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Los Angeles Business Journal

Monday January 10, 2011

City Councilman Homes in on L.A.'s Landlords
REGULATION WATCH: Owners of rent-controlled, affordable units may get tax breaks.

By Howard Fine

An L.A. councilman wants to give owners of rent-controlled apartments and affordable housing units a tax break.

Stop Tax Breaks for the Wealthy

City Councilman Bernard Parks, an ally of apartment owners, has proposed exempting landlords of rent-controlled buildings from paying city business taxes, or at least significantly reducing those taxes. The proposal would also apply to landlords who agree to affordable rents for federally subsidized tenants.

Parks said that rent control imposes limits on landlords that result in lower revenue.

"Given the financial hardship suffered by those businesses upon which we impose these affordable housing restrictions, it is appropriate that we consider giving these businesses some relief from their business tax obligations," Parks said in his Dec. 15 motion.

The motion calls for administrators to study the matter and report back to the council.

Tax the Rich

Currently, landlords of rent-controlled units - any building with more than four units that was built before 1978 - pay an estimated $14 million a year in business taxes, according to a study produced for the L.A. chapter of the California Apartment Association.

The council last fall debated whether to lower the annual rent increases allowed under the city's rent-control law from the current 3 percent to as low as zero. Councilman Richard Alarcon originally proposed lowering the increases, and in response to protests from landlords, he suggested business tax relief to compensate them. The matter was sent back to administrators for more study.

The Los Angeles chapter of the apartment association is opposed to Alarcon's proposal, but supports Parks'. Chapter President Ryan Minniear said that Parks' proposal would result in improved bottom lines for landlords, allowing them to put more resources into upgrading properties.

But advocates for tenants' rights said the reduction in business taxes would lead to cuts in city services, including some that benefit low-income residents. In addition, they questioned whether landlords would use the tax savings to upgrade their properties.

"There's no requirement written into this that landlords put the extra money into tenant improvements, so many will just pocket the savings," said Larry Gross, executive director of the Coalition for Economic Survival.

Corporate Welfare

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