One often-mentioned solution to the current structural deficit in Amherst is to increase commercial property and/or the tax rate for commercial property in town. Of the sixteen towns with higher tax rates than Amherst, only Springfield has a higher tax rate for commercial property than for residential property. Among other local towns, none have a split tax rate although all three of the towns often compared to Amherst for their school systems do. Brookline, Cambridge, and Newton all have a lower residential tax rate than Amherst and a higher rate for commercial property. That could be one reason their residential tax rates are relatively low, although Hadley's rate is the lowest of all towns shown here except for Cambridge and it does not have a split tax rate.
Surprisingly, when I looked at the relative distribution of parcels into different classifications (single family homes, multi-family homes, commercial, industrial, open, etc), Amherst had 5.0% of its parcels classified as commercial. This is above the state proportion of 3.8%. Among the towns with higher tax rates than Amherst, only the cities--Springfield and Greenfield--had a higher proportion of commercial parcels. Nearby Hadley has 12.3% of its parcels classified as commercial. Cambridge and Newton, the other two towns with residential tax rates below $10, have commercial proportions of 5.0% and 2.8%, respectively but do have higher tax rates for commercial property.
To raise increased revenue through commercial property, Amherst would either have to increase the commercial parcels or increase the commercial tax rate (or both). Another idea might be to take advantage of one aspect of Amherst that is different than many other communities--the relatively high proportion of our parcels that are classified as "apartments." For Amherst, this is 2.1%, above the state average of 1.4% and higher than all towns shown here with the exceptions of Greenfield and Cambridge.
One respondent to the Facilitation of Community Choices questionnaire had an interesting idea for solving the structural deficit:
"Tax landlord-owned residences at a higher rax rate than home owner-occupied residence. The city of Somerville does this by giving homeowners $1,800 off their property taxes. Rental houses are businesses. 50% of Amherst homes are rentals and the increased taxes can be shared by landlords, who can write off ALL expenses related to their properties--unlike homeowners."
Not only are 2.1% of the parcels in Amhert classified as apartments...according to the U.S. Census Bureau's American FactFinder, 54.4% of the housing units in Amherst are renter-occupied! Compared to only 32.7% for the U.S. as a whole. Perhaps Amherst should look to this resource as a way to decrease the gap between revenue and expenses in town. The suggestion above does make sense.
4 comments:
Renters tend to be less wealthy than homeowners.
And landlords in Amherst can (and, I think, WILL) pass along any tax increases directly to their tenants. Amherst has a pretty big rental shortage (the evidence is the incredibly low rental vacancy rate in town, on the order of 1-2%).
So increasing taxes on rentals would just be a roundabout regressive tax; the least wealthy folks in town would end up paying it.
Gavin: Yes, this is possible, for sure. Since I don't know the current market rate for apartments in Amherst and the surrounding communities (although that would be interesting to investigate), I don't know how much potential rate increase the market in Amherst could handle before landlords would lose tenants to other towns (again, though, your low vacancy rate comes into play). I would also think that folks on subsidized housing would be immune to rent hikes? Aren't their rents set by the government?
It's not just renters in subsidized housing who are in general less wealthy than homeowners. It includes those in un-subsidized housing. Across the board renters tend to be less wealthy. And raising the tax on rentals is indeed a regressive tax - balancing the budget on those who can least afford it.
Anon: Yes, again, if the market in Amherst can support a rent hike. Being unaware of the relative rents in our surrounding communities (or the vacancy rates), I don't know whether or not renters would leave Amherst if rents were raised or if they would have no choice but to stay and pay a higher rate.
Obama's team might offer this as a reason why homeownership could be more affordable than renting! Not sure I agree with this, but with push now for first-time home buyers to enter the market, higher rents could entice some renters into buying.
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