The Impact of East Palo Alto's 2.5% Rental Tax (Measure JJ)

East Palo Alto imposes a 2.5% tax on gross rental income. Although originally presented to voters as a fee paid exclusively by landlords, the economic reality is that this is a tax paid by tenants. The result is that JJ makes renting more expensive for EPA tenants.

During a City Council meeting in the Spring of 2025, JJ advocate and Council Member Carlos Romero acknowledged this reality:

"I also want to make it clear that this, ultimately,  winds up being a tenant tax in the long run. Why? Because eventually rents adjust."

The impact of JJ is clear - if you pay $1000 a month in annual tax, $300 a year will go to JJ. A family renting a house at $5000 a month will pay $1500 a year in JJ tax. JJ makes renting more expensive in East Palo Alto and landlords pass this cost on directly to tenants.

Disincentivizing New Housing

Measure JJ serves as a significant barrier to new residential development. Most privately funded housing projects require a profit margin between 12% and 15% to be viable for investors, such as union pension funds and insurance companies.

By taking 2.5% off the top of gross income, this tax can consume up to 25% of a project's total profit margin. The result is not that these projects are built with lower profitability, but that they are not built at all in East Palo Alto. This lack of new supply perpetuates our housing shortage, which further drives up rents for local tenants.

Deteriorating Living Conditions

The tax is particularly damaging to rent-controlled units. In these cases, landlords are often unable to pass the tax directly to renters, forcing them to pull the 2.5% from other areas of the budget. This frequently results in:

• Reduced spending on maintenance and upkeep.
• Neglected landscaping and property improvements.
• Worsening overall living conditions for residents.

East Palo Alto’s Rental Tax is bad policy.  We should not raise the cost of living in EPA with taxes on rent.  We should be working to lower the cost of living for our residents, not raising it with a rental tax that is paid for by the very tenants it purports to be helping.