Amid housing crisis, California cities look to target vacant homes with taxes

BERKELEY, Calif. (CN) — The city of Berkeley joins a growing list of California cities planning to ask voters whether property owners with vacant homes should be taxed to relieve unprecedented pressure on the housing market.

San Francisco, Napa, Santa Cruz and other cities all rank high in desirability and median rent rates, and are moving forward with vacancy tax measures to address a worsening housing availability crisis. Voters this November will weigh claims the strategy will free up revenue to create more affordable housing and push more units onto the strained market amid widespread home bidding wars. 

Some city leaders say forcing vacant homes onto the market via tax or fine will help prevent valuable units from standing unused for long periods of time. But others argue committing to building more housing would be more effective.

The 2020 UCLA Affordable Housing Brief found 17% of homeowners and 30% of renters pay more than half of their household income for housing, while the state’s population grows faster than the housing supply. Meanwhile, the California Association of Realtors estimated that around 1.2 million units, apartments and single-family homes may sit vacant around California.

Berkeley City Council Vice Mayor Kate Harrison pushed her colleagues for an empty home tax ordinance on this year’s ballot on June 14.  It was finally approved for November’s ballot on Wednesday, with many calls of both support and opposition coming from the community.

‘’Unfortunately, Alameda County’s housing remains unaffordable for many of its residents, and this burden does not fall evenly across income and racial groups,” Harrison’s report said. “While 47% of renters in Alameda County are rent burdened, the rate is 58% for Black renters and 87% for extremely low-income renters. Meanwhile, as this crisis continues to unfold, Berkeley Rent Stabilization Board data indicates that 1,128 fully or partially regulated units have been classified by their owners as not available to rent.’’

Harrison cited a report in San Francisco finding vacancies are disproportionately in multi-family apartment complexes and in areas with older housing stock and higher rates of new construction. She said this suggests property owners are holding older units vacant to capitalize on new construction, and she wants a tax to send a message to these owners and “out of towners” who let property sit empty in a city they may not live in.

Berkeley, where 55% of residents are renters, saw median rents increase by more than 50% between 2005 to 2019, hitting $3,165 — not affordable to people earning under $130,000 per year. Zillow shows that median has dropped to about $2,975 this year. Like most Bay Area cities, there is plenty of housing priced above the median income, but not enough for any other categories of income earners.  

“The extraordinary gap between the housing needs of residents and the availability of housing can only be bridged through the use of numerous policy interventions, including a vacancy tax intended to incentivize owners of housing property to bring units back on the market and discourage speculation,” city staff wrote.

Across the bay, San Francisco also approved a measure asking for a vote on whether to tax empty units and add revenue to an affordable housing fund.

The proposed tax would launch in 2024 and start applying to owners of buildings with three or more units vacant for more than 182 days per year, taxing them between $2,500 to $5,000. The strategy could bring 4,500 units back on the market and generate as much as $38 million annually for affordable housing, according to city staff. 

This policy is unique from other cities by keeping vacant single family homes and duplexes exempt. Supervisor Dean Preston told the San Francisco Chronicle that’s because he is targeting real estate speculators who operate high end downtown developments currently standing empty.

Down the coast, Santa Cruz — where the median rent has skyrocketed to $4,000 per month — also OK'd a similar measure being presented this November. 

Housing Department staffer Elizabeth Smith said the voter-led initiative proposes taxing landlords whose properties were occupied for less than 120 days a year, for $3,000 to $6,000. City staff reported that if approved, it would cost $607,000 to launch — but should cost $420,000 and generate up to $4 million annually.

Cyndi Dawson, campaign manager of Yes on Empty Homes, said her team thinks it’s key to put a levy on homes which stand empty to create a revenue stream for building subsidized homes. 

“The community is looking around and seeing friends, families and colleagues pushed out by skyrocketing housing costs,” Dawson said. “If a property owner opts to keep their housing vacant, this creates a pathway for that property owner to support this community they want to be a part of and meet the number one need.” 

While Dawson acknowledged an opposition campaign running against the empty homes measure, called Santa Cruz Together, she said the campaign hired a tax lawyer to confirm the proposed ordinance aligns with local best practices to make sure it is the “lowest burden” option for homeowners.

Lynn Renshaw of Santa Cruz Together said their group thinks the measure is “poorly written” and would open property owners to being charged for multiple offenses because they won't understand how to comply.

In Los Angeles, officials have grappled with putting the question to voters for years, after a report in 2020 showed approximately 85,000 to 100,000 units may be empty throughout the city. A new report from the ACCE Institute reflects the city has more than 46,000 units suspended in non-market vacancy or “more than one for every unhoused person.” 

While nearby West Hollywood City Council pushed off discussing the same policy until next spring, this past April the Los Angeles City Council asked staff to draft options for a future ballot measure. A city spokesperson said the city is still designing a draft ordinance and would not comment on a timeline for approval.

There is a debate about whether this strategy will help open housing for homeless residents, by pushing property owners to not hold vacant units. Dawson said annual counts of homeless residents show a “huge spike” in Santa Cruz residents who lost longtime homes. She hopes to motivate property owners to rent their units as they are legally required to accept people holding housing choice (Section 8) vouchers. 

“That’s guaranteed income from the government, and people who hold those vouchers are great tenants,” she said. 

Ryan Finnigan, senior research associate at UC Berkeley’s Turner Center, said while the concept is relatively new, he does not think taxing empty units will necessarily directly address homelessness. He said even if approved, there are not many units which the tax would apply to.

“I don’t think it’ll move the needle in a profound way, it might not be a huge contributor to addressing homelessness,” Finnigan said. But he called the concept reasonable: “Especially if we don't just think of housing as a profitable commodity, but when we consider the value of housing as being of both public importance and relevance.”

Sharon Cornu, executive director at the senior homeless services organization St. Mary’s in Oakland, said she thinks such measures do directly address homelessness. She supported Oakland’s passing an empty homes tax measure in 2018, Measure W, from Vice Mayor Rebecca Kaplan. That tax of $3,000 to $6,000 based on property type collected more than $7 million in its first year. Oakland has the lowest median rent, $2,595, compared to market reports from other cities considering this strategy.

Cornu said St. Mary’s has helped senior clients who were stably housed until a new landlord bought their property, raised rents and evicted people. She said often many properties stay empty after such evictions.

“We believe the exemptions for affordable housing and development underway  are important to incentivize appropriate infill development,” Cornu said. “National real estate corporations buying up single family homes, duplexes and affordable private apartments have also put barriers between people in need and housing.

“Those vacant homes could help people off the streets and are a critical resource,” she said.

Association of Realtors chapters in Santa Cruz, San Francisco and the North Bay did not respond to requests for comment by press time. 

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