Supervisor Aaron Peskin, alongside Caffe Sapore owner Elias Bikahi (in orange) helmed a rally today in support of the restaurant, which has been abruptly evicted by its landlord. Behind them stands Sen. Scott Wiener. Photo by Abraham Rodriguez

Standing today with Elias Bihaki, the proprietor of Caffe Sapore at 790 Lombard St., Supervisor Aaron Peskin told North Beach residents that he and his fellow legislators are aiming to curb the displacement of businesses by “greedy landlords” who increase commercial rents by unreasonable amounts. Bihaki has owned Caffe Sapore for 23 years, but his landlord abruptly terminated his lease so that he will have to close by Dec. 31. 

“He has struggled to make ends meet in one of the most expensive cities in the world, only to have his lease unjustly terminated,” Peskin told the crowd during the media event. “We all know what that means: It means another vacant storefront.”

Vacant storefronts are a problem not just in North Beach but throughout the city — especially in the Mission. Peskin has proposed legislation to tax landlords who keep commercial storefronts empty for extended periods of time. The legislation could have a huge impact on the Mission, where a recent Mission Local tally found 49 vacant storefronts on Mission between Duboce and Cesar Chavez alone. 

Peskin’s legislation would impose a $250 per-linear-foot tax on empty commercial storefronts in the first year, but would double the tax to $500 the following year. If the commercial unit is still empty in year three, the city would impose a $1,000 per-linear-foot tax until it is occupied.

There are exemptions for a “disaster period,” or a natural disaster, as well as a construction period exemption for earthquake retrofits. There’s also a six-month exemption that can be applied for when a tenant is moving in, but is still applying for the permits to operate. 

Any taxes collected would be pooled into a Small Business Assistance Fund that would provide financial help in case of issues with city construction projects, seismic retrofitting or to build ramps and access points, legacy business grants, and other improvements.

The proposal is slated for a citywide vote on March 3, 2020. It would require two-thirds approval to pass. 

This measure comes on the heels of legislation from Supervisor Sandra Lee Fewer requiring registration of vacant storefronts.

Sen. Scott Wiener addresses the crowd at the North Beach rally. Photo by Abraham Rodriguez

Philip Lesser, a director with the Mission Merchants Association, chalked up the spate of vacancies to the decline in retail businesses and the rise in e-commerce. 

Lesser said that entertainment businesses including restaurants and bars, to better but are constantly being blocked by the city and by community groups. With this in mind, he questioned the efficacy of the proposed legislation. 

District 8 Supervisor Rafael Mandelman, whose district extends into Valencia Street and parts of the Mission, said there is still a lot of data missing to gauge what has caused the vacancies. He hopes the tax works, but said legislators are still trying to gather information from the Department of Building Inspection about vacancies in the Castro. He said further information is required before placing the onus solely on bad landlords. 

“Is it reasonable to ask the landlord to take a tenant in who has shown they don’t have enough capital to make a go at it? I don’t know yet,” Mandelman queried. Still, he expressed support for the measure. 

Mandelman noted that start-up costs, like permits and inspections for small businesses, are too high and often become the biggest obstacle in getting a business off the ground. District 9 Supervisor Hillary Ronen concurred. She said that her office is working on ways to make it easier for small businesses to flourish. 

She, too,  is supportive of this tax measure. 

“What I’m hoping, once this tax is up and running, is that it creates an incentive for landlords to rent their units at reasonable prices,” Ronen said. “This is going to help the district and the city so much.”

If passed, the Board of Supervisors could make amendments to the vacancy tax with a two-thirds vote to include new provisions or remove old ones.

Correction: This article originally said the tax was based on square footage, but it has been updated to correctly say “per linear foot.”  

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12 Comments

  1. I wish the supervisors would look into ways to lesson the cost of starting a business(taxes, fees, paperwork, surveys, etc…) instead of adding more taxes. These will be passed down and lead to higher costs of starting a business.

    Why not work on a simplified checklist for new businesses? If they do x,y, and z, they are approved no matter what. Even if they are an evil republican or anti abortion activist. Written in a language that only needs an 8th grade education to understand. This would actually help people start businesses vs. thinking they need a college degree to do so.

  2. A $250, $500 and $1000 per square foot tax?!

    Once again, Peskin is all stick and no carrot — all reaction and no data.

    How about getting some actual data — like Supervisor Mandelman suggests — prior to imposing more penalties?

    How about radically reforming the absurdly complex, time-consuming, costly and wasteful bureaucratic review and approval process for opening a retail or restaurant in this City — like Supervisor Ronen suggests — prior to imposing more penalties?

    There is no way any reasonable person should vote for this outrageous, regressive and downright punitive tax!

    1. Don’t forget, all new franchise businesses are banned in San Francisco. They are statistically the most successful businesses. Very kafkaesque, when the city bans the most successful business and then blames landlords for empty store fronts.

      1. Absolutely wrong. Formula retail regulations are limited to certain neighborhoods. You should stop spreading disinformation; it makes you look like a liar.

    2. Yes, we should just let the landlord class continue to strangle San Francisco neighborhoods with hundreds of vacant storefronts because they refuse to lower rents. What’s safer and more family-friendly than block after block of dark, vacant storefronts?

      The theory of supply & demand that our economic system is supposedly based on doesn’t work if sellers refuse to lower their prices to facilitate “market clearing” and “equilibrium.”

      1. Who knew a “living” wage and mandated health care would be finacially unsustainable and many businesses would close and very few new business would ever open again. 49 empty store fronts on Mission St, between Duboce and Cesar Chavez alone. They said, “If you can’t pay a living wage and benefits, you dont deserve to be in business”. Well they got what they wished for! The theory that government can manage the affairs of private businesses and landlords is what does not work here.

        1. You are disingenuously putting small business tenants and their landlords on the same team. Adam Smith would be (and was!) the first to tell you that landlords are the existential enemy of small business.

          If the theory of supply & demand obtained, then landlords would lower their astronomical rents until vacant storefronts were filled. Landlords don’t, so the theory of supply & demand doesn’t describe what is happening in the San Francisco neighborhood storefront market.

          There are plenty of small businesses that would snatch up reasonably-priced space, but they cannot sustain a viable business while forking over the astronomical rents that landlords feel entitled to. For the landlords, the theory of supply & demand only applies when prices are going up.

          Landlords use vacant properties as losses against their profits, and incur lower tax bills as a result. One simple solution is to tax egregiously-vacant properties to incentivize landlords to fill those properties.

          1. Fore-gone rents are not “losses”, like a Capital Gains loss from a stock/mutual fund transaction to be balanced against ‘gains’. Vacant props are simply rental income not collected. It would be the same as renting for $5000/ vs $7500/mth – a decrease in income (and, hopefully, not profits).

            In actuality, a tax such as proposed, would be counted against profits, much like a utility bill, a parcel tax, or a maintenance cost.

            So, if a lower rent or a vacant storefront both lower income, why is it the owner chooses the ‘no-income’ option, rather than the ‘some-income’ option? This is what we need answered, don;’t you think?.

  3. Abraham,

    It would be interesting, to me at least, to put this Tax idea in the context of the political climate that seems to drive some of the vacancies.

    https://missionlocal-newspack.newspackstaging.com/2017/11/sf-nonprofit-wants-changes-from-proposed-mission-street-cafe/

    It would seem that there is some reason to fear that Tax on vacant storefronts would simply end up as another tool to be used to manipulate the make up of the store fronts. I’d appreciate if you have any thoughts to share about this angle.

  4. Businesses in San Francisco — especially new business — are hampered by a Byzantine system of cumbersome paperwork, permits and neighborhood group meddling that make it extremely difficult to start a business unless you are already very wealthy and. An weather the headache and delays.

    For example, allowing six months for a business to open in most places would be reasonable… in SF it’s laughable – particularly if any construction is required. Anyone who has dealt with the SF Building department can tell you that arbitrary rules, favoritism, and extremely burdensome requirements will draw out project completion for months. Add to that the high cost of actual construction in the city, and there are very few types of businesses that can actually make a go of it. And then you have the likes of “community organizations” MEDA, who will exact additional demands and work to thwart your prospects with concession demands, delays, or simply shouting you down in meetings.

    A whole book could be written about the unintended consequences of “progressive” idealistic policy choices, among which this is just another chapter in the slow demise of San Francisco.

  5. I am a small-time commercial landlord in the Mission, and even I would vote in favor of this tax. It is the responsibility of a good landlord to help make the neighborhood the best it can be. Letting a commercial unit sit vacant is not only lazy and financially foolish, but also a kind of crime because it causes blight and increases quality-of-life problems. If this tax passes, the rent I might be able to charge for a vacant storefront may ultimately be a bit lower in the future, but in the end it would be worth it as it will make the city and our neighborhood a better place to live. The argument about minimum wage and online sales decimating brick-and-mortar retail is wildly overblown. Besides, commercial units have other purposes besides retail, such as professional, arts, and community spaces. Sad to say, the problem is simply a matter of greed and laziness on behalf of absentee or incompetent landlords.

    That being said, The City really needs to get its act together to streamline the permitting process. It can take years to get approvals from the various city agencies, and cost well in excess of $100,000 in construction, permit, expediting, and consulting fees; just to open up a shop. (This is an abusive and notorious problem, and I’ve heard and witnessed this experience from businesses repeatedly.) The permitting process should be ‘by-right’ and take 30 days or less, with conditional-use permits required in only the most extreme of circumstances (e.g., excessive smoke, noise, resource consumption, etc. — not for zoning minutiae).

    I’m really looking forward to a day when our neighborhood is utilized to its creative and full and potential. A vacancy tax coupled with by-right permit streamlining could be just such a welcome solution.

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