City Council explores revenue streams for affordable housing, including TOT rate increase, vacancy tax

SOUTH LAKE TAHOE, Calif. — The South Lake Tahoe City Council spent several hours Tuesday discussing and hearing public comment regarding potential revenue streams to fund affordable housing. 

The affordable housing shortfall in South Lake Tahoe has been a topic of conversation for many years. Finding more housing options is a priority in both the city’s strategic plan and its housing element and within the housing element, there are 45 active or potential programs the city is working on. 

While a lot of the housing programs can be funded through state and federal grants, private equity and bonds, there is still a shortfall when it comes to funding programs in the city. 

During the meeting, council discussed the possibility of pursuing an increase of the transient occupancy tax rate, which is an additional tax paid by guests of hotels, motels and vacation home rentals, from 12% to 14%. This option is estimated to generate about $1.8-2.2 million annually. 

The other option discussed is a vacancy tax, which would be a $3,000 annual fee homeowners of vacant homes would pay. This is estimated to bring in about $16.8 million annually. The money generated from these options would be used for new affordable housing projects and programs.

Councilmember Scott Robbins, who had been passionate about finding housing solutions long before he was elected to council, asked staff to update the housing needs study, since the current one was done before COVID. 

“We can anecdotally say the need is greater,” said Housing Manager Zach Thomas, adding there is general consensus that the housing situation has gotten worse since the pandemic. 

Public comment lasted over an hour, with people speaking for and against both options. There was concern that raising TOT could hurt the tourism industry, which is the biggest industry in the city. 

One community member told the council that he had been no fault evicted from his home last month and had difficulties finding new housing. 

“It wasn’t my fault to be evicted and I had to struggle and stress just to find one roof over my head and people want to fuss about a second one that they’re not doing anything with,” the community member said. 

On the other hand, one public commenter discussed how she scrimped and scrapped to buy a small cabin as a second home and that she used it as a vacation home rental to cover the costs when her family wasn’t using it. After Measure T, she can barely afford to pay the costs of the home and is concerned she’ll now be charged an additional fee because she can’t rent the home.

These two comments get at the crux of the issue that many of the public commenters addressed; there isn’t enough housing in the basin and many of the employees that make the city run can’t afford to live there, but not every second-homeowner is a mega-rich person from the Bay Area that doesn’t care about Lake Tahoe or the people who live there. 

One public commenter recommended a sliding scale vacancy tax based on how much the home was used over a year. She also recommended the city consider more programs that incentivize homeowners to rent their homes long-term. 

San Francisco is currently fighting in court their proposed vacancy tax and Mayor Pro Tem Cody Bass wants to hold off on considering implementing one until legal precedent is set. Councilmembers John Friedrich and Robbins were both interested in getting more information about the vacancy tax while Mayor Cristi Creegan and Councilmember Tamara Wallace were against it. 

Wallace was also against raising the TOT rate while the rest of the four members were interested in seeing that brought to the voters. The item was for discussion only, so no decisions were made during the meeting. 

The council also discussed establishing an inclusionary housing requirement and in-lieu fee which would require home developers to also build affordable housing or pay a fee if they don’t. The fee percentage would be based on square-foot and type of housing. The city contracted a study to be done showing what the feasible fee percentage amount could be before it becomes too cost prohibitive for developers. 

The council had agreed that they’d like to know what the fees would look like if it a progressive fee model based on home size rather than a blanket percentage. They also wanted to see what the possible revenue generation could be. 

During the meeting, the council unanimously voted to repaint several sidewalks in town with the pride flag colors in recognition of Pride Month. The three sections of the South Tahoe Bikeway path between 3351 Lake Tahoe Blvd and Fremont Ave, which were painted in summer 2022 and will be repainted before June 1. 

Bass, who is a member of the Lake Tahoe Pride organization, wants the city to also host a celebration when the painting is complete. 

The city already has the paint from last year but Robbins inquired about ordering more colors to include trans and nonbinary colors. A member of Lake Tahoe Pride spoke during public comment and seconded that idea. 

Staff will look into ordering more colors but if they won’t come in by June 1, they’ll proceed with the same colors as last year. Bass said if the colors don’t come in time, he’d like to see the inclusivity flag recognized in another way. 

“I’m in support of recommitting to being an inclusive city,” Friedrich said, adding everyone belongs here.

Wallace asked that the city also paint a sidewalk in red, white and blue leading up to the July 4 parade, adding that she supports and wants to see unity between the Pride Flag and the American Flag. The council agreed on that being brought back for approval at another meeting. 

Several contracts were approved during the consent agenda including nearly $2 million for the Barton Avenue and 2nd Street Drainage Project, half a million for the Tahoe Valley Stormwater and Greenbelt Improvement Project, half a million to update the Airport Master Plan and the purchase of four e-bikes for the South Lake Tahoe Police Department. 

The meeting began with a proclamation declaring May as “Child Abuse Prevention Month.”

The next meeting is scheduled for 5:30 p.m. Tuesday, May 16, during which the council will hear a Washoe Tribe Land Acknowledgement Presentation and Resolution. 

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