SCOTTSDALE, AZ — As neighbors around Arizona find themselves priced out of a decent place to live, some relief is coming for renters in the new year. Due to new legislation taking effect on January 1st, 2025, Arizona will no longer charge a rental tax.
James Bedah has lived in apartments for 20 years, so he was excited when he got a letter from his leasing office announcing a state rental tax is being eliminated.
“It matters, it really matters!” Bedah said.
Briana Holdridge feels the same way.
“I am so excited I won’t have to pay any more taxes on my rent!” Holdridge said.
Eliminating this transaction privilege tax, or TPT rental tax, will impact renters staying long-term, for 30 days or more.
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Rates are set by the 75 cities and towns that impose the rental tax, and they vary from 1.5 to 3.5 percent. For instance, renters in Cave Creek pay 3 percent, while those in Gilbert pay 1.5 percent.
“Everything’s getting high,” Bedah said. “People can’t pay, you know there’s struggle. But now, I think it’s easier.”
While renters celebrate the extra pocket change, one housing expert warns this will not keep rent from skyrocketing.
“I don’t know that it’s going to have a profound impact,” Mark Stapp, ASU professor of real estate, said. “Rents are going to continue to rise."
Stapp believes one answer to overcoming the lack of affordable housing is to build more units, something he says is not happening fast enough in Arizona.
“There’s many competing factors that make it difficult to add the additional supply, and especially add the additional affordable and attainable supply,” Stapp said.
As for the lost tax revenue, tax policy analyst Lee Grafstrom says the 75 cities and towns that had the rental tax now stand to lose a combined $230 million.
“You have to find some other way to make up that revenue,” Grafstrom, tax policy analyst with League of Arizona Cities and Towns, said. “Either through raising another tax or raising property taxes. Or the other alternative, which is one that citizens don’t want, which is you end up having to cut services."
For now, some renters are smiling.
“Every little bit helps: gas, groceries, everything else,” Holdridge said.
