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City of Industry Charges Its Employees Crazy-Low Rents

The small San Gabriel Valley community, the City of Industry, has been basically giving away housing to city officials and employees and their families. For years, these lucky tenants have been on the receiving end of "a subsidized city-housing program that rents 3-bedroom homes for $700 or less," says the San Gabriel Valley Tribune, and it looks like nobody's even been paying taxes on the thousands they saved from the city's gift of dirt-cheap housing.

Though City of Industry officials like to think of the program as "affordable housing," the people who live in the houses are city employees "making more than $100,000 a year." Not one of them pays more than $700 a month in rent, and, incredibly, rents haven't been raised since 2007. (In nearby neighborhoods, similar houses might rent for more than $2,000 a month, local real estate agents told the Tribune.) A previous SGVT report said that these old-timey rents even extended to hilltop houses overlooking a golf course, where a handful of upper-level city employees live. The overall difference between these rates and market rates "is more than $1 million combined between 2007 and 2015."

The issue isn't the shady practice of offering deeply discounted rents for city employees and their relatives, though; it's that the money that the employees are saving isn't getting taxed at all, and that could be an issue, say some tax experts. A tax attorney and accounting instructor at UC Irvine explain the "IRS could view the subsidy as gross income for both employees and anyone close to them that they helped get discounted rent." Another tax expert with USC's School of Accounting adds that by giving rock-bottom rents to well-off city employees, but not reporting that discount, the low rent looks like "disguised income," and that if the IRS decided that that was a form of compensation, "the city and the employees could owe decades of back taxes, dating to the first tenants of the properties."

Industry's already got its explanation for why they shouldn't have to pay taxes. The city attorney says that it's not the city that's in charge of setting the rent; it's the job of the Industry Property Management Authority to decide which tenants to accept and how much to charge them. But the city council is in charge of selecting two of the three members of the authority's board and "nearly all of the past and current councils have benefited from it." Maybe now that formerly corrupt neighbor Vernon is trying to clean up its act, a corruption vacuum has appeared and City of Industry is trying to fill the void.
· How well-paid City of Industry politicians, employees get tax free, affordable housing from the city [SGVT]
· Most City of Industry Voters Paying Rock-Bottom Rents to City and Former Mayor [Curbed LA]