Would a simple tax create 30,000 new housing units in SF?

Taxing vacant housing units in SF would bring in $63 million -- and help put more housing on the market right now

Let us stipulate for a moment that there are reasonable people who have rational disagreements about some local policy issues. We can also agree that housing policy can be complicated, and there is room for debate and compromise.

But there is no credible policy argument I have ever heard in favor of leaving tens of thousands of housing units in the city vacant.

There’s remotely non-lunatic perspective that says the city should allow as many as 30,000 usable apartments to sit empty in a housing crisis.

This chart shows vacant units as a percentage of available housing in major cities
This chart shows vacant units as a percentage of available housing in major cities

And yet, we all know it’s happening. Huge numbers of the new condos built in the city are owned by people who don’t live there. It’s not just a San Francisco problem – there are, census data shows, 213,000 empty homes in Los Angeles.

The United Nations has a special report on the problem, looking at how speculative capital has turned housing into such a commodity that vast areas are vacant, unused, with huge implications.

And in Paris, where there are 107,000 vacant homes, the city is doing something about it. The city recently increased its tax on vacant homes to 60 percent of the fair market value of rent.

The Canadian real-estate blog betterdwelling.com has a lovely chart that shows the percentage of the housing stock in every city that’s vacant. And at least in San Francisco (and in many of these other cities) they aren’t vacant and on the market – the official vacancy rate for apartments (that is, the number that are available for rent) is below 3 percent.

Betterdwelling puts the number of vacant units in the city at about 15,000; the says it’s twice that.

Let’s think about what Paris did for a second – because at a time when this city needs a lot of new revenue, and the state limits our ability to raise a lot of taxes, a levy on vacant units seems to be perfectly legal.

We’ll start with the numbers. Say there are 30,000 vacant units in the city, and we’ll average them out at one-bedroom. Median rent for that apartment is about $3,500 a month in the current market.

So do the math: Sixty percent of $3,500 is $2,100. Apply that to 30,000 units and you’re talking $63 million a year. Not a bad income stream for the city – from a tax that only the truly crazy folks could oppose.

But this is a tax like the soda tax: The goal, long term, would not be to bring in revenue but to encourage the owners to put those units on the rental market. I don’t think building luxury condos will bring down housing prices, but suddenly adding 30,000 existing rental units to the market? That’s housing for at least 50,000 people.

There are, as always, imperfections. Some people have vacant units because they are renovating, or because the property is in probate, or there’s a lawsuit, or because a tenant left and they are looking for a new tenant. These are easy to fix: Give a reasonable time for renovations, exempt probate, and don’t start the tax until a unit has been vacant for, say, six months. (There is not a single rental in San Francisco that can’t be filled in six months.)

I wonder if SFBARF and the build, baby, build folks would get behind this idea. Because it’s way, way cheaper than building.

I’m always looking for progressive revenue measures, and a (serious) tax on vacant units seems like a winner. The Parisians are ahead of us.

Then let’s move this a step further and add a (similar) tax on vacant commercial units. Small businesses all over the city are desperate for storefront space – while landlords hold storefronts vacant, hoping the rents will go up.

I have no numbers on this, but the city ought to look into it.

 

On another note: I don’t know why Randy Shaw decided to pick my neighborhood, Bernal Heights, to attack in his piece arguing for “fair share” policies on Navigation Centers, and I’m not sure why he picked on my friends David Campos, David Talbot and me. But for the record, I am fully in support of the fair-share idea, and I am fully in support of building a Navigation Center in , and I have made it abundantly clear over many years that I have no interest in promoting policies that increase my property value and have always supported policies that do the opposite. You can criticize me for a lot of things, but this isn’t one of them.

Talbot told me he agrees: “Of course I support a Navigation Center and homeless services in Heights.”

Campos told me the same; he did, and would, support a center in — as well as in every other district.

I await Randy’s support for a 60 percent tax on vacant housing units.

 

 

 

 

  • Don Sebastopol

    Most of the vacant units in the City are for rent, sale, or rented and sold but not yet occupied. Less than 20% are for seasonal or occasional use. If someone has a second home in the City it is not really vacant if it is occupied part time. How will you determine vacant? Will there be a minimum on how many nights one must sleep in their unit? Will there be bed-checks?

    • playland

      It would be interesting to hear how it is determined that a unit is vacant.

      If you follow the link that Tim provides it claims that a unit is vacant if the owner has a second address out of the city. That obviously makes no sense.

      But, hey, if a Chinese investor spends $2 million cash for a unit and is willing to pay HOA, RE taxes and insurance without even looking for a tenant than he or she probably won’t even notice the tax so why not.

      These units are supposedly inflation hedged investments. Is it really a hedge against inflation if it costs over 2% a year to maintain? Why doesn’t the astute investor find a tenant to pay those expenses?

      • Don Sebastopol

        That 30,000 number of vacant units is from the census; a snapshot taken in time. It is 31,130 total vacant units, 5,563 vacant for occasional use; 18% of the vacancies, and less than 2% of all units. The largest percent of occasional use units are in upscale areas such as Nob Hill, Cow Hollow, Pacific Heights, Russian Hill, South Beach etc. If an occasional use unit were occupied on the day of the census, it would not have been counted as vacant. If someone who lives in St. Francis Wood was at his second home in Sonoma or Napa on the day of the census, his St. Francis Wood home would have been counted a vacant.

        If someone has a condo unit as an investment and does not use it, I can’t imagine them not renting it out. However, for the wealthy who have an SF Pied-a-terre, like Al Gore, they would probably not rent it out if they use it now and then. Forty-five years ago, my boss had a Co-op on Nob Hill he used during the week; he had a sheep ranch in the Sierra foothills where he spent his weekends. The Astor’s had a unit there and a Rolls in the garage. He rarely saw them. Staying in a hotel is so déclassé. Half the units were empty during the week. Some who lived in the suburbs would come into the City on weekends for the Symphony, Opera, plays, or social events. Those in the permanently occupied units were mainly elderly. The Co-op had an onsite chef, a dining room, or they would deliver meals to your unit. That’s the life!

        The Below Market rate condos and rent controlled units also add to the number of vacant number. I knew a doctor who lived down the peninsula but keep a rent controlled unit in Park Merced; the rent was cheap. I knew a woman artist who bought a BMR condo when she was early in her career at an ad agency. Her income had since quadrupled and she married a lawyer. They live in Sonoma and work in the City and keep the BMR condo as a pied-a-terre. They sold his market rate unit for the down payment. Her BMR unit could not be sold at the market rate so the profit was far less. And the low mortgage payments made sense to keep it.

        • Sir Charles

          A BMR unit has to be your primary residence.

          • Don Sebastopol

            Yes it is supposed to be. Prove it is not.

          • 4th Gen SF

            But it often is not. I know of too many cases where it’s not & they’re renting it out or airbnb’g it.

      • Don Sebastopol

        Of the 31,130 vacant units, 12,832 are vacant for rent, 2,984 vacant for sale, 779 rented not occupied, 759 sold not occupied, and 8,208 other.

        The most units vacant for rent were in Park Merced – Stonestown – Lakeshore; Downtown/Tenderloin; the Mission; and the Inner Sunset, where turnover is high and tenure is low; more transient like students. The most vacant for sale units were in the BVHP, SOMA, Outer Mission, and Ocean View. I am guessing where homes were slower to sell at the time or turnover is high.

  • Sanchez Resident

    Interesting idea, Mr. Redmond. Would you support a database of all rental units in the City including occupancy numbers, duration of residency, monthly rental cost, and any other data deemed fit for accounting?

    • curiousKulak

      I know this would be hotly contested by LL groups, but I’d luv to see that data.

    • Foginacan

      It would have to be the honor system, not to mention the rolls are always changing.

      • curiousKulak

        Another factor in the “housing crisis” is tenants (and owners) who leave rooms vacant. The unit is ‘occupied’ but not nearly used to capacity. An example is last year, the ‘artist’ in Duboce Triange, who lived in a 6 rm apt for 30 yrs, and only had an occasional roommate cuz he paid $700/mth. Most renters actively seek out other roomies (like my niece) cuz they pay huge sums. But those in cheap rent controlled apts are like long-term empty-nesters with a whole house to themselves – they can afford to live in peace – but keep that housing away from others. Shouldn’t these be considered as well?

        • Cynthia

          “6 room” = two bedrooms. That’s a single unoccupied bedroom, not exactly some big mansion he’s rattling around in.

          • curiousKulak

            If you remember the story, there were five/six? other tenants when he moved in.

            And if you had a 6 rm apt, it most likely would hold a kitchen, a LR and four BRs. But, justify all you want.

          • Cynthia

            Huh.

            6-room apartment with 2 bedrooms:
            https://hartford.craigslist.org/apa/5975950069.html

            And another:
            https://www.airbnb.ca/rooms/13387370

            And another:
            https://www.padmapper.com/apartments/watertown-ma/east-watertown/l-16055701

            The standard for a “six-room apartment” is: living room, dining room, bathroom, kitchen, bedroom 1, bedroom 2.

          • curiousKulak

            Have you even lived in SF in the last 40 yrs? What you have described is a “5 rm’ unit: LR, DR, Kit, BR, BR. Bathrooms do not count as a ‘room’.

            Very few SF apt occupants are able to keep DR (or some even a LR), due to the high costs. If someone has both, then their costs are low or their income is high. Even with a high income, thats not necessarily the case. My niece, a 6 figure earner, has two roommates for her 5 rm apt, one BR of which happens to be empty now and they need a replacement.

            But, justify all you want.

          • Cynthia

            Yes, I have lived in SF, and in the past 10 years. So have numerous, friends, family members, acquaintances, clients, and coworkers. That seems a very silly way to make your argument.

            Again, you’re trying to argue that it simply MUST be the case that the artist in question has all kinds of rooms that he’s not renting because his $700 a month rent is just letting him roll in the dough.

          • curiousKulak

            According to http://propertymap.sfplanning.org, the bldg at 53 Walter, a 3U, of which Brenkus-the-artist lives/d, is on the top floor, and has 16 rms. Having lived in an Edwardian like that, the top floor typically has an additional room (where the stairs would otherwise continue). The two lower units have 5 rms and the other has 6 rms.

            6 rms would be Kitchen, LR, “DR”, BR, BR and the other room (often they were called “feinting rooms” as they are small-but-usable). We had a 5 rm, which held 3 tenants; is it really a stretch to say that a 6 rm unit should only house 2? Brenkus had only one occasional roommate, and then each paid $375/, or $750 total. You can be pretty sure that if the rent were $3750, there would be one or two or four addtiional ‘roommates’.

            Your example of an apt near Hartford for $1050 illustrates my point. At that price point most folks wouldn’t resort to crowding, as in SF. Broncos – and many other renters (and homeowners) in SF live like they’re situated in Hartford or Sheboygan. Which makes it difficult for people from Hartford of Sheboygan to move to SF if they’d like.
            I guess you were pampered with living accommodations that perhaps didn’t need sharing.

        • Foginacan

          Yes, but you’re talking about occupied housing that’s not getting utilized to it’s maximum legality. Are we going to fine home owners that don’t put accessory units in their properties as well? Where does it stop?

          Unlike the artist you mentioned, many renters utilize their second bedrooms as offices, or bedrooms for visitation with their children, etc.

          • Sanchez Resident

            If the State owned and operated all rental housing, beds would be assigned to citizens. All available space would be utilized. We need to get private individuals out of the rental housing market. Private ownership would continue, but if a citizen wants or needs to rent living space they would coordinate through the State.

          • Foginacan

            The government as the only landlord/management company?

            You should stick to up voting every post you disagree with.

          • Sanchez Resident

            Thank you for the comment. To answer your question, the government should be the sole source for citizens that can’t afford to buy their own housing.

            I use the upvote indicator as an easy way to myself that I have read a comment. This is very helpful when some articles have dozens of comments. I always use the oldest first order for comments. I also use the block user feature for commentors that I just can’t upvote even to indicate read status.

          • Foginacan

            You’re describing greater class disparity where you would have one class of private home owners, and then subsidized renters living under a massive HUD program. Then you have even greater disparity over who gets issued the SRO in the Tenderloin and who gets issued the swanky penthouse in the sky.

          • curiousKulak

            So you’re saying a tenant – who has the power to evict unwanted roommates on a whim – can hold housing vacant so that they can alternately utilitize the space, or save it for family or guests; but that a small property owner must rent out any extra space to those who will, in effect, “own” that space in perpetuity, and be essentially un-evictable?

          • Foginacan

            What disorder do you have that’s giving you the idea I’m saying a small property owner must do anything?

            I think they’re both intrusive ideas.

          • curiousKulak

            Then can I conclude you disagree with Tim’ suggestion of a Vacancy Tax?

          • Foginacan

            I disagree with a vacancy tax.

  • 4th Gen SF

    I would not say it’s not a “non-lunatic solution” as it’s none of the business of the city what LL’s/owners do with their properties.

  • Tim, no such tax is permitted in California. It is a naive policy idea.

    Also, don’t be so twitchy around BARF that everything you allow yourself to think is framed in reaction to them. They are all but dead in the water at this point.

    • ScumbreonJones

      Dead in the water? Either you don’t read the news very often, or you forgot that Berkeley isn’t the only city in the world. My bet is on both.

      • From my perspective, their challenge right now is that they don’t have a concentrated base anywhere, and much more importantly, they don’t display a really well developed platform. Their stated outcome goals and their policy recommendations are often at odds. They give off an appearance of running in front of parades that are already on the march. Worse, their argumentation and manner is often so bad that I think they have in some cases slowed down the more sophisticated supporters of what they want.

        I’m looking forward to seeing what they evolve into as reality forces them to be a little more sophisticated in their housing economics theorizing. Their leadership doesn’t seem stupid but rather intelligent. More knowledge, critical self-examination of their assumptions, and social experience might benefit them greatly.

        • ScumbreonJones

          That’s interesting and fair and I actually agree with just about everything you said there. That doesn’t strike me as “dead in the water” though! ;-D

          • Dead in the water insofar as Tim R. shouldn’t be taking their tired old bait.

          • ScumbreonJones

            Lol, totally in agreement there. Would love to see both sides take a break from burning each others’ strawmen but it seems that’s more fun than accomplishing anything meaningful.

        • 4th Gen SF

          FWIW someone from that group assured me they could get 50 ppl to a hearing/city meeting in a snap. I laughed at them.

    • Foginacan

      I think they simply merged/rebranded.

      • 4th Gen SF

        Yeah they have a new name. YIMBY. But yes they are dead.

        • Foginacan

          Seeing they organized a rally outside Peter Thiel’s home has convinced me you may be right.

          • 4th Gen SF

            Peter is like Honey Badger. He DGAF.

  • Miranda Pierpont

    A “simple” tax is always a tax the authors of such articles would never be paying.

  • ScumbreonJones

    So long as it doesn’t raise taxes on his own property or his buddies Bronstein and Talbot, Tim will propose any loony idea regardless of whether or not it could survive a lawsuit.

  • curiousKulak

    The problem with having a Navigation Center nearby is not the hit to property values (for owners; keeping rents low for tenants).

    The problem is the crazies that go with the homeless demographic. Property value is one thing; personal safety is quite another. I no longer ride my bike before sunrise (my favorite time: quiet, no traffic, just the wind and the road) – all due to the street people who feel they can dominate the Night therefore the street, and act on their odd, often violent, visions. These people really ought to be hospitalized, but ain’t gonna happen in SF. Instead, we want to congregate them all over town.

    Lets see, we could put on right at the top of Cortland; another near the tunnel in West Portal, another near the library on Chestnut; maybe one next to Wash Sq Park 9unless we could squeeze one into Chinatown). 48th & Judah? Naw, put it over by Lincoln High (if thats not too far away from “services”. And, for D5 – Stanyan & Haight.

  • Foginacan

    Vacancy rates aren’t the same as absentee owners. People live in their properties, or rent them out hee. It’s not like in other cities with seasons.

    Foreign money sitting on investments is a temporary scenario dependent on foreign currency, and our markets. It’s not forever.

    You can’t punish people for an inability to rent out an apartment, or for choosing to leave something they own empty on a temporary basis. The City can’t enforce every rumored absentee owner, attempting to disprove every accusation.

  • Chris H.

    IT would be much better to sell off public land to private developers so they can build shiny new buildings and make a lot of money…not.

    • curiousKulak

      I remember in the early 80s – during the heat of the ‘housing crisis’ – there was land on the south side of Potrero Hill (recall it as just grassy slopes, but ..). It was decried that housing needed to be built there (next to the Potrero Hill project) in the name of “affordable housing”. Of course, those units today? Unaffordable. Or maybe like the one’s next door – uninhabitable.

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