Vacancy tax can ‘move the needle’ amid larger housing crisis

During the pre-pandemic housing boom, roughly 10 percent of the city’s residential units, or some 40,000 units, sat empty, according to a report released Monday from the city’s  Budget and Legislative Analyst.

The fine may push owners to lease out faster, but that won’t solve all our housing problems, the report emphasized. 

“While a vacancy tax could encourage owners to occupy them, it should be considered one of a number of policy tools to increase housing supply in San Francisco,” it stated.

The report that looked at vacancy rates in 2019 was produced after Supervisor Dean Preston’s request to investigate the residential vacancy rate in San Francisco. 

Preston believes that a vacancy tax could address housing demand by putting pressure on speculators who keep units off the market in hopes of selling in a more profitable period.  

That likely accounts for a fraction of empty homes. The Budget Analyst report estimated that 40,000 of San Francisco’s 400,000 units lay empty. This was attributed to a variety of reasons, including normal turnover, units held off the market, seasonal use, and a myriad of “other” explanations.

Most of the vacancies are concentrated in underserved and dense neighborhoods, like SoMa, downtown, the Mission and Mission Bay. These neighborhoods also bear the brunt of the city’s housing development. 

The high vacancy rate came as little surprise to housing activists in these neighborhoods.

“Property owners hold housing off the market because it makes sense for them to do that, even though it obviously harms society as a whole,” said housing activist and president of Tenants and Owners Development Corp., John Elberling. “We are absolutely behind [the tax]. The only thing to make those investors change their tune is a penalty.”

Since all tax measures must be voted on by the public, this measure still has a ways to go. Elberling’s Todco is also donating $30,000 toward a campaign that will get the vacancy tax on the ballot, Elberling told Mission Local. 

Meanwhile, the Mission is rife with empty homes. 

The district leads the pack in terms of vacancies that have been sold but remain unoccupied, reporting 621 units in total. Not far behind are the Sunset and Noe Valley. This type of vacancy accounts for 20 percent of the city’s overall vacant units. 

But that hardly compares to “other” vacancies, which account for nearly one-third of total residential vacancies in San Francisco and include vacancies for construction, corporate housing and family reasons. The Mission reported another 677 units as vacant for “other” reasons.  

The Mission also ranks fifth among other neighborhoods regarding vacancies due to seasonal use, at roughly 437 units. 

Sam Moss, the executive director of affordable housing developer Mission Housing, backs the push for a vacancy tax. “I don’t believe it’ll move the needle a lot, but it will a little. But incremental change is a cornerstone of the YIMBY movement, and I applaud Preston, who took up that cornerstone.”

The severe shortage of affordable units, however, will not go away with just a vacancy tax, Moss and other developers said. “Money is the only answer,” he said. Policies that streamline housing are just as essential, he added: “Allowing people to build affordable housing all over San Francisco, and not just segregating it to the East side.”

Indeed, the report underscored the city’s failure to build enough affordable housing to meet its goals and found that in 2015 to 2020, the city racked up a deficit of roughly 11,000 low-income and middle-income units. Those problems aren’t easily resolved; dried up funding, especially from the feds, make development an enduring challenge. 

Potentially, a vacancy tax could lure in some money. One proposal floated in the Budget Analyst report suggested the city redirect future tax revenue toward an affordable housing fund or other anti-displacement programs like Small Sites. An estimate from the report shows San Francisco could initially earn up to between $12.2 and $61.2 million per year in net revenue.

The figure depends on what kind of program San Francisco employs. Thus, the Budget Analyst report researched other cities that already employ vacancy tax programs, including Oakland, Washington, D.C. and Vancouver.

The easiest policy to implement would be a flat tax, as Oakland does. Barcelona, Spain, runs a more strict version, where the city can reoccupy certain units that have been vacant for years. 

Regardless, developers believe it’s a good idea to explore a tax, in conjunction with new construction. 

“Certainly, a tax can generate [and fund] resident and community services,” Moss said. Still, “I think I am cautious that this vacancy tax will solve the housing crisis.”