clear calculations showing how rent decisions affect their tax bill, this approach maximizes behavioral response.

**Administrative efficiency:** Tax systems already exist. Rather than creating new regulatory infrastructure, this policy works through established property tax mechanisms, reducing implementation costs and leveraging existing enforcement capacity.

### Comparison to Rent Control

| Dimension | Traditional Rent Control | Income-Linked Tax Adjustment |
|-----------|--------------------------|------------------------------|
| Mechanism | Price cap (legal limit on rent) | Tax incentive (financial consequence of rent level) |
| Landlord flexibility | None above cap | Full—any rent permitted |
| Supply effects | Negative (documented 15-25% reduction) | Neutral to positive (theoretical) |
| Revenue impact | None | Generates revenue for affordable housing |
| Vacancy decontrol | Often resets rent to market on turnover | Applies continuously regardless of turnover |
| Legal vulnerability | Often preempted by state law | Tax policy—likely not preempted |
| Political framing | "Government tells you what to charge" | "Market-based incentive alignment" |
| Administrative burden | Requires rent board, hearings, enforcement | Integrates with existing tax assessment |

### Design Principles

**Dynamic calibration:** The target threshold adjusts automatically with community median income. As incomes rise, landlords can raise rents while staying under the threshold. As incomes fall, the threshold tightens. This maintains the relationship between housing cost and ability to pay.

**Blended income measurement:** To prevent gaming, the "reference median income" combines three sources:

- 50% weight: Median income of current residents
- 30% weight: Median income of workers in the area (regardless of residence)
- 20% weight: Metropolitan Statistical Area median income

This blending prevents manipulation through any single metric.

**Operating cost recognition:** The target threshold adjusts upward when operating costs (insurance, utilities, maintenance) increase faster than 3% annually. This acknowledges that landlords face legitimate cost pressures and cannot always maintain rents without increases.

**Graduated incentives:** Rather than a cliff at a single threshold, the policy uses smooth curves that create gentle pressure near the target and strong pressure at extremes. This reduces distortion and gaming around threshold points.

**Supply preservation:** New construction is exempt for 15 years, preserving incentives for developers. Condo conversions are permitted and even encouraged as a pathway to homeownership—they don't reduce housing supply, just change tenure type.

### What This Policy Does NOT Do

**Does not cap rents:** Landlords can charge any rent they choose. There is no legal maximum.

**Does not create rent boards or hearings:** No bureaucratic process to approve rent increases. The tax adjustment is calculated automatically based on reported rents.

**Does not require government spending:** The policy generates revenue rather than requiring appropriations.

**Does not apply to owner-occupied small properties:** Properties with 4 or fewer units where the owner occupies one unit and has income below 150% of Area Median Income are exempt.

**Does not apply to already-regulated affordable housing:** Properties with existing affordability restrictions under federal, state, or local programs are exempt.

**Does not apply to new construction:** Properties built after the ordinance effective date are exempt for 15 years, preserving development incentives.

---

## 4. How the Policy Works

### Step 1: Determine Reference Median Income

The policy begins by calculating a "Reference Median Income" (RMI) for each community. This blended figure prevents gaming and ensures the policy reflects actual affordability conditions.

**Formula:**

$$
RMI = (0.50 \times M_R) + (0.30 \times M_W) + (0.20 \times M_{MSA})
$$

Where:

- $M_R$ = Median household income of residents in the jurisdiction (from Census ACS 5-year estimates)
- $M_W$ = Median income of persons employed within the jurisdiction regardless of residence (from ACS or Local Employment Dynamics data)
- $M_{MSA}$ = Metropolitan Statistical Area median household income (from ACS)

**Example calculation:**

For a city where:

- Resident median income: $65,000
- Worker median income: $72,000
- MSA median income: $70,000

$$
RMI = (0.50 \times 65,000) + (0.30 \times 72,000) + (0.20 \times 70,000)
$$

$$
RMI = 32,500 + 21,600 + 14,000 = 68,100
$$

Monthly RMI = 68,100 ÷ 12 = **5,675**

The administering department publishes the RMI annually by January 31.

### Step 2: Calculate Gross Monthly Housing Cost

For each rental unit, calculate the total housing cost the tenant pays:

**Formula:**

$$
\text{Gross Monthly Housing Cost} = \text{Base Rent} + \text{Mandatory Fees} + \text{Required Utility Share}
$$

This comprehensive definition prevents landlords from evading by shifting costs to fees.

**Standardization:** To compare units of different sizes, the policy normalizes costs to a standard 750 square foot unit:

$$
\text{Standardized Cost} = \frac{\text{Gross Monthly Housing Cost}}{\text{Unit Square Footage}} \times 750
$$

**Example:**

A 900 sq ft unit with:

- Base rent: $1,800
- Parking fee (mandatory): $150
- Pet fee: $50
- Trash fee: $25
- Tenant utility share: $75

Gross Monthly Housing Cost = 1,800 + 150 + 50 + 25 + 75 = **2,100**

Standardized Cost = (2,100 ÷ 900) × 750 = **1,750**

### Step 3: Calculate Affordability Ratio

For each unit, divide the standardized monthly housing cost by the monthly RMI:

$$
\text{Affordability Ratio} = \frac{\text{Standardized Monthly Housing Cost}}{\text{RMI} \div 12}
$$

**Example:**

Using the standardized cost of 1,750 and monthly RMI of 5,675:

$$
\text{Affordability Ratio} = \frac{1,750}{5,675} = 0.308 = 30.8\%
$$

### Step 4: Calculate Property-Level Weighted Average

For properties with multiple units, calculate a weighted average affordability ratio using square footage as the weight:

$$
AR_{property} = \frac{\sum_{i=1}^{n} AR_i \times SF_i}{\sum_{i=1}^{n} SF_i}
$$

This prevents gaming by having a few very cheap units offset many expensive ones.

### Step 5: Determine Adjusted Target Ratio

The base target affordability ratio is 27%. This adjusts upward when operating costs increase significantly:

$$
AR_{target} = 0.27 + \max(0, OCI - 0.03)
$$

Where OCI is the Operating Cost Index—the annual percentage change in rental operating costs (insurance, utilities, maintenance, etc.).

**Example:**

If the Operating Cost Index is 5% (costs rose 5% this year):

$$
AR_{target} = 0.27 + \max(0, 0.05 - 0.03) = 0.27 + 0.02 = 0.29 = 29\%
$$

This means if operating costs spike, landlords get more room before penalties apply.

### Step 6: Calculate Tax Adjustment Multiplier

The tax multiplier depends on where the property's affordability ratio falls relative to the adjusted target:

**Zone 1: Significant Reward (AR below target - 5%)**

For properties well below the target:

$$
\text{Multiplier} = 1 - 0.15 \times \frac{AR_{target} - 0.05 - AR_{property}}{0.07}
$$

Capped at minimum multiplier of 0.85 (15% tax reduction maximum).

**Zone 2: Moderate Reward (AR between target - 5% and target)**

$$
\text{Multiplier} = 1 - 0.08 \times \frac{AR_{target} - AR_{property}}{0.05}
$$

**Zone 3: Neutral (AR between target and target + 3%)**

$$
\text{Multiplier} = 1.0
$$

No adjustment—property taxes unchanged.

**Zone 4: Penalty (AR above target + 3%)**

$$
\text{Multiplier} = 1 + 0.50 \times (AR_{property} - AR_{target} - 0.03)^{1.5}
$$

This exponential formula creates gentle penalties near the threshold and steep penalties at extremes.

**Caps:** Multiplier cannot go below 0.85 (15% reduction) or above 3.00 (200% increase).

### Step 7: Apply to Property Tax

The adjusted property tax is simply:

$$
T_{adjusted} = T_{base} \times \text{Multiplier}
$$

### Complete Example

**Property characteristics:**

- 24-unit apartment building
- Average unit size: 800 sq ft
- Average base rent: $1,600/month
- Average mandatory fees: $100/month
- Average utility share: $50/month
- Current property tax: $96,000/year

**Reference Median Income:** $68,100/year ($5,675/month)

**Operating Cost Index:** 4%

**Calculations:**

Average Gross Housing Cost = 1,600 + 100 + 50 = 1,750

Standardized Cost = (1,750 ÷ 800) × 750 = 1,641

Affordability Ratio = 1,641 ÷ 5,675 = 0.289 = 28.9%

Adjusted Target = 0.27 + max(0, 0.04 - 0.03) = 0.28 = 28%

Since 28.9% is between 28% (target) and 31% (target + 3%), the property is in the **neutral zone**.

Multiplier = 1.0

Adjusted Property Tax = 96,000 × 1.0 = **96,000** (no change)

**Alternative scenario—if rents were higher:**

If average rent were $2,000/month instead:

Gross Housing Cost = 2,000 + 100 + 50 = 2,150

Standardized Cost = (2,150 ÷ 800) × 750 = 2,016

Affordability Ratio = 2,016 ÷ 5,675 = 0.355 = 35.5%

Since 35.5% is above 31% (target + 3%), the property is in the **penalty zone**.

The exponential formula would then apply, creating a tax increase.

## 5. Economic Analysis and Modeling

### Modeling Framework

To predict policy outcomes and calibrate parameters, we model landlord decision-making and market responses.

#### The Landlord's Decision

A rational landlord compares net income under different rent levels:

$$
\text{Net Income} = \text{Annual Rent} - \text{Property Tax} - \text{Operating Costs}
$$

Under this policy, property tax becomes a function of rent:

$$
T = T_{base} \times f(R)
$$

Where $f(R)$ is the tax multiplier function and $R$ is rent.

The landlord maximizes:

$$
\text{Net Income} = R \times 12 - T_{base} \times f(R) - C
$$

#### Finding the Optimal Rent

Taking the derivative with respect to rent and setting equal to zero:

$$
\frac{d(\text{Net Income})}{dR} = 12 - T_{base} \times f'(R) = 0
$$

This means the landlord stops raising rent when the marginal tax cost equals the marginal rent revenue.

### Calibrating Penalty Strength

For the penalty to change behavior, the tax increase must offset the rent increase at some point. 

**Example property:**

- Base tax: $96,000/year
- Operating costs: $200,000/year
- RMI (monthly): $5,675

| Rent Level | Annual Revenue | Affordability Ratio | Multiplier | Adjusted Tax | Net Income |
|------------|----------------|---------------------|------------|--------------|------------|
| $1,463 (27% of RMI) | $421,344 | 27% | 0.95 | $91,200 | $130,144 |
| $1,750 (32% of RMI) | $504,000 | 32% | 1.02 | $97,920 | $206,080 |
| $2,000 (37% of RMI) | $576,000 | 37% | 1.15 | $110,400 | $265,600 |
| $2,275 (42% of RMI) | $655,200 | 42% | 1.45 | $139,200 | $316,000 |

**Problem identified:** Even with penalties, higher rents still yield higher net income. The current formula doesn't create strong enough incentives.

### Recalibrating the Formula

To make landlords genuinely prefer lower rents, we need steeper penalties. Alternative formulations:

**Option A: Higher coefficient**

$$
\text{Multiplier} = 1 + 1.5 \times (AR - AR_{target} - 0.03)^{1.5}
$$

**Option B: Higher exponent**

$$
\text{Multiplier} = 1 + 0.5 \times (AR - AR_{target} - 0.03)^{2.5}
$$

**Option C: Exponential growth**

$$
\text{Multiplier} = e^{5 \times (AR - AR_{target} - 0.03)} \text{ for } AR > AR_{target} + 0.03
$$

Testing Option C with the same property:

| Rent Level | Affordability Ratio | Multiplier | Adjusted Tax | Net Income |
|------------|---------------------|------------|--------------|------------|
| $1,463 (27%) | 27% | 0.95 | $91,200 | $130,144 |
| $1,750 (32%) | 32% | 1.05 | $100,800 | $203,200 |
| $2,000 (37%) | 37% | 1.65 | $158,400 | $217,600 |
| $2,275 (42%) | 42% | 3.00 (cap) | $288,000 | $167,200 |

With the exponential formula, the landlord's net income is maximized around the 32% level and actually decreases at extreme rent levels. This creates the intended incentive.

**Recommendation:** Use the exponential formula with appropriate caps, or significantly increase the coefficient in the polynomial formula.

### Market-Level Effects

#### Scenario Modeling

For a hypothetical city with:

- 50,000 rental units
- Average property tax per unit: $4,200/year
- Current average affordability ratio: 38%
- Target affordability ratio: 27%

**Scenario 1: Weak Penalties (Current Formula)**

| Property Response | Share of Properties | Rent Change | Tax Change |
|-------------------|---------------------|-------------|------------|
| Lower rent to target | 10% | -15% | -8% |
| Lower rent partially | 15% | -8% | +2% |
| Maintain current rent | 60% | 0% | +12% |
| Raise rent (accept penalty) | 10% | +5% | +25% |
| Convert to condo | 5% | N/A | N/A |

Net tax revenue change: +$8.4M

Average rent change: -2%

**Scenario 2: Strong Penalties (Recalibrated Formula)**

| Property Response | Share of Properties | Rent Change | Tax Change |
|-------------------|---------------------|-------------|------------|
| Lower rent to target | 30% | -18% | -10% |
| Lower rent partially | 25% | -10% | 0% |
| Maintain current rent | 25% | 0% | +45% |
| Raise rent (accept penalty) | 5% | +5% | +100% |
| Convert to condo | 15% | N/A | N/A |

Net tax revenue change: +$6.2M

Average rent change: -9%

The strong penalty scenario produces larger rent reductions but also more condo conversions. As discussed below, condo conversions are not problematic—they shift tenure without reducing housing supply.

### Condo Conversions: A Feature, Not a Bug

A common concern with housing policies is that landlords will respond by converting apartments to condominiums, "removing" rental housing from the market. This concern is misplaced for several reasons:

**No net housing loss:** A 100-unit apartment building converted to 100 condos still houses 100 households. The total housing supply is unchanged.

**Wealth-building pathway:** Renters spending $1,800/month could instead build equity with a $1,600 mortgage payment. Homeownership is the primary wealth-building vehicle for American families.

**Price pressure on ownership market:** More condos mean more supply in the for-sale market, which puts downward pressure on purchase prices and makes homeownership more accessible.

**Alignment with policy goals:** The stated goal is helping households spend 25-30% of income on housing while building wealth. Homeownership accomplishes both objectives.

**Policy response:** Rather than preventing condo conversions, the policy should facilitate them while protecting current tenants:

- Right of first refusal for existing tenants to purchase their unit
- Down payment assistance funded by policy revenue
- Minimum 12-month notice before required vacancy

### Revenue Projections

The policy generates revenue when more properties face penalties than receive rewards, and when penalties exceed rewards on average.

**Conservative projection (weak penalties):**

| Revenue Source | Calculation | Annual Amount |
|----------------|-------------|---------------|
| Net tax adjustment | 50,000 units × $4,200 avg tax × 4% avg increase | $8,400,000 |
| Registration fees | 50,000 units × $50/unit | $2,500,000 |
| STR penalties | 500 violations × $2,000 avg | $1,000,000 |
| **Total** | | **$11,900,000** |

**Revenue allocation (per ordinance):**

| Use | Minimum Allocation | Amount |
|-----|-------------------|--------|
| Down payment assistance | 40% | $4,760,000 |
| Affordable housing construction/preservation | 30% | $3,570,000 |
| Emergency rental assistance | 20% | $2,380,000 |
| Administration | 10% (max) | $1,190,000 |

---

## 6. Addressing Counterarguments

### Counterargument 1: "This will reduce housing supply"

**The argument:** If landlords can't profit sufficiently, they'll exit the market—converting rentals to condos, letting buildings decay, or not building new units.

**Response:**

This policy is fundamentally different from rent control in ways that preserve supply:

1. **No profit cap exists.** Landlords can always charge more; it just costs them more in taxes. A well-located, high-amenity property can still command premium rents—the landlord simply bears more of the social cost of that pricing.

2. **The tax revenue recycles locally.** Unlike rent control, this generates revenue that can fund affordable housing construction, potentially increasing net supply.

3. **New construction is exempt.** The 15-year exemption for new buildings preserves full development incentives during the period when supply response matters most.

4. **Condo conversions aren't supply losses.** A rental converted to a condo is still a housing unit. This policy embraces ownership as a positive outcome.

5. **Operating cost adjustments maintain viability.** The threshold adjusts upward when operating costs spike, preventing situations where landlords cannot cover legitimate costs.

**Evidence:** Studies of rent control supply effects (Diamond et al., 2019) document 15-25% reductions. But those studies examine hard price caps, not graduated tax incentives. The Low-Income Housing Tax Credit, which operates through tax incentives to developers, has successfully produced millions of affordable units without supply destruction.

### Counterargument 2: "Landlords will just pass the tax to tenants"

**The argument:** Landlords raise rent to cover the tax increase, creating a spiral.

**Response:**

This argument contains a self-limiting mechanism:

1. Landlord charges high rent
2. Property tax increases
3. Landlord raises rent to cover tax
4. Tax penalty increases further
5. Landlord raises rent again
6. Repeat until...

The spiral terminates when:

- Rent becomes so high that vacancies increase (market ceiling)
- Tax penalty exceeds possible rent increase (policy ceiling)
- Landlord decides lowering rent below threshold is cheaper

**Key insight:** This argument actually supports steeper penalties. If penalties are too shallow, landlords pass them through. If penalties are steep enough, passing them through becomes self-defeating faster because each rent increase triggers a larger tax increase than the rent revenue it generates.

### Counterargument 3: "This penalizes landlords for neighborhood improvement"

**The argument:** If a neighborhood improves (gentrifies), landlords who charge market rents are penalized even though they're responding to legitimate market conditions.

**Response:**

The policy uses median income as the reference point, which rises with gentrification. If neighborhood incomes rise:

- Reference median income increases
- The 27% threshold (in dollars) increases
- Landlords can charge higher rents while remaining under threshold

The policy maintains the ratio, not the dollar amount. Landlords in improving neighborhoods aren't penalized—they can raise rents as the neighborhood changes, but the rents cannot outpace income growth.

**The deeper point:** The problem today is that rents rise faster than incomes. This policy ties them together. If a neighborhood gentrifies and higher-income residents move in, rents can rise accordingly. But if rents rise while incumbent residents' incomes don't, the policy provides pushback.

### Counterargument 4: "The income measurement will be gamed"

**The argument:** Landlords will manipulate income data or exploit delays in measurement.

**Response:**

The blended income measurement formula specifically addresses gaming:

- **50% current residents:** This component does rise with gentrification, but only as actual resident population changes
- **30% local workers:** This captures people who work in the area regardless of where they live, preventing "resident sorting" from fully driving the number
- **20% MSA-wide:** This regional anchor prevents localized manipulation

Additionally:

- Census ACS 5-year estimates smooth year-to-year fluctuations
- The administering department can investigate anomalies
- Penalties for data manipulation are severe

**Lag acknowledgment:** There is inherent lag in income data (1-2 years). This is acceptable because housing affordability is a long-term challenge, not a month-to-month trading opportunity. Annual recalibration is sufficient.

### Counterargument 5: "Administrative complexity makes this unworkable"

**The argument:** Tracking rents, incomes, unit types, and calculating variable tax rates is expensive and error-prone.

**Response:**

Many cities already have the necessary infrastructure:

- **Rental registries:** Los Angeles, San Francisco, Portland, New York, and others already require landlords to register units and report rents
- **Tax assessor databases:** Already track property ownership, values, and characteristics
- **Income data:** Census provides this at no cost to the jurisdiction

The administrative lift is connecting existing systems, not building new ones.

**Phased implementation reduces burden:**

| Phase | Scope | Administrative Capacity Needed |
|-------|-------|-------------------------------|
| Year 1-2 | Buildings with 50+ units | Minimal—professional management already reports |
| Year 3-4 | Buildings with 10+ units | Moderate—may need additional staff |
| Year 5+ | All rental properties | Full—but experience from earlier phases informs design |

**Estimated administrative cost:** 5-10% of revenue generated, well within the 10% cap specified in the model ordinance.

### Counterargument 6: "This is just rent control by another name"

**The argument:** Whatever you call it, this limits what landlords can charge for rent.

**Response:**

This argument conflates "limiting" with "creating consequences for." Key differences:

| Dimension | Rent Control | This Policy |
|-----------|--------------|-------------|
| Can landlord charge above threshold? | No (illegal) | Yes (legal but taxed) |
| Is there a maximum rent? | Yes | No |
| Does government set prices? | Yes | No—landlord sets price, government sets tax |
| Are there hearings/approvals for increases? | Often yes | No |
| Can landlord respond to cost increases? | Limited | Yes—operating cost adjustment |

**Analogy:** We tax cigarettes heavily, but we don't prohibit them. The tax creates a price signal about social costs without banning the activity. This policy does the same for housing unaffordability.

### Counterargument 7: "This violates state preemption / constitutional rights"

**The argument:** State laws prohibit rent regulation, and this policy is unconstitutional.

**Response:**

**State preemption:** Most state preemption laws specifically prohibit "rent control" defined as caps on rent or rent increases. They do not prohibit tax policy. Examples:

- Texas Government Code §214.902: "A municipality may not adopt or enforce an ordinance that limits the amount of rent..."
- This policy does not limit the amount of rent. It adjusts taxes based on rent levels.

That said, legal analysis specific to each state is necessary. The distinction between "limiting rent" and "taxing based on rent levels" will need to be tested.

**Constitutional challenges:**

- **Takings:** No property is taken; property use is unchanged; taxes are a normal government function
- **Equal protection:** All similarly situated properties are treated the same
- **Due process:** Clear standards, notice, and appeals process provided
- **Commerce clause:** Applies only to local properties; no interstate commerce impact

**Precedent:** Governments routinely use tax policy to influence behavior—historic preservation credits, green building incentives, enterprise zones, mortgage interest deductions. Taxing based on housing affordability follows the same principle.

### Counterargument 8: "What about landlords with high mortgages?"

**The argument:** Some landlords have high mortgage payments and can't afford to charge lower rents.

**Response:**

This is a legitimate concern that the policy addresses in several ways:

1. **Operating cost adjustment:** If borrowing costs rise across the market, this would be captured in the operating cost index, raising the threshold.

2. **Phase-in period:** The 24-month implementation window allows landlords to adjust financial arrangements before the policy takes effect.

3. **New construction exemption:** Recent purchases of new buildings have 15 years before the policy applies.

4. **Market reality:** A landlord who purchased a property at a price requiring unaffordable rents made a business decision. The policy doesn't guarantee profitability for all business decisions.

5. **Exit options:** A landlord who cannot operate profitably at affordable rent levels can sell the property—likely to a buyer with different cost structure—or convert to condos.

**Small landlord protection:** Owner-occupied properties with 1-4 units where the owner's income is below 150% of AMI are exempt. This protects the homeowner renting a basement apartment to cover their mortgage.

## 7. Legal Framework and Model Ordinance

### Legal Authority

Municipalities generally have authority to:

1. **Levy property taxes** - This is a core municipal power
2. **Create property tax classifications** - Many states allow differential rates for different property types
3. **Offer tax incentives and penalties** - Historic preservation credits, enterprise zones, and similar programs demonstrate this authority
4. **Regulate rental housing** - Through registration, inspection, and habitability requirements

The combination of these powers supports an income-linked property tax adjustment for rental properties.

### State Preemption Analysis

States fall into three categories:

**Category 1: No preemption (clearly viable)**

Oregon, Minnesota, New Jersey, Maine, Vermont, Rhode Island, Massachusetts (with home rule petition), Connecticut, New Hampshire, Delaware, New Mexico

**Category 2: Preemption of "rent control" (likely viable with careful drafting)**

Colorado (repealed 2021), Washington (modified 2023), Illinois (modified 2021), Nevada (repealed 2023), California (Costa-Hawkins—may not apply to tax policies), New York (for localities outside NYC)

**Category 3: Broad preemption (likely not viable without state action)**

Texas, Florida, Arizona, Georgia, North Carolina, Tennessee, Alabama, Indiana, Wisconsin, Michigan, Ohio, Missouri, Iowa, Kansas, Kentucky, Oklahoma, South Carolina

For Category 3 states, state legislative action would be required before local implementation.

---

### Model Ordinance

#### ORDINANCE NO. [XXXX]

#### AN ORDINANCE ESTABLISHING AN INCOME-LINKED PROPERTY TAX ADJUSTMENT FOR RESIDENTIAL RENTAL PROPERTIES AND REGULATING SHORT-TERM RENTALS

**WHEREAS** the [City/County] finds that housing affordability is essential to economic vitality, workforce stability, and community wellbeing; and

**WHEREAS** median rents in [jurisdiction] currently exceed [X]% of median household income, creating financial hardship for residents and reducing discretionary spending in the local economy; and

**WHEREAS** market-based incentives that align property owner interests with community affordability goals are preferable to direct price controls; and

**WHEREAS** the [City/County] has authority under [state enabling statute] to establish property tax rates and classifications; and

**WHEREAS** the conversion of long-term rental housing to short-term rental use threatens both housing affordability and fair competition for licensed lodging establishments;

**NOW, THEREFORE, BE IT ORDAINED** by the [governing body] of [jurisdiction] as follows:

---

##### ARTICLE I. PROPERTY TAX ADJUSTMENT FOR RENTAL AFFORDABILITY

##### SECTION 1. DEFINITIONS

**1.1** "Covered rental property" means any real property containing one or more dwelling units offered for rent for residential purposes for terms of thirty (30) days or more, excluding:

(a) Owner-occupied properties of four (4) or fewer units where the owner's household income is below 150% of Area Median Income;

(b) Properties subject to existing affordability restrictions under federal, state, or local programs;

(c) Properties issued a certificate of occupancy within the preceding fifteen (15) years;

(d) Licensed assisted living facilities, dormitories, and other institutional housing.

**1.2** "Gross monthly housing cost" means the total of:

(a) Base monthly rent; and

(b) All mandatory recurring fees including but not limited to parking, trash, amenity, pet, and administrative fees; and

(c) The tenant's required share of utilities if master-metered;

divided by the habitable square footage of the unit and multiplied by 750 to produce a standardized one-bedroom equivalent cost.

**1.3** "Reference median income" means a figure calculated annually by the [administering department] according to the following formula:

$$
RMI = (0.50 \times M_R) + (0.30 \times M_W) + (0.20 \times M_{MSA})
$$

Where:

- $M_R$ = Median household income of census tracts within [jurisdiction] per most recent American Community Survey 5-year estimates
- $M_W$ = Median income of persons employed within [jurisdiction] regardless of residence per most recent ACS or Local Employment Dynamics data
- $M_{MSA}$ = Metropolitan Statistical Area median household income per most recent ACS estimates

**1.4** "Affordability ratio" means the Gross Monthly Housing Cost divided by one-twelfth of the Reference Median Income.

**1.5** "Base property tax" means the property tax that would be assessed on a covered rental property absent the adjustments established by this ordinance.

**1.6** "Operating cost index" means the annual percentage change in operating costs for rental properties in [jurisdiction] as calculated by [administering department] based on weighted changes in property insurance premiums, water and sewer rates, waste collection fees, licensed contractor labor rates, and property maintenance materials.

---

##### SECTION 2. TAX ADJUSTMENT CALCULATION

**2.1** For each covered rental property, the [administering department] shall calculate an adjusted property tax as follows:

**2.1.1** Calculate the weighted average affordability ratio across all units in the property, using square footage as the weight.

**2.1.2** Adjust the target affordability ratio for operating cost changes:

$$
AR_{target} = 0.27 + \max(0, OCI - 0.03)
$$

**2.1.3** Calculate the tax adjustment multiplier:

(a) If $AR_{property} \leq AR_{target} - 0.05$:

$$
\text{Multiplier} = \max\left(0.85, 1 - 0.15 \times \frac{AR_{target} - 0.05 - AR_{property}}{0.07}\right)
$$

(b) If $AR_{target} - 0.05 < AR_{property} \leq AR_{target}$:

$$
\text{Multiplier} = 1 - 0.08 \times \frac{AR_{target} - AR_{property}}{0.05}
$$

(c) If $AR_{target} < AR_{property} \leq AR_{target} + 0.03$:

$$
\text{Multiplier} = 1.0
$$

(d) If $AR_{property} > AR_{target} + 0.03$:

$$
\text{Multiplier} = \min\left(3.0, e^{5 \times (AR_{property} - AR_{target} - 0.03)}\right)
$$

**2.1.4** The adjusted property tax shall be:

$$
T_{adjusted} = T_{base} \times \text{Multiplier}
$$

---

##### SECTION 3. REPORTING REQUIREMENTS

**3.1** All owners of covered rental properties shall register with the [administering department] within ninety (90) days of the effective date of this ordinance and annually thereafter.

**3.2** Registration shall include:

(a) Property address and assessor's parcel number;

(b) Number of dwelling units;

(c) Square footage of each unit;

(d) Current gross monthly housing cost for each unit;

(e) Vacancy status of each unit;

(f) Contact information for owner or authorized agent.

**3.3** Owners shall report within thirty (30) days any:

(a) Change in gross monthly housing cost for any unit;

(b) Change in the number of dwelling units;

(c) Conversion of any unit to non-residential use or short-term rental.

**3.4** Failure to register or report as required shall result in:

(a) First violation: Written warning and 60-day cure period;

(b) Second violation: $500 per unit civil penalty;

(c) Third and subsequent violations: $1,000 per unit civil penalty and automatic application of maximum tax adjustment multiplier until compliance is achieved.

---

##### SECTION 4. ANTI-EVASION PROVISIONS

**4.1** Fee manipulation: The [administering department] may investigate and impute fair market value for any fee that appears designed to circumvent the intent of this ordinance, including:

(a) Fees that increased more than 20% in a single year without documented cost justification;

(b) Fees for services not actually provided;

(c) Fees that differ substantially from comparable properties.

**4.2** Income verification: The [administering department] may require documentation of actual rents received, including copies of leases, bank statements, and tax returns.

---

##### SECTION 5. APPEALS PROCESS

**5.1** Any property owner aggrieved by a tax adjustment determination may appeal to the [appeals board/hearing officer] within sixty (60) days of receiving notice of the adjustment.

**5.2** Grounds for appeal include:

(a) Mathematical or clerical error in calculation;

(b) Incorrect classification of property as covered rental property;

(c) Incorrect determination of gross monthly housing cost;

(d) Hardship: The owner's household income is below 200% of Area Median Income and the property contains ten (10) or fewer units.

**5.3** The burden of proof shall be on the appellant.

---

##### SECTION 6. REVENUE ALLOCATION

**6.1** Net revenue generated by tax adjustment increases under this ordinance shall be deposited into the [jurisdiction] Housing Affordability Fund.

**6.2** Monies in the Housing Affordability Fund shall be used exclusively for:

(a) Down payment assistance for first-time homebuyers with household income below 120% of Area Median Income (minimum 40% of fund);

(b) Construction or preservation of affordable housing (minimum 30% of fund);

(c) Administration of this ordinance (maximum 10% of fund);

(d) Emergency rental assistance for households facing eviction (remainder).

---

##### SECTION 7. NEW CONSTRUCTION INCENTIVE

**7.1** Covered rental properties issued a certificate of occupancy after the effective date of this ordinance shall be exempt from tax adjustment increases (multiplier capped at 1.0) for fifteen (15) years, provided that:

(a) At least 10% of units are offered at gross monthly housing costs below the target affordability ratio; or

(b) The property owner pays an in-lieu fee of $10,000 per unit to the Housing Affordability Fund.

---

##### SECTION 8. CONDOMINIUM CONVERSION PROVISIONS

**8.1** Nothing in this ordinance shall prohibit or discourage conversion of rental properties to owner-occupied condominiums.

**8.2** Tenants of units being converted shall have:

(a) Right of first refusal to purchase their unit at the offering price, exercisable within sixty (60) days;

(b) Minimum twelve (12) months' notice prior to required vacancy;

(c) Priority access to down payment assistance through the Housing Affordability Fund.

## 8. Short-Term Rental Anti-Evasion Provisions

### The Evasion Threat

Without strong short-term rental regulations, the income-linked property tax adjustment contains a critical vulnerability: landlords can evade entirely by converting units to Airbnb or VRBO. This conversion:

- Removes housing from the long-term rental market
- Escapes the affordability requirements
- Often evades transient occupancy taxes
- Creates unfair competition for licensed hotels

### Model Ordinance: Article II - Short-Term Rental Regulations

##### SECTION 9. PURPOSE

The [governing body] finds that conversion of long-term rental housing to short-term rental use reduces housing supply, undermines the purposes of Article I, and creates unfair competition for licensed lodging establishments. This Article establishes registration and operating requirements for short-term rentals.

---

##### SECTION 10. DEFINITIONS

**10.1** "Short-term rental" means rental of any dwelling unit for periods of less than thirty (30) consecutive days, regardless of booking method.

**10.2** "Hosted short-term rental" means a short-term rental where the host is physically present during the guest's stay and the property is the host's primary residence.

**10.3** "Un-hosted short-term rental" means a short-term rental that is not a hosted short-term rental.

**10.4** "Booking platform" means any online marketplace facilitating short-term rental transactions, including Airbnb, VRBO, Booking.com, and similar services.

**10.5** "Primary residence" means the dwelling where a person resides for at least 275 nights per calendar year.

---

##### SECTION 11. REGISTRATION REQUIRED

**11.1** No person shall operate a short-term rental without a valid registration from the [administering department].

**11.2** Registration applications shall include:

(a) Property address and assessor's parcel number;

(b) Owner information and contact;

(c) Primary residence status (if claiming);

(d) Documentation of primary residence if applicable;

(e) Whether hosted or un-hosted;

(f) Booking platforms used;

(g) Proof of liability insurance ($1,000,000 minimum);

(h) Proof of transient occupancy tax registration;

(i) Certification of code compliance;

(j) 24/7 emergency contact information.

**11.3** Registration fee: $250 per unit annually.

**11.4** Each registration shall be assigned a unique number that must appear on all listings.

---

##### SECTION 12. OPERATING REQUIREMENTS

**12.1** All short-term rentals shall:

(a) Collect and remit transient occupancy tax;

(b) Comply with all building, fire, and housing codes;

(c) Maintain required liability insurance;

(d) Post registration number, emergency contacts, and evacuation routes;

(e) Ensure responsible party available within 30 minutes during guest stays.

**12.2** Un-hosted short-term rentals shall additionally:

(a) Be limited to ninety (90) nights of rental per calendar year;

(b) Not be permitted if the property was used for long-term rental within the preceding five (5) years, unless the owner has occupied it as primary residence for at least two (2) years;

(c) Be subject to the maximum property tax adjustment multiplier under Article I.

**12.3** Hosted short-term rentals shall:

(a) Be limited to the host's primary residence;

(b) Be limited to ninety (90) nights per year;

(c) Require host presence during all guest stays;

(d) Be exempt from property tax adjustment under Article I.

---

##### SECTION 13. PROHIBITED CONVERSIONS

**13.1** No property used for long-term rental within the preceding five (5) years may be registered as an un-hosted short-term rental unless:

(a) The owner has occupied it as primary residence for at least two (2) consecutive years; or

(b) The property is newly constructed and never used for long-term rental.

**13.2** Violations shall result in:

(a) Maximum property tax multiplier for five (5) years;

(b) Ineligibility for STR registration for five (5) years;

(c) Civil penalties as specified in Section 16.

---

##### SECTION 14. PLATFORM RESPONSIBILITIES

**14.1** No booking platform shall process a transaction for any short-term rental in [jurisdiction] unless:

(a) The listing displays a valid registration number;

(b) The platform has verified the number against the [jurisdiction] registry;

(c) The platform has a data-sharing agreement with [jurisdiction];

(d) The platform collects and remits transient occupancy tax.

**14.2** Platforms shall:

(a) Remove unregistered listings within 48 hours of notification;

(b) Provide quarterly transaction reports to [jurisdiction];

(c) Maintain records for five (5) years.

**14.3** Platforms processing transactions for unregistered rentals shall be liable for:

(a) Unpaid transient occupancy taxes;

(b) Civil penalty of $1,000 per transaction;

(c) Enforcement costs.

---

##### SECTION 15. ENFORCEMENT

**15.1** The [administering department] may:

(a) Conduct inspections with 24 hours' notice;

(b) Contract with monitoring services to identify unregistered listings;

(c) Issue cease-and-desist orders;

(d) Revoke registrations;

(e) Refer violations for civil prosecution.

**15.2** A complaint hotline and online portal shall be established.

---

##### SECTION 16. PENALTIES

**16.1** Operating unregistered STR:

(a) First violation: $1,000 plus registration or cessation;

(b) Second violation: $5,000;

(c) Third violation: $10,000 and one-year registration prohibition.

**16.2** False registration information: $2,500, revocation, two-year prohibition.

**16.3** Exceeding night cap: $500 per night over limit.

**16.4** False primary residence claim: $5,000, back taxes, revocation, five-year prohibition.

**16.5** All penalties deposited in Housing Affordability Fund.

---

### Coalition with Hotel Industry

The hotel and lodging industry has spent over a decade fighting short-term rentals. They bring significant resources to this fight:

**What hotels offer:**

- Full-time government affairs staff
- Established relationships with legislators
- Financial resources for campaigns and research
- Legal expertise from years of STR litigation
- Model legislation and policy language
- Data on STR impacts

**What this coalition offers hotels:**

- New allies (housing advocates, tenant unions, labor)
- New policy frame ("protecting housing" vs. "protecting hotel profits")
- Revenue mechanism that funds enforcement
- Progressive credibility

### Labor Union Partnership

UNITE HERE represents 300,000 hotel and food service workers. Their interest aligns on two fronts:

1. **Housing:** Members face severe affordability burdens; STR conversions reduce housing supply
2. **Jobs:** STRs create non-union competition that threatens hotel employment

### Enforcement Technology

Several companies provide STR monitoring services:

**Granicus (formerly Host Compliance):** Scans platforms, identifies unregistered listings, matches addresses to registries

**STR Helper:** Similar monitoring capabilities with complaint management

**AirDNA:** Market analytics useful for understanding scope of issue

**Estimated cost:** $2-5 per housing unit annually for comprehensive monitoring—easily covered by registration fees and penalties.

## 9. Implementation Roadmap

### Phase 0: Coalition Building (Months 1-6)

**Months 1-2: Research and Preparation**

- Compile local housing affordability data
- Identify key stakeholders and decision-makers
- Research local legal authority and any preemption issues
- Prepare initial pitch materials

**Months 3-4: Initial Outreach**

- Meet with tenant advocacy organizations
- Contact housing nonprofits
- Reach out to local business associations
- Connect with state hotel association
- Brief sympathetic elected officials

**Months 5-6: Coalition Formalization**

- Draft coalition letter or MOU
- Agree on messaging and division of labor
- Identify lead legislative sponsor
- Finalize ordinance language with coalition input

### Phase 1: Legislative Campaign (Months 7-14)

**Month 7: Pre-Introduction**

- Brief city council members individually
- Share draft ordinance with city attorney for review
- Prepare testimony and supporting materials
- Line up organizational endorsements

**Month 8: Introduction**

- Ordinance introduced with coalition press event
- Housing advocates, hotel industry, and labor present unified front
- Media outreach—op-eds, editorial board meetings
- Launch constituent contact campaign

**Months 9-11: Committee Process**

- Coordinate testimony at hearings
- Provide research and data to committee staff
- Negotiate amendments as necessary
- Respond to opposition arguments
- Maintain media presence

**Months 12-13: Floor Vote**

- Whip count and targeted outreach to swing votes
- Grassroots pressure on undecided members
- Final coalition push

**Month 14: Post-Vote**

- If passed: celebration, implementation planning
- If failed: debrief, identify obstacles, plan next attempt

### Phase 2: Implementation (Months 15-26)

**Months 15-17: Administrative Setup**

- Designate administering department
- Hire or assign staff
- Develop registration systems and forms
- Create public-facing website and materials
- Train staff on calculations and enforcement

**Months 18-20: Landlord Education and Registration**

- Public information campaign
- Landlord workshops and Q&A sessions
- Registration period opens
- Technical assistance for compliance

**Months 21-23: System Testing**

- Verify calculations with sample properties
- Test appeals process
- Debug registration database
- Coordinate with tax assessor systems

**Months 24-26: First Tax Cycle**

- First adjusted tax assessments issued
- Appeals process operational
- Monitor initial compliance
- Address emergent issues

### Phase 3: Evaluation and Refinement (Months 27-60)

**Year 3: Early Monitoring**

- Track all evaluation metrics monthly
- Identify any gaming or evasion patterns
- Propose technical corrections if needed
- Quarterly reports to city council

**Year 4: Mid-Term Assessment**

- Commission academic evaluation
- Conduct landlord and tenant surveys
- Compare outcomes to projections
- Consider parameter adjustments

**Year 5: Sunset Decision**

- Independent evaluation completed
- Public hearings on renewal
- Decision on continuation, modification, or sunset
- If renewed, incorporate lessons learned

---

## 10. Target Jurisdictions

### Tier 1: Highest Viability

These jurisdictions combine legal authority, political feasibility, administrative capacity, and housing crisis severity.

**Oregon (State-Level)**

- Already passed statewide rent stabilization (SB 608)
- Strong tenant advocacy infrastructure
- No constitutional barriers
- Could strengthen existing policy with tax incentives

**Massachusetts (Municipal)**

- Strong home rule authority
- 1994 rent control ban may not apply to tax policy
- Severe crisis in Greater Boston
- High-capacity municipal governments
- Top targets: Cambridge, Boston, Somerville

**Minnesota (Municipal)**

- No state preemption
- St. Paul rent control experience creates "better alternative" opening
- Strong housing advocacy
- Top targets: St. Paul, Minneapolis

**Colorado (Municipal)**

- Preemption repealed in 2021
- Clean slate for first-mover
- Severe Front Range affordability crisis
- Top targets: Denver, Boulder

**New Jersey (Municipal)**

- 100+ municipalities have rent regulation
- Clear legal authority
- Severe crisis near NYC
- Top targets: Newark, Jersey City

### Tier 1 Target Cities Detail

| City | State | Median Rent | Median Income | Current AR | Rental Registry | Political Lean |
|------|-------|-------------|---------------|------------|-----------------|----------------|
| Cambridge | MA | $3,200 | $104,000 | 37% | Yes | Very Progressive |
| St. Paul | MN | $1,250 | $61,000 | 25% | Yes | Progressive |
| Newark | NJ | $1,400 | $37,000 | 45% | Yes | Progressive |
| Denver | CO | $1,850 | $78,000 | 28% | No | Progressive |
| Portland | ME | $1,900 | $66,000 | 35% | Yes | Very Progressive |

### Tier 2: Strong Viability with Considerations

**California**

- Costa-Hawkins may not apply to tax policies (needs legal analysis)
- If viable, enormous impact
- Top targets: Los Angeles, Oakland, San Jose

**New York**

- Would require state enabling legislation
- Governor and legislature have prioritized housing
- Massive scale—success transforms national conversation
- Top targets: NYC (with state action), Buffalo, Rochester

**Illinois**

- Home rule exists for cities over 25,000
- Rent control ban lifted in 2021
- Mayor Johnson prioritizing housing
- Top target: Chicago

### Tier 2 Target Cities Detail

| City | State | Median Rent | Median Income | Current AR | Notes |
|------|-------|-------------|---------------|------------|-------|
| Los Angeles | CA | $2,750 | $69,000 | 48% | Costa-Hawkins analysis needed |
| Chicago | IL | $1,700 | $65,000 | 31% | Mayor Johnson supportive |
| Seattle | WA | $2,100 | $110,000 | 23% | Preemption modified 2023 |
| Boston | MA | $3,100 | $81,000 | 46% | Complex politics |

### Priority Ranking for Pilot Programs

Based on combination of all factors:

1. **St. Paul, MN** - Rent control experience creates opening; registry exists
2. **Newark, NJ** - Severe crisis; progressive mayor; existing infrastructure
3. **Cambridge, MA** - Lost rent control 1994; seeking alternatives; high capacity
4. **Denver, CO** - Clean slate; first-mover advantage; high capacity
5. **Portland, ME** - Rent control passed but limited; seeking complements

### States to Avoid (Strong Preemption)

| State | Preemption Status |
|-------|-------------------|
| Texas | Strong preemption (1987) |
| Florida | Strong preemption (1977) |
| Arizona | Strong preemption (1981) |
| Georgia | Strong preemption (1984) |
| North Carolina | Strong preemption (1987) |
| Tennessee | Strong preemption (1978) |
| Alabama | Strong preemption (1983) |
| Indiana | Strong preemption (2002) |
| Wisconsin | Strong preemption (2018) |
| Michigan | Strong preemption (1988) |

## 11. Coalition Building Strategy

### Natural Allies

| Stakeholder | Primary Interest | Appeal |
|-------------|------------------|--------|
| Tenant organizations | Direct rent relief | Policy creates incentives for lower rents |
| Affordable housing nonprofits | Resources for mission | Revenue funds affordable housing |
| Local businesses | Customer spending power | Frees discretionary income |
| Employers | Workforce housing | Employees can afford to live locally |
| Healthcare systems | Social determinants of health | Housing stability improves outcomes |
| Hotel industry | Fair competition | Closes STR loopholes |
| Labor unions (UNITE HERE) | Housing + job protection | Addresses both concerns |

### Messaging by Audience

**For progressive audiences:**

"This policy ensures that landlords share the costs when they price out working families, and rewards those who keep housing attainable."

**For moderate/business audiences:**

"This market-based approach aligns property owners' interests with community affordability without the supply destruction of traditional rent control."

**For fiscal conservatives:**

"Rather than expanding government housing programs, this creates incentives for the private market to produce affordable outcomes on its own."

### Opposition Neutralization

| Stakeholder | Primary Objection | Strategy |
|-------------|-------------------|----------|
| Large landlord associations | Profit reduction | Cannot be won; isolate politically |
| Libertarian/property rights groups | Government overreach | Frame as less intrusive than rent control |
| Anti-tax groups | Any tax increase | Emphasize that compliant landlords can reduce taxes |

### Key Meetings

**With tenant advocates:**

- Listen to their concerns
- Incorporate their feedback on loopholes
- Ask what would earn their active support
- Discuss pairing with other protections (just cause eviction, etc.)

**With hotel industry:**

- Emphasize shared interest in STR regulation
- Explain how housing advocates strengthen their coalition
- Ask for lobbying and financial support
- Discuss joint testimony and messaging

**With elected officials:**

- Lead with compelling local data
- Emphasize pilot program (reduces risk)
- Identify their specific concerns
- Make tiered asks (sponsor, co-sponsor, support, neutral)

### Stakeholder Contact Templates

**Initial outreach to state hotel association:**

Subject: Partnership opportunity: Housing affordability + STR regulation

Dear [Name],

I'm reaching out because I believe [State Hotel Association] and housing affordability advocates have an important shared interest—and an opportunity to work together.

I'm [your name/organization], and we're advancing a housing affordability proposal in [City/State] that uses property tax incentives to encourage landlords to maintain reasonable rents. Early analysis suggests that without strong short-term rental regulations, landlords may evade the policy by converting units to Airbnb.

I know [Association] has been working on STR issues for years. We'd like to explore whether there's an opportunity to coordinate—our housing coalition could strengthen your STR advocacy, and your STR expertise could strengthen our anti-evasion provisions.

Would you have 30 minutes in the next few weeks to discuss?

Best regards,
[Your name]

---

**Initial outreach to UNITE HERE local:**

Subject: Housing + Jobs: Potential partnership on STR regulations

Dear [Name],

I'm reaching out because UNITE HERE members face two challenges that are more connected than they might appear—housing costs and short-term rental competition.

I'm [your name/organization], and we're advancing a housing affordability proposal in [City] that would create tax incentives for landlords to maintain reasonable rents. But there's a loophole: without strong STR regulations, landlords could evade by converting apartments to Airbnb—taking housing off the market AND creating non-union competition for your members' hotels.

I'd like to explore whether there's interest in coordinating. Our housing coalition could amplify your voice on STR issues, and your members could be powerful advocates for keeping housing affordable in the city where they work.

Would you have time to discuss?

In solidarity,
[Your name]

---

## 12. Evaluation Framework

### Metrics to Track

**Primary outcomes:**

| Metric | Baseline | Year 2 Target | Year 5 Target |
|--------|----------|---------------|---------------|
| Median affordability ratio | 38% | 34% | 28% |
| Share of renters cost-burdened (>30%) | 52% | 45% | 35% |
| Share severely cost-burdened (>50%) | 24% | 20% | 12% |

**Supply indicators:**

| Metric | Direction to Monitor |
|--------|---------------------|
| Rental unit inventory | Should remain stable or increase |
| Building permits (new rental) | Should remain stable |
| Condo conversions | Expected to increase (acceptable) |
| STR listings | Should decrease or remain stable |
| Vacancy rates | Should remain in 4-6% range |

**Quality indicators:**

| Metric | Direction to Monitor |
|--------|---------------------|
| Code violation rates | Should not increase |
| Habitability complaints | Should not increase |
| Eviction filing rates | Should decrease |

**Revenue indicators:**

| Metric | Projection |
|--------|------------|
| Net tax adjustment revenue | Positive |
| Registration fee revenue | Per unit × fee |
| STR penalty revenue | Depends on compliance |
| Administrative costs | < 10% of revenue |

### Evaluation Methodology

**Quantitative analysis:**

- Pre/post comparison of all metrics
- Synthetic control method comparing to similar cities without policy
- Regression discontinuity around policy thresholds

**Qualitative research:**

- Landlord surveys on decision-making
- Tenant surveys on housing stability
- Stakeholder interviews

**Independent evaluator:**

- Commission university or research institution
- Provide full data access
- Publish results regardless of findings

### Decision Points

**Year 2 review:**

- Are any metrics moving dramatically in wrong direction?
- Are there widespread evasion patterns?
- Should parameters be adjusted?

**Year 5 sunset decision:**

- Did policy achieve primary outcome targets?
- Were supply effects manageable?
- What modifications would improve results?
- Should the pilot be renewed, expanded, or terminated?

## 13. Appendices

### Appendix A: Financial Modeling Spreadsheet Structure

**Tab 1: Parameters**

Stores all adjustable policy parameters:

- Target AR (0.27)
- AR tolerance band (0.03)
- Tax floor multiplier (0.85)
- Tax ceiling multiplier (3.00)
- Penalty exponent (varies)
- Penalty coefficient (varies)
- Reward coefficient (0.15)
- New construction exemption years (15)
- Operating cost adjustment threshold (0.03)
- Reference median income
- Operating cost index

**Tab 2: Income Data**

Import Census ACS data:

- Census tract
- Resident median income
- Worker median income
- MSA median income
- Calculated RMI (formula: 0.5×resident + 0.3×worker + 0.2×MSA)

**Tab 3: Property Inventory**

One row per property:

- Parcel ID
- Address
- Census tract
- Total units
- Total square footage
- Base property tax
- Year built
- Exemption status and reason

**Tab 4: Unit Detail**

One row per unit:

- Parcel ID
- Unit identifier
- Square footage
- Base rent
- Mandatory fees
- Utility share
- Gross housing cost (sum)
- Standardized cost (formula)
- Affordability ratio (formula)

**Tab 5: Property Calculations**

Aggregated from unit detail:

- Parcel ID
- Weighted average AR
- Adjusted target AR
- Tax multiplier (formula per Section 2)
- Base tax
- Adjusted tax
- Tax change

**Tab 6: Scenario Analysis**

Compare different parameter settings:

- Scenario name
- Key parameters
- Properties lowering rent (%)
- Net revenue change
- Average AR change

---

### Appendix B: Academic Literature Summary

**Diamond, R., McQuade, T., & Qian, F. (2019).** "The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco." American Economic Review, 109(9), 3365-3394.

- Found 15% reduction in rental supply from rent control
- Incumbent tenants benefited; future renters harmed
- Primary concern this policy addresses through different mechanism

**Eriksen, M.D. & Rosenthal, S.S. (2010).** "Crowd Out Effects of Place-Based Subsidized Rental Housing: New Evidence from the LIHTC Program." Journal of Public Economics, 94(11-12), 953-966.

- Tax incentives can effectively shape housing provider behavior
- LIHTC demonstrates administrative feasibility

**Schuetz, J., Meltzer, R., & Been, V. (2009).** "31 Flavors of Inclusionary Zoning." Journal of the American Planning Association, 75(4), 441-456.

- Mandatory programs with cost offsets work best
- Density bonuses increase compliance

**Chetty, R., Looney, A., & Kroft, K. (2009).** "Salience and Taxation: Theory and Evidence." American Economic Review, 99(4), 1145-1177.

- Visible taxes affect behavior more than hidden costs
- Supports clear communication of tax consequences to landlords

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### Appendix C: Glossary

**Affordability Ratio (AR):** Gross monthly housing cost divided by one-twelfth of reference median income; expressed as a percentage.

**Area Median Income (AMI):** The median household income for a metropolitan area, published annually by HUD; commonly used to define affordable housing eligibility.

**Cost-Burdened:** A household spending more than 30% of income on housing costs.

**Covered Rental Property:** Properties subject to the tax adjustment provisions; excludes owner-occupied small properties, deed-restricted affordable housing, and new construction.

**Gross Monthly Housing Cost:** Base rent plus mandatory fees plus required utility share; used to calculate affordability ratio.

**Operating Cost Index (OCI):** Annual percentage change in landlord operating costs; used to adjust target affordability ratio.

**Primary Residence:** Dwelling where a person resides at least 275 nights per year; relevant for STR exemptions.

**Reference Median Income (RMI):** Blended income measure using 50% resident income, 30% worker income, and 20% MSA income; prevents gaming of income measurement.

**Severely Cost-Burdened:** A household spending more than 50% of income on housing costs.

**Short-Term Rental (STR):** Rental of a dwelling for periods less than 30 days; subject to registration and operating requirements.

**Standardized Cost:** Gross housing cost normalized to a 750 square foot unit; allows comparison across different unit sizes.

**Tax Adjustment Multiplier:** Factor applied to base property tax based on affordability ratio; ranges from 0.85 (15% reduction) to 3.00 (200% increase).

**Transient Occupancy Tax (TOT):** Tax on short-term lodging; typically 10-15% of room rate; applies to both hotels and short-term rentals.

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### Appendix D: Frequently Asked Questions

**Q: Isn't this just rent control by another name?**

A: No. Rent control caps what landlords can charge—there's a legal maximum. This policy allows landlords to charge any rent they choose; it simply adjusts their property tax based on that choice. A landlord can charge double the target ratio if they're willing to pay the tax consequences. The mechanism is entirely different.

**Q: Will this reduce housing supply?**

A: Several design features specifically address supply concerns: new construction is exempt for 15 years, condo conversions are permitted (and don't reduce housing supply), and the operating cost adjustment ensures landlords can cover legitimate cost increases. The documented supply reductions from rent control stem from hard price caps that this policy avoids.

**Q: How will this be enforced?**

A: The policy builds on existing infrastructure. Many cities already have rental registries that track rents and unit characteristics. Property tax systems already track ownership and assess values. The policy connects these systems and adds reporting requirements. For short-term rentals, monitoring technology can identify unregistered listings automatically.

**Q: What if landlords just raise fees instead of rent?**

A: The policy defines "gross monthly housing cost" to include all mandatory fees—parking, pet fees, amenity fees, trash, etc. Landlords cannot evade by shifting costs to fees.

**Q: What about landlords who have high mortgages?**

A: The policy includes an operating cost adjustment that raises the target when costs increase. Small landlords (owner-occupied, 1-4 units, income below 150% AMI) are exempt. Landlords who purchased properties at prices requiring unaffordable rents made a business decision; the policy doesn't guarantee profitability for all decisions.

**Q: Will this hurt property values?**

A: Properties that maintain affordable rents receive tax reductions, potentially increasing their value. Properties charging above-target rents face higher taxes, which may reduce value. This is the intended incentive—shifting value toward affordability.

**Q: What happens if incomes fall (recession)?**

A: The reference median income adjusts annually based on actual data. If incomes fall, the target ratio (in dollars) falls, and landlords must lower rents to stay under the threshold. This maintains the income-to-rent relationship through economic cycles.

**Q: Why 27% instead of 30%?**

A: The 30% figure is the traditional "cost-burdened" threshold—above this, households are considered strained. The 27% target aims for optimal outcomes where households can save, build wealth, and have discretionary spending. The policy includes a neutral zone up to 30% to avoid penalizing landlords near the threshold.

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## Conclusion

The income-linked property tax adjustment represents a novel approach to housing affordability that learns from the limitations of existing policies. By using market-based incentives rather than price mandates, generating revenue rather than requiring spending, and preserving supply incentives while creating affordability pressure, this approach offers a promising path forward.

The proposal is designed for pilot implementation—a five-year test in one or more jurisdictions with rigorous evaluation. Success would provide evidence for broader adoption; failure would provide lessons for improvement.

Housing affordability is among the most pressing challenges facing American cities. Existing approaches have proven insufficient. This proposal offers a new tool for the toolbox—one that aligns incentives, respects markets, and prioritizes the goal we all share: ensuring that working families can afford to live in the communities where they work.

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*This document is intended for educational and advocacy purposes. Legal review by qualified attorneys is recommended before introducing legislation in any specific jurisdiction.*