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By Joe W. Bowers Jr. and Edward Henderson | California Black Media
California lawmakers are scrambling to find ways to alleviate the housing crisis occurring in the state. Programs and subsidies are in constant development; however, under an obscure tax rule called possessory interest, individuals may be responsible for getting hit with an unexpected tax bill as a result.
In a move to aid the middle class, government agencies (known as joint power authorities) are buying luxury buildings and lowering rent for possible tenants. The discount is possible because these agencies do not need to pay property taxes. Instead of pocketing the extra cash, programs are being implemented to place middle income workers like police officers, teachers and construction workers in these buildings at a discounted rent price.
But, under the tax rule, tenants may need to pay some of the lost revenue in individual tax bills upwards of $1,000 a year. The rule states that if a government owned property leases to a private entity, then that entity can have a “possessory” interest that must be taxed.
Joint Power Authorities involved in these programs do not want to tax tenants. However, unless the Legislature gets involved, they are afraid they will have to abide by the rule. If taxes go unpaid, residents could face liens that would make it more difficult to quality for mortgages and other loans.
