Coalition group says new tax could add $324,000 to housing costs

A new California tax could add up to $324,000 per unit to development costs, affecting new homeowners, developers and contractors, according to a coalition group called CARE Housing.

The coalition is largely made up of regional Chambers of Commerce, taxpayers associations, and small business and industry groups.

The existence of the tax can be attributed to the state aiming to reduce car trips by 50% by 2035, by taxing new developments based on their potential vehicle miles traveled.

“The state thinks that they need money to build housing for low income families, subsidized housing,” said Lori Holt Pfeiler, president and chief executive officer of the San Diego County Building Industry Association, which is a partner in the coalition.

“So then they’re going to tax new development with this VMT fee. So, a new development has to mitigate their vehicle miles traveled that that house will bring to the environment, and so they are going to charge up to $324,000 for one unit.”

The Vehicle Miles Traveled tax will disproportionately affect low-income households and people of color, she said.

“Fundamentally, if we do not build the housing that we need, that is a shame on us,” Pfeiler added.

“If there’s no home to buy, or the home that you just built now costs $324,000 more than the home that the white person bought last year, you’re affecting people of color,” she said.

“I see people of color have huge, huge demand. They would love to buy a home, but the price of the home is pricing them out.”

The VMT tax, buried in sections 57 and 58 of AB 130, threatens to create unprecedented uncertainty for developers and could raise monthly rents by as much as $1,350, according to the San Diego Building Industry Association. This gave local governments and regional lead agencies the sole option to impose VMT taxes on builders, new homeowners, and renters. 

“No developer can take the risk of doing all the work and then find out that there’s going to be that kind of a fee,” Pfeiler said.

The effects of these new taxes are massive, according to a Caltrans-funded study on VMT housing taxes, and will negatively affect many California residents.

“We have a housing policy crisis, and when we continue to put policies in place and add to the expensive housing, we’re not getting the housing that we need,” Pfeiler said.