Against the increasingly mainstream view that housing costs are high because new supply is constrained by regulation is an alternative thesis: There are plenty of homes once vacant units deliberately held off the market are accounted for.
asserted
units → constrain → market
To fix this problem, a handful of California cities have adopted vacancy taxes to try and force these allegedly hoarded homes back onto the market.
uncertain
handful → fix → market
Critics of empty home taxes point to the minimal, consistent tax revenue these levies raise as evidence that only a small number of homes remain persistently unoccupied and the tax does little to bring them back onto the market.
asserted
tax → point → market
Earlier this month, a California appeals court upheld a lower court ruling that had struck down San Francisco's empty home tax.
asserted
that → uphold → tax
In an opinion authored by Judge Kathleen Banke, the court reasoned that the city's tax was superseded by a state law, known as the Ellis Act, which guarantees property owners' right to withdraw their units from the rental market.
asserted
which → author → market
San Francisco's empty home tax, known as Proposition M, was passed by voters in 2022. The tax was scheduled to be implemented in 2024.
asserted
tax → know → 2024
In 2023, a collection of owners of vacant units and trade associations representing landlords challenged the tax on a range of legal and constitutional grounds.
asserted
collection → represent → grounds
They argued the tax infringes upon the Fifth and Fourteenth Amendments of the U.S. Constitution by singling out property owners' right to not rent out their units for special taxation.
asserted
tax → argue → taxation
The tax also violates the California Constitution's privacy protections, they claimed.
asserted
they → violate → protections
They also argued that the tax was illegal because it charged property owners for exercising their rights under the state's Ellis Act to remove rental units from the market.
asserted
it → argue → market
In 2024, the Superior Court of San Francisco ruled in plaintiffs' favor on all these counts and forbade the city from collecting the tax.
asserted
Court → rule → tax
The city appealed the ruling to the First District of California's Court of Appeal.
asserted
city → appeal → Appeal
That court also sided with plaintiffs on their claim that San Francisco's tax was superseded by the Ellis Act.
uncertain
tax → side → Act
Throughout the litigation, San Francisco had argued that it was not restricting owners' right to remove their units from the rental market.
asserted
it → argue → market
It was merely taxing them for holding units vacant.
asserted
It → tax → units
"As the City apparently sees it, while a property owner, indeed, has the right to exit the residential rental business, they have no correlative right to remain out of that business and can be pressured back into it on pain of significant taxation.
asserted
they → see → taxation
This circularity in reasoning is a patently unreasonable reading of the Ellis Act," she wrote.
asserted
she → write → Act
Because the tax is illegal under state law, the appeals court declined to rule on the plaintiffs' constitutional claims.
uncertain
court → decline → claims
A spokesperson for San Francisco city attorney David Chiu declined to say whether the city would appeal the ruling to the state Supreme Court.
asserted
city → decline → Court
In addition to San Francisco, Oakland and Berkeley have both adopted vacancy taxes.
asserted
Oakland → adopt → taxes
San Diego has also considered adopting an empty home tax.
asserted
Diego → consider → tax
The ruling in the San Francisco case would seem to put those taxes in legal jeopardy as well.
asserted
ruling → seem → jeopardy
Already, Berkeley officials have reported that some property owners have not been paying the city's vacancy tax because of its uncertain legality.
asserted
owners → report → legality
In a recent audit, Oakland officials rated their vacancy tax (which applies to both empty lots and vacant units) a revenue success.
asserted
which → rat → lots
It's consistently pulling in $6 million a year.
asserted
It → pull → million
The city's auditor said it was having little impact on bringing productive use to empty lots and units.
asserted
it → say → lots
Vacancy taxes generally disappoint on the supply front.
asserted
taxes → disappoint → front
As studies have shown, there are just not that many homes that sit empty for long stretches of time.
asserted
that → show → time
That's particularly true in cities facing severe housing cost pressures.
asserted
That → face → pressures
Indeed, low-vacancy rates are generally considered a symptom of an overall housing shortage.
asserted
rates → consider → shortage
When rents are high, property owners face a strong incentive to rent out whatever spare square footage they have.
asserted
they → face → footage
Higher vacancy rates are typically associated with a healthier, better-supplied housing market.
asserted
rates → associate → market
In addition to the legal problems they pose, taxes designed to drive high-cost cities' already-low vacancy rates down to zero misdiagnose the problem.
asserted
taxes → pose → problem
The Aporia
