In Mayor Muriel Bowser’s second inaugural address in January, she announced an ambitious goal: create 36,000 new housing units in the District of Columbia by 2025. She is the first government official in our region to commit to an ambitious housing affordability goal for all income levels so D.C. can be a truly inclusive city.
As we all know, the District cannot achieve this objective alone, and the mayor has rightly ignited a call-to-action for the region. It’s also going to require a multifaceted, public and private sector approach that addresses one of the top reasons that affordable housing has been suppressed in the District: a zoning, regulatory and permitting environment that makes building housing unnecessarily expensive.
While the mayor recognizes this, the budget proposal she released on March 20 includes two tax increases on commercial real estate that do nothing to improve our zoning requirements or reduce the regulatory burden imposed on constructing housing. With the commercial property tax already amounting to 65 percent of the total amount of real property tax collection by the District, and the District seeing increases, not decreases, year over year in tax revenues, asking for even more revenue without parallel actions to reduce the regulatory burden to ensure the development of affordable housing is unseemly.
First, the plan would increase the deed transfer and deed recordation tax rates for mixed-use and commercial real estate transactions worth $2 million or more from 1.45 percent to 2.5 percent. Since these are two separate taxes, in reality, this is a tax increase from 2.9 percent to 5 percent per transaction. The plan would also increase the recordation tax on any deed that evidences a transfer of interest in a commercial property worth $2 million or more from 2.9 percent to 5 percent. These amount to an additional cost of $42,000 per transaction, at a minimum.
Second, the budget proposes to increase the commercial property tax rate on properties over $10 million from $1.86 per $100 of assessed value to $1.89 per $100 of assessed value. It would do this by repealing the commercial property tax reduction the D.C. Council passed last year as part of the internet sales tax.