Lawmakers in Los Angeles seem to be taking a cue from our own Board of Supervisors as they explore legislation to impose a tax penalty on property owners who leave residential rental units vacant.  As John Phillips notes in the Los Angeles Daily News, Los Angeles City Councilmembers Mike Bonin, Marqueece Harris-Dawson, Paul Koretz and David Ryu are spearheading a plan for an “empty-home penalty” or vacancy tax.

“No bed in this city should be empty when people are being forced to sleep on the pavement” explains Councilmember Mike Bonin.  “Empty-home penalties encourage landlords to keep people housed, and they help raise needed funds to create more affordable housing.  This is an important tool for addressing one of the root causes of homelessness in Los Angeles, and it is a step we desperately need to take.”

Skewed Logic

The councilman’s justification for this “desperately needed measure” is based on his claim that the city of Los Angeles has over 100,000 vacant units and about 60,000 homeless people.  However, John Phillips rightly questions Bonin’s logic: “So just give every homeless person a vacant place to live and voila! No more homeless”.

Penalizing owners of vacant units is a typical big-government solution to an economic issue disguised as a remedy for homelessness.”  Also, there is absolutely no proof to substantiate Bonin’s outrageous claim that vacant units are the “root cause” of homelessness.

“Property owners are already operating vacant units at a loss.” Notes John Phillips, “Because they pay property taxes, special assessments, mortgages and regular upkeep, but derive no income from them.”  How can adding to their losses possibly lead to more affordable housing for Los Angeles?

Just as in San Francisco, Los Angeles rental units often sit empty, and for good reason – in preparation for being placed back on the rental market or for major renovation, which can take many months to complete.  

Obtaining the proper permits and the approval from surrounding property owners/neighbors further adds to the delay and the cost.  The end result – a remodeled rental unit or single-family rental home – only serves to increase the value of the property and the neighborhood.  “And when a home is sold,” writes Phillips, “property taxes are set at the current and typically higher value. A sale also triggers numerous real estate transaction taxes and fees that go into public coffers.”  The renovation of a rental unit also adds to the assessed value of the building and thus to the city’s property tax revenue.

Of course in San Francisco, there’s another compelling reason that some rental property owners chose to keep their units vacant:  draconian rent control laws that make it nearly impossible to evict a bad tenant and effectively force the owner to provide the tenant with a lifetime lease.

Why is This Legislation Being Proposed?

John Phillips believes that all of this talk about penalizing rental property owners by taxing vacant units is in response to the embarrassing revelation that Los Angeles spent $619 million last year to combat homelessness, yet the number of transients shot up 16% to 60,000.  The most recent data found that 75% of the city’s homeless population live outdoors, primarily in encampments on the streets.

Bottom Line

The bottom line is – this is no way to solve the homeless program in Los Angeles or anywhere else.

Reprinted with permission of the Small Property Owners of San Francisco Institute (SPOSFI) News.  For more information on becoming a member of SPOSFI or to send a tax-deductible donation, please visit their website at www.smallprop.org or call (415) 647-2419.