In 2022, San Francisco voters adopted Prop. M, the so-called “Empty Homes Tax,” a ballot measure championed by former progressive Supervisor Dean Preston. The measure subjects owners of residential units left empty for more than six months to a hefty penalty of $2,500 to $5,000 per unit (maxing out at $20,000), increasing each year for as long as the unit is not occupied by a tenant or an owner as their primary residence.
A unit is considered “vacant” if occupied by an owner’s family, even if that family member signs a bona fide lease agreement.
The tax only applies to buildings with three or more units and was to go into effect on January 1, 2025.
Judge Strikes Down Prop. M
As discussed in our January issue, SPOSFI joined other plaintiffs in challenging Prop. M, arguing that it could not be enforced because:
- The Takings and Due Process Clauses of the Constitution bar the city from forcing property owners to rent out their property, and the city cannot indirectly coerce the same result by burdensome taxation
- It is preempted by the Ellis Act
- It unconstitutionally disadvantages a property owner’s choice to use his or her property to house family members, in violation of due process and equal protection
- It also unlawfully burdens constitutionally-protected privacy interests
In November 2024, San Francisco Superior Court Judge Charles Haines agreed with the plaintiffs’ assertions and struck down the law. City Attorney Chiu is pledging to appeal the ruling, but most people in the know believe he stands on shaky legal ground.
Supervisor Wanted to Collect the Tax Sooner
After the vacancy tax was rejected by the court, the Board of Supervisors passed a measure officially suspending collection of the tax until a final decision on all appeals is reached.
Eager to explore options that would allow the city to begin collecting the tax sooner (assuming the city wins its appeal), D-9 Supervisor Jackie Fielder proposed amendments to the measure that “would suspend the tax only until the courts tell us otherwise, meaning the tax would be collected if the court allows the city to do so. I would like to explore amendments that would potentially avoid having the Empty Homes Tax suspended for years while the case makes its way through the courts,” she explained. Fielder argued that the suspension could mean that if the court’s decision to strike down the ordinance is reversed, the city might still have to wait years to enact the tax.
D-1 Supervisor Connie Chan rejected Fielder’s argument, stating: “Reinstating the tax before the final legal outcome of the case is known would likely create a burden and confusion for the tax collector’s office, so that the administrative cost would be greater than the potentially projected tax collected.”
Full Board says NO
Fielder’s measure was defeated 9-2, a decisive NO to her overly ambitious (and illegal) vacancy tax collecting scheme. The bottom line is that the Board of Supervisors is not going to start collecting the Empty Homes Tax until a final court decision is reached.
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.