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It's time for a residential vacancy tax in San Francisco

In a city with so many unhoused, why are there so many empty houses?

387 Beacon Street is a residential gem in a San Francisco studded with them. Perched between Noe Valley and Glen Park, it enjoys panoramic views of Downtown from giant windows, proximity to two open space areas, and 3,200 square feet of living space. It comes with a now-typical San Francisco price: $3.5 million.

Yet the house isn't for sale. Not because the owner loves living in it and wants to remain in their piece of California's Gold Coast that they prospected in 1978, when they bought the house for $200,000 and locked in property taxes which are now estimated at $6,000 per year (roughly 0.2% of the current value of the home). Nor because the owner rents it out to another family, who would be paying market rate rent of roughly $6,500 a month.

No, 387 Beacon Street sits unused, unoccupied, empty. Its owner is an absentee landlord of several buildings in the Mission who lives in Washington State. It is semi-furnished, with no inhabitants, and has remained that way, according to one neighbor, for eighteen years. According to another, for thirty-five. (The photo above is the view from the front door - a view which no one ever enjoys.)

In a city with an unprecedented housing crisis, where homelessness on a given night, 387 Beacon Street's vacancy is a mockery. California's property tax rules - enshrined in Prop 13 - mean there is ample incentive for its owner to sit on the unused property and enjoy increasing wealth with minimal tax impact, a rapidly-appreciating savings account that just happens to be made of lumber, nails, and drywall.

It's also not alone in its existence as a waste of property in a land of the unsheltered. According to the (a "mini Census" taken annually in the U.S.), in 2018 there were 38,651 unoccupied housing units in San Francisco. Of those, roughly 7,500 were for "seasonal, recreational, or other use" and 14,500 were designated as "other vacant", a category which includes properties undergoing significant renovations. Overall, San Francisco has 9.6% gross vacancy rate - defined as the number of vacant units over the total housing units. (Many oft-cited vacancy rates of the City are lower, as they are counting only the rental vacancy rate, which includes only rental units).

In 2018 there were 38,651 unoccupied housing units in San Francisco

Residents recently approved Proposition D by a wide margin (since it's a tax increase, it had to clear 2/3rds of the voters' approval - Prop 13 again). The proposition, championed by Supervisor Aaron Peskin, applies a tax to certain commercial properties if vacant for more than half a year.

It's time to institute a residential vacancy tax, too.

In 2017 Peskin himself of a residential vacancy tax, citing "ghost buildings" in his own North Beach neighborhood. The City already requires that property owners pay a fee of $711 per unit if their property sits vacant, though this is voluntary and the vast majority of empty-unit-landlords don't pay it (, or roughly 0.01%). And a $711 fee on a $1.43M property (the average in the City) is 0.05% of the value. That's the equivalent of a median-income San Francisco earner paying $32 of their after-tax income, per year.

Residential vacancy taxes have recently become more discussed in urban policy circles. is perhaps the best-known West Coast example. In 2017 the city instituted a 1% tax on assessed value for non-primary residences if they are unoccupied more than six months per year. The law's effects are still being evaluated, it raised $29 Million and reduced the vacant housing stock by 15% by putting more units on the rental market. Paris also in the city in 2017, to 60% of a unit's rental income.

Residential vacancy taxes also have precedent in the Bay Area. Oakland passed in 2018, which taxes commercial or residential vacant property (including undeveloped lots) if in use less than 50 days a year, at fixed fees ranging from $3,000 to $6,000. This is a generous standard of vacancy - a vacation rental could sit empty for ten months a year and still not be subject to the new tax. (The law has problems - what law doesn't? - in particular, , a negative loophole that should be closed.)

A residential vacancy tax is not, in itself, sufficient to solve the severity of the housing crisis; it should be coupled with myriad policy changes, which can be argued for elsewhere. But it's a piece of the puzzle to make a dent in San Francisco and California's housing and tax shortage (which will only be exacerbated by COVID; California's surplus .) And philosophically, it feels right too. The existence of thousands of "spare", empty homes in San Francisco during a homelessness crisis is akin to a village saving dessert for well-heeled out-of-town visitors in the midst of a famine.

What would a residential vacancy tax get San Francisco? Even a modest estimate, 10% of the existing units vacant for the two categories mentioned above (21,908 units) taxed at 1% of the market value of a median house in the City ($1.43M), would yield $31M per year. (You can see more data and do your own calculations in the
section of this doc.) Like in Oakland, these proceeds could be used for homeless services, affordable housing, and the clean-up of blighted neighborhoods.

More importantly, a residential vacancy tax would spur property owners to rent, sell, or move into their units, forcing more supply into an incredibly competitive housing market. If 20% of the vacant units in the two categories above were occupied, and each one housed an average of 2.3 people (), then over ten thousand more people could call San Francisco home.

And maybe someone would actually enjoy the views from 387 Beacon.

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