San Francisco Voters Considering Another Vacancy Tax, This Time For Residences
A measure on this year’s local ballot takes aim at San Francisco’s affordable housing crunch by imposing a tax on the owners of vacant residences, but questions persist about how many units would actually be affected.
If passed, Proposition M would levy a tax on units that sit empty for 182 days or more per year, with the goal of clamping down on real estate investment speculation. The proposal claims such investment is a key contributor to lack of home availability in San Francisco, and hopes to deter investors from purchasing properties solely as investments, keeping them unoccupied.
“Investors buy up old buildings and let them sit empty. We need to say no more,” Housing Rights Committee of San Francisco Executive Director Fred Sherburn-Zimmer said at a rally earlier this year in support of the proposition, according to Mission Local. “A home is a home, and we are going to tax the shit out of it until you rent it out to San Franciscans.”
But opponents argue that the tax is ultimately misguided and misses the mark, suggesting that the proposal either goes too far in one direction, or doesn’t do enough to address the housing concerns of the city.
Taxes would range between $2,500 and $5,000 annually in the measure’s inaugural year of 2024. The tax rate, relative to the size of the unit, would increase to a maximum of $20K as time goes on. The tax would apply to property owners with vacancies of three or more units, exempting single-family homes and duplexes.
Public arguments from the San Francisco Apartment Association have claimed that it “targets small property owners and intergenerational households, not corporate landlords.”
The tax was heavily modeled after a 2016 initiative passed in Vancouver, Canada, that generated $21M in 2019. The city of Oakland implemented a vacancy tax in 2018 that generated $7M in revenue in 2020, according to The Real Deal.
A similar vacancy tax for retail properties in certain parts of San Francisco went into effect this year, meant to deter retail landlords from keeping properties vacant. Collections for that tax begin in 2023. Opinions on the the retail vacancy tax are mixed, but the ultimate effectiveness of the tax is yet to be determined.
Proposition M relies on a study by the city’s Budget and Legislative Analyst’s Office earlier this year, which stated that in 2019, the city had over 40,000 vacant housing units, making up just under 10% of the city’s total 406,000 housing units.
The majority of the vacancies are centered around districts such as SoMa, downtown and the Mission District, or “generally the same areas where new housing construction has been concentrated,” according to the report.
The study speculated that the fasted-growing segment of vacant housing within the city belongs to units classified as “sold, not occupied,” which made up over 8,000 of the 40,000 units, and attributes this to units that are still under construction, or “may also be due to owners purchasing them as investments or cash havens with no intention of moving in or renting them out.”
The report suggests that the tax has the potential to make 4,500 units available over the next two years and will generate $38M in annual revenue.
Grow SF Director Steven Buss, told SFStandard the number of units affected by the tax is “laughably small,” with the group’s voter guide suggesting the proposition won’t do enough to incentivize owners to change behavior, or raise enough money to meaningfully impact affordable housing.
In an economic impact report on the residential vacancy tax released at the end of September, San Francisco Chief Economist Ted Egan noted the city’s census data indicates that San Francisco has a higher residential vacancy rate than the state and region, but also noted that regarding vacancies that exceed six months, the city’s vacancy rate is average by Bay Area standards.
Additionally, the report suggests an additional $26M in consumer spending on the part of people who would theoretically move into the units and spend money in their neighborhoods.
Egan also stated compared to other cities, while San Francisco’s vacancy’s rate is overall high, it might not make a difference when it comes to the ultimate impact of the tax should it go into effect.
“Yes, we have an overall high vacancy rate, but most of our vacancies are less than six months and wouldn't be affected by this,” he said.