San Francisco Has Voted to Tax Corporate Landlords for Leaving Housing Vacant

With nearly 60,000 unoccupied units, San Francisco has a significant vacancy problem, in addition to an acute affordable housing shortage. This creates something of an irony: The city simultaneously has too few and too many rooms available.

The contradiction is explained by the priorities of developers and capital taking precedence over the needs of populace. It can only be resolved when all housing is made more affordable and accessible for working people. To mitigate the city’s catastrophic housing crisis, new rent-controlled housing must be constructed and existing unfilled units returned to the market at affordable rates.

Earlier this month, San Francisco residents voted to approve “Proposition M,” a local measure aimed at addressing the housing crisis by levying a tax on landlords of multi-unit buildings who have allowed rooms to sit vacant for an extended period of time. Proposition M’s tax, advocates hope, will disincentivize large landlords from leaving units unfilled, while the revenue it brings in will go towards homelessness prevention and affordable housing.

Despite opposition from real estate interests, Proposition M passed handily on November 8, thanks to the diligent campaigning of its two proponent organizations: the San Francisco chapter of the Democratic Socialists of America and the interfaith social justice organization Faith in Action Bay Area.

Tenant advocates across the city are hopeful that the successful implementation of Prop M will not only help ease the crisis in San Francisco but will serve as a model that can be replicated nationwide.

Empty Homes, Crowded Streets

Housing and tenant advocates have long pointed out the frustrating fact that the number of vacant properties in San Francisco vastly exceeds the number of unhoused individuals. (This is true both in San Francisco and in the U.S. as a whole.) In 2019, data from the American Community Survey found around 40,000 empty units in San Francisco; by 2021, the rate had increased to 15 percent of all units in the city, at 58,000 vacancies.

There are quite a few self-interested reasons why landlords might allow units to sit empty. Owners might be waiting for real estate markets to improve so that they can charge higher rent, or may be disinclined to rent to anyone with a lower income. Attracting a certain kind of clientele is part of the feedback loop of gentrification: A higher-priced area attracts wealthier renters, whose higher incomes drives up prices, and so on — a boon to luxury developers, and less so to the people of color and the working class who soon find themselves priced out. Soon after, investors will take advantage of cheap, emptied-out properties with the intention of improving and “flipping” them for profit. If that’s their aim, a developer might prefer to keep the place empty so as not to have to deal with evicting their tenants before sale. For all these reasons and more, viable units across the city sit empty, while thousands of people huddle in tents or sit and lie on sidewalks — and are then punished for existing in the only place they’re able to.

The resources are already there in San Francisco, a city of extraordinary wealth. As heated debates over housing continue, the maddening fact remains: Simply by mobilizing existing stock, every San Franciscan living on the street could be housed many times over. While a total revolutionary expropriation might be a little impractical, tenant activists have managed to design a way to pry open some of those closed doors, placing more affordable housing — some even with rent control protections, which are far more of a rarity in recent years — back on the tightly squeezed market.

San Francisco’s Full House

Shanti Singh, a member of the Democratic Socialists of America’s San Francisco chapter who is a tenants’ rights advocate and campaigned for Prop M, spoke with Truthout about the effort that led to Prop M’s passage. Singh was heavily involved in the campaign in her capacity as a DSA organizer, as were many in the chapter. City Supervisor Dean Preston, also a DSA member, is a key backer of the measure, and DSA SF provided a volunteer base for signature gathering and voter outreach.

Singh said the socialists’ initial interest in the model appeared around 2016. “It’s something that people had talked about for a long time, but it just hadn’t been brought forward,” she noted. “And it wasn’t just DSA that brought it forward — it was Faith in Action Bay Area. We did this together.”

Plenty of other groups were eager to confer their approval on the plan: “We had a ton of support from all sorts of different labor, community etc. organizations across the city,” said Singh.

Endorsements came in from (to name only a few): the San Francisco Democratic Party and local Democratic clubs, major unions (including locals of the SEIU, ILWU, AFT, IATSE and the SF Tenants Union), and other city supervisors and liberal politicians. The proposition enjoyed widespread organizational support from the left and many liberals.

“We hit our signature goal ahead of target,” Singh related. “I think that’s because when we talked to people on the street asking for their signatures, they thought it was really clear — they thought it was a no-brainer. Getting the message across was pretty straightforward and elegant. We were outspent three to one, but that doesn’t surprise me. Real estate always outspends.”

There were some residual concerns about turnout, Singh recalled; San Francisco had, again, four elections this year, and voter fatigue was a real possibility. Yet those obstacles proved surmountable, and the hard work of all campaigners delivered an early lead on election night, culminating in a solid win: 54.5 in favor to 45.5 percent opposed. “The first round of returns you get are usually the most conservative. So I think we thought, the night of, that we probably had it in the bag. We were in a good mood.”

Aiming Higher

Opponents of the measure, among them the San Francisco Apartment Association, a real estate interest group, were quick to claim that the tax would place an undue burden on “mom-and-pop” landlords. (Leaping to defend the vaunted “small business owner” is a time-honored rhetorical move, favored by the kneejerk opponents of progressive taxation and redistributive policy.)

As Singh put it: “They always say, ‘You’re hurting mom-and-pop landlords!’ because they’re all funded by big corporate landlords. Mom-and-pop landlords are not the ones filling their lobbyists’ coffers. They’re getting paid by the big money, but they know that they can’t admit to that.”

Instead, real estate’s messaging smears pro-tenant policies as destructive to sympathetic small-time landlords — but the criticism lands flat when the tax is explicitly designed to target only large property owners. It is a relatively simple matter to do so, and thereby to target by far the largest source of vacancies. Small “mom-and-pop” landlords, more often than not, can’t afford to leave units vacant for six months or more.

It is actually the corporate landlords with significant real estate holdings that harbor the most vacancies: Data from the American Community Survey cited by the Prop M campaign indicates that 33.2 percent of vacancies are found in buildings with more than 50 units, with another 28.9 percent in buildings from 5 to 49 units. And, while exact numbers are not yet clear, Singh said a sizeable number of the units that sit vacant are rent-controlled. Opening them to renters would bring some much-needed easing of the acute affordable housing shortage.

“In California, we have the Ellis Act,” Singh pointed out, “which allows a landlord to clear a whole building of rent controlled tenants, evicting them and selling it off — basically to flip the building, which they can turn into condos, it can get demolished, all sorts of things can happen.

But sometimes you see buildings that had been Ellis Act-ed that have rent-controlled tenants in them. [Real estate speculators] sit on it, and they wait for the land under it to go up on the price of the property in total, and then they flip it.”

Tenant advocates needed to find a way to interrupt that tactic. They looked to Vancouver, B.C. for a vacancy tax model; the program had already proven effective in the Canadian city. The key aspect of the Vancouver policy that was adopted for Prop M was the stipulation that the tax owed would grow along with the length of time that a unit is vacant. Prop M’s tax rate now rises to a maximum $20,000 per unit, reaching that height after a unit has been vacant for three years. That penalty should make for a strong incentive indeed.

It’s worth noting that San Francisco’s new tax is not inflexible; it allows extended grace periods if, for instance, a property owner needs time to make necessary repairs. Water damage at 33 Tehama or fire damage at 901 Divisadero will, for example, render these properties temporarily exempt.

“If you really need to rehab a unit and it’s in really bad shape and wasn’t habitable anyways, you just have to have your permits out with the city, which everyone has to do regardless,” Singh explained. “There are carve-outs for that kind of stuff. And again, it kicks in at six months — if you just couldn’t find a renter for three months or something, it’s not going to apply to you. We’re laser-targeting it at speculators and speculative behavior. That’s what drives long-term vacancy.”

Corporate landlords can rest assured that mom and pop’s two-room bed and breakfast, over which they have expressed such sincere concern, will be spared.

Channeling Revenue to Renters

Of course, if a landlord is, as intended, spurred by the tax to bring an occupant into a unit, the city will lose the no-longer-applicable tax’s revenue. But the measure’s existence creates a dually favorable situation: either one more unit is filled, or a little more money is taken in for homelessness prevention measures. The city controller has estimated a yearly revenue of $20 million. Supervisor Preston and the Prop M campaign, with a deservedly more optimistic outlook, have suggested that it could be as high as $38 million. (The discrepancy is the result of the assumptions necessary in making future projections amidst market and behavioral uncertainty, Singh explained. In addition, San Francisco’s full rental registry is still being rolled out. Once it is, it will provide more granular data and better insight into vacancy numbers and rental dynamics.)

With the tax in place, “There’s really only two things that can happen,” said Singh. “One, the unit gets rented out. Good! Someone’s living in housing. I think that, as socialists, we believe that the purpose of housing is to have people live in that housing,” she added wryly. That point seems un-controversially self-evident until one considers all the apartments that sit empty, waiting to be leveraged for speculation and as investment vehicles.

“But if you decide to continue to leave it vacant,” Singh continued, then you’re going to pay into the fund.” The fund — whatever the exact number, it will be in the tens of millions — will go to two crucial pillars of the city’s homelessness prevention strategy. One main expenditure, said Singh, is “subsidizing rent for seniors, which is hugely important to San Francisco. People don’t really talk about it a lot, but one of the linchpins of San Francisco’s homelessness prevention strategy is rental subsidy.… That homelessness prevention rental subsidy program is so important, and there are a lot of seniors who are falling through the cracks. That’s really where we decided to send the money.”

The rest of the funding will be employed to further increase housing availability: the city, “can use it to actually acquire vacant housing and vacant buildings.”

“It’s a win-win situation: Either you’re putting people in housing, or you’re raising money to put people in housing,” making for an effective multi-pronged approach.

Vacancy Tax Proliferation

Singh hopes that the measure’s success will serve as a model for tenant activists and DSA chapters in other cities.

“I’m very lucky to work with tenant organizers and tenant policy people, not even just in [San Francisco] or in California, but across the country,” she told Truthout. While San Francisco might be a flashpoint (and a media-saturated example), the housing crisis is far from confined to major cities. In a nation with, by some estimates, over 15 million vacant units (and around half a million unhoused people), the same dynamics scale up.

“I think [the measure is] relevant in a lot of the country. Usually when one city or state passes something good for tenants, you start to see that momentum happening in other places,” Singh said. The snowballing growth of the right-to-counsel movement is one example. Activists are adept at learning from each other’s successes, and DSA chapters are no different.

A vacancy tax, of course, cannot address all of the underlying structural maladies. “It’s not the single solution to the housing crisis in San Francisco. What we really need is more social housing,” said Singh. Instead, the model will serve as one mechanism in the designs for a better world.

“We passed it,” Singh said with finality. “Now we gotta implement it.”