Keyser Marston Associates’ report proves that when landlords use the Ellis Act to remove rental units from the market, Santa Monica benefits.
1. The report says that Ellis Act withdrawals create “downzoning.” Many rental units are replaced by a few condos or single family homes.
Excellent! This reduces density, traffic, water usage, school over-crowding, and strains on city services, resulting in a greener, more sustainable city. And progressives complain?
2. The report says that developers are replacing old buildings with new buildings that are sold for “a tidy profit.” Fantastic! This means that our city and schools are likewise raking in massive windfall tax profits.
Developers pay hefty taxes and fees during construction (while providing good jobs for the economy). But the real windfall for city and schools is from property tax increases.
Prop 13 only allows property values to be reassessed when a property is sold or improved.
(According to Zillow, some houses north of Montana only pay annual property taxes of about $2,000.) But demolish an old building, sell the new one for $6.8 million (a number cited by Keyser Marston), and the annual property tax jumps to about $85,000.
Considering how well-paid are our city and school employees, and all those school bonds that must be repaid (with interest), those windfall tax profits are certainly welcome.
3. Finally, new, more expensive buildings, with lower density, raise nearby property values, further increasing windfall tax profits for city and schools — for the children! — when those buildings are sold.
Less congestion. Higher property values. More tax revenue. Go Ellis!
Thomas M. Sipos