Vacancy Taxes: Pros and Cons

To combat affordability issues, some California cities are considering an “empty homes penalty,” also known as a vacancy tax. Voters in Oakland, California recently approved Measure W, a tax of as much as $6,000 per parcel and $3,000 per condo unit on properties occupied fewer than 50 days per year. The tax is expected to bring in around $10 million per year, which is intended to go toward homeless services and new affordable housing, Capital and Main reports. 

Additionally, San Francisco Supervisor Aaron Peskin wants to put a vacancy tax on the March 2020 election ballot, with a focus on empty storefront. Meanwhile, vacancy tax pushes in Los Angeles focus more on residential properties. 

Proponents of these vacancy taxes say that they will improve access to affordable housing by keeping speculators from sitting on them until they can rent them for a higher rate, or sell them at a greater profit when prices inevitably increase. Opponents say that the key to affordable housing isn’t taxes, but the revising of zoning to build more housing. 

According to the U.S. Census Bureau, national vacancy rates in the first quarter 2019 were 7.0% for rental housing and 1.4% for homeowner housing, and the homeownership rate of 64.2% was virtually unchanged from the rate in the first quarter 2018, but 0.6% points lower than the rate in the fourth quarter 2018. The homeownership rate was unchanged at 64.2%.

The homeowner vacancy rates outside MSAs (1.6%) was higher than the rate in the suburbs (1.3%), but not statistically different from the rate in principal cities (1.4%). The rates in principal cities and in the suburbs were not statistically different from each other. The homeowner vacancy rate in principal cities was lower than the first quarter 2018 rate, while rates in the suburbs and outside MSAs were not statistically different from the first quarter 2018 rates.