Most cities have a homelessness problem and a lot of vacant housing, but in San Francisco, everything is amplified. Last year, 7,700 people were reported to be living in shelters or on the streets of the Bayside city. city figures. At the same time, according to policy analysis, there were more than 60,000 vacant units as of the end of 2021. last fall, although this figure includes both new-build apartments and those awaiting sale. Enter the vacant homes tax.
This week, San Francisco formalized a voter-approved law, also known as Proposition M, aimed at cracking down on property owners who leave multifamily apartments vacant. The city estimates that the law, which takes effect in January, could put as many as 7,000 housing units on the market, which would equate to housing 90 percent of the city’s homeless population, according to the data. The problem is solved?
That could be a big deal for a city of less than a million people that has become a modern-day obsession with widespread homelessness, a pervasive cost-of-living crisis, and a notoriously dysfunctional housing problem. The poster child for 1970s-style “doomsday cycle” fears. market. But real estate interests have fought the law in state courts, claiming their constitutional right not to rent the properties.
“The primary purpose of this law is to fill vacant homes,” said Supervisor Dean Preston, a leading proponent of the law. wealth Friday. “It’s bad for our city to keep housing away from people for a long time when they need it,” he said. “We hope (the tax) is enough to change the decision-making of real estate speculators or property owners.”
Sometimes, Preston said, developers’ strategy is to buy buildings, remove long-term tenants and then resell them for a profit. Recently, some new buildings have failed to sell amid the downturn in the market, creating “zombie buildings.” san francisco chronicle reported last month.
“We’re facing a situation where thousands of people are homeless and living on the streets and tens of thousands of apartments are being taken off the market,” Preston said. wealth. “Some of the buildings in our area have been vacant for years.”
America’s Strongest Vacancy Tax
According to one company, the scope of the tax is quite narrow and applies to units ranging from 4,400 to 7,300 units. estimate Budget analyst from the city. Also known as Proposition M, it exempts single-family homes, duplexes, short-term rentals, nonprofit and institutional housing (such as nursing homes), and any apartment used as a primary residence. It also allows for additional time to wait for a certificate of occupancy or for new construction that is uninhabitable due to a natural disaster.
While a handful of cities, including neighboring Oakland, Washington, D.C., and Vancouver, have passed some form of vacancy tax, Preston believes San Francisco’s vacancy tax is the most aggressive in the country.and multiple groups representing landlords, including the San Francisco Apartment Association, the San Francisco Small Homeowners Association and the San Francisco Association of Realtors be accused In February, the city claimed the law violated their constitutional rights.
“The United States Supreme Court has repeatedly held that a property owner’s power to exclude (others) from the property has traditionally been considered one of the most cherished parts of the owner’s property rights,” the lawsuit said, citing a 1982 lawsuit. . Decide. San Francisco landlords are already burdened with “legal, administrative, practical and financial barriers to renting,” the lawsuit says, including rent control laws, property registration requirements and the difficulty of evicting tenants.
In other cases, apartments may be vacant because of high crime or few job opportunities in the area, but owners may be reluctant to lower asking rents for fear that rent control laws won’t allow them to raise rents in the future, the lawsuit said. Others may want to keep an apartment and live there a few months out of the year, or live alone in a four-unit building because they don’t want to deal with the hassle of renting to tenants, the lawsuit said. This applies to both plaintiffs.
Under the vacancy tax, property owners will pay between $2,500 and $5,000 per vacant unit, depending on the size of the vacant unit, with the amount increasing each year when vacant. An empty building with 10 mid-sized apartments (1,000 to 2,000 square feet) would pay $140,000 in taxes by the third year, and that amount would then be tied to the federal Consumer Price Index.
Preston said the tax is intended to fund affordable housing programs, but added, “raising funds is not the primary purpose of this measure.”
“If we can fill 10,000 units in the next few years, we’ll be happy even with little or no tax revenue,” he said.
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