Feb 14, 2023 - News

San Francisco faces vacant homes tax lawsuit


Photo: David Paul Morris/Bloomberg via Getty Images

A group of property owners and real estate organizations has sued the city and county of San Francisco, alleging a voter-approved residential vacancy tax is unconstitutional and violates state law.

State of play: Roughly 10% of the city's 406,399 housing units went unoccupied in 2019, a 2022 report found.

  • In November, San Francisco voters approved Proposition M, a measure to tax property owners for each housing unit left vacant for more than 182 days a year, starting in 2024.
  • The tax specifically applies to buildings with three or more units.
  • The lawsuit, filed last week, seeks to block the implementation of Proposition M, Courthouse News reports.

Why it matters: The goal of the measure is to alleviate San Francisco's housing crisis by incentivizing property owners to rent vacant units.

  • Yes, but: The lawsuit argues there are a number of burdens property owners face, like rent control laws, "elaborate" eviction notice requirements and bureaucratic processes delaying repair work that result in property owners not leasing units.

By the numbers: Proposition M passed in November with 54.1% of the vote.

  • Annual residential vacancy taxes will cost $2,500 for units 1,000 square feet and smaller and up to $5,000 for units exceeding 2,000 square feet in 2024, according to the legislation.
  • Annual revenue generated from the measure is expected to hit $15.4 million by 2026, according to a September report.

What they're saying: "The measure seeks to coerce owners to rent their units by severely penalizing those who exercise their rights to keep units vacant (or even those who are trying but are unable to rent a unit for any reason)," the lawsuit alleges.

The other side: San Francisco District 5 Supervisor Dean Preston wrote in a press statement that when it comes to "popular and essential reforms," real estate lobbyists "regularly file frivolous lawsuits to invalidate the will of the people."

What's next: The city attorney has yet to be served with the suit but "will review the complaint and respond appropriately," Jen Kwart, a spokesperson for the City Attorney's Office, told Axios via email.


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