Definitely a nasty tax. Another example of why you should not locate your home or business in SF - the voters love to tax anything no matter what the harmful effects are.
It’s sad because it’s true — politics and governing here seems far more insane than anywhere else I’ve lived in terms of a focus on bananas laws/taxes/regulations instead of just getting the core job done.
It’s a great place in a lot of ways, that could be great in a lot more.
(No particular opinion on this tax as I intend to leave regardless).
I mean, I lived here 12 years and in a Midwest city 10 years before that. There’s a big difference. Obviously for any 1 human the N will be small. So I used “seems” to indicate that while that’s my experience I don’t have like a study to prove it.
It might be helpful to have an opinion on this tax. Perhaps this is one of the more useful ones. Not all taxes are bad, but agreed that SF seems to miss the mark more often than not.
Because of Prop 13 and the various extensions passed by HJTA (eg Prop 218) the state needs to come up with increasingly bananas schemes to fund public services.
In a sane place we'd simply adjust property taxes but that's not possible in California.
> voters love to tax anything no matter what the harmful effects are
I broadly share your view of San Francisco's civic culture. But what are the unexpected consequences of a vacancy tax? Practically every problem I think of, e.g. developers getting hit when the market goes down being forced to fire sell, has a simple solution (renting on short-term leases). The only failure mode is market breakdown, i.e. where homeowners trying to rent cannot find tenants at any price.
There are many, but I'll list just one for that great SF flavor. You can exclude a vacant residence if it is currently waiting for a building permit. But the exclusion only lasts one year, no matter how long SF takes to approve the permit. If there are multiple permit cycles, only the first year of any can be excluded.
Build a new large apartment, and it takes more than a year to lease out? As a nice thank-you from SF for your building contribution, you can now pay that vacancy tax.
There is a more general problem here though. This whole thing suffers from Smart Person syndrome, where Smart People will continue tweaking every little detail of life without realizing that they have created a system that is more and more complicated and more and more impossible to deal with.
I don't really know how they are going to be able to tell that these units are vacant. Maybe owners should just lie to avoid the expense and hassle of tracking this. That's also not great.
Shelter as a necessity for life that is artificial and cities being the main entry point for wealth in the world kind of make this a necessity. It's not like any of these business owners will stop being landlords because they will still make money. Making money without working for it should be hard. What is nasty about not allowing a select few to control a basic human necessity?
"“The government cannot compel a property owner to rent his or her property to third parties without violating” the Takings Clause of the U.S. Constitution, the lawsuit said."
A vacancy tax no more compels someone to rent their property than an income tax compels me to be unemployed. Feels like the kind of lazy argument you'd lob up just to give your fellow rich people an opportunity to bail you out in a hyper undemocratic way.
Are there any limiting principles to your perspective? Do you feel it would be acceptable for your municipality to tax your disuse of expensive guitars, riding mowers, boats, or graphics cards you don't actually employ to their satisfaction?
Your analogy doesn't hold, because owning and neglecting such items doesn't prevent someone else from having them. Property speculation is so runaway that landlords are keeping properties vacant because they hope to make more money on rising real estate values alone.
The number of top–end GPUs in existence is finite and surprisingly small. If I buy one, that is one fewer for everyone else to squabble over. It is in effect just the same as land, and GPU prices are much higher today than they were 5 years ago. Even 5 year old used GPUs cost as much or more than they did 5 years ago.
That’s circular. This discussion of GPUs started when tomcam asked why a tax on unused housing was OK, and whether or not it could be extended to a tax on unused GPUs.
In particular, a vacancy tax seems to force people to rent out property rather than merely posses it. Can the same law be used to force people to enter into other rental agreements? I have a bunch of old computer parts, including motherboards, cpus, and gpus sitting around unused. I dare say that I could build two or three working computers out of them. Should I be taxed for owning these unused computers?
I have a few thousand books that I’m not currently reading, what about them? Should we tax people for having more books than they can carry? What about your bed, which is currently going unused approximately 16 hours out of the day? Can the government one day force you to rent that out too? Hot bunking would certainly “solve” any housing problem a city might face. Where is the distinction?
Simply stating that no law has been passed to force you to rent out your unused GPUs is not stating a guiding principle, because that’s merely a matter of time.
Lots of other people, including me, have pointed out that the differentiating principle is "is X a fundamental human need". Housing is, GPUs aren't.
But to steelman the strawman you're putting up here, economics tries really hard to maximize the efficiency of markets, the idea being if you've got something you can make money with (e.g. a CPU/GPU/book/bike/car/bed you could rent out) you should, and thereby someone gets to use your thing and you get to make a little money. You paint this as some kind of hyper-communistic dystopia, but this is actually the world that hyper-capitalist companies like Uber and Airbnb are working pretty hard to create right now.
This is critical to understanding the anti-democratic underpinnings of this landlord action. There's nothing unconstitutional going on here--it's basic market regulation that States and the US have been doing for literally hundreds of years. There's nothing wrong with policies aimed at making markets more efficient, that's why we have regulations and antitrust.
And besides, rental housing is a market. Hogging supply to artificially inflate market prices is generally a crime. Suppliers in this market are suspected of doing that, so the people of SF are taking action to make them stop. They're lucky they're getting off with a tax.
That said, I'm not a fan of this policy in this case. SF's vacancy rate is super low, and I think that indicates this tax won't result in meaningful revenue or vacancy rate increases. This seems like purely a supply problem. I know there are other places (Vancouver, Toronto, NYC) where "property as investment" has gotten out of hand and municipalities are passing laws to try and address it, but they had way higher vacancy rates than SF.
I could be wrong though. Others have made the argument that SF's market is secretly inefficient, that for one reason or another landlords are reporting their units as occupied when they in fact aren't. In that case, this tax might motivate those landlords to rent their places. I don't buy this though, in particular I don't think many people would leave > $30k a year on the table just to have the option of one day letting their parents move into a unit.
There’s no comparison. Land already has a ton of riders attached to it, because ultimately a city, state, or nation is defined by the land they control.
For example, we would all be justifiably outraged if the government declared that SF buyers are only allowed to buy AMD graphics cards, while those living in Oakland are allowed only Nvidia, and the rest of the people in the area are not allowed graphics cards at all.
And yet, while many like me dislike land zoning, which is basically equivalent to the graphics card example, no one is calling it a fundamentally illegal and unconstitutional practice.
... they already have those on housing. No one taxes you more or less because of how frequently you use your boat, or if you rent your boat to others, etc.
They should just make a law to decrease taxes on primary house by 75%, on secondary houses by 50%, then augment the taxation by 400%.
I understand having a vacation/family home (not in crowded cities however), but having more than one and leaving it empty just to raise the price of similar unit feel really scammy to me.
> but having more than one and leaving it empty just to raise the price of a similar unit
Is there a dearth of this happening? SF vacancy rates are roughly the same as they are across the country.
Also, from a balance sheet standpoint: if you raise the rent of a similar unit, then the rent lost on your empty unit goes up. You're actually losing more money (potential rent - rent received).
Importantly they said fundamental need and not fundamental right, though I find it a bit disgusting how someone could be so strongly opposed to helping people meet their basic needs. Isn't that what society is for?
I think the question posed is quite relevant, and FWIW my take is that property rights are a concern here. The answer is that there are other concerns in tension with this — including the desire to have more affordable housing in The city and voters apparently consider this to be more important in this case.
It's a fundamental need for some people, if you want to have a healthy city where firefighters, teachers, baristas, servers, etc. can live there without having the city's cost of living externalized via multiple hour megacommutes.
There's a one bedroom flat in Moldovia that's a perfect fit for you. They will also deliver meals every day. Of course, you don't get to choose which flat or which meal. Choice is freedom, and freedom is never free.
I agree, access to healthcare is a fundamental human right. Shkreli might have liked to act like Robin Hood, "You'll only ever pay $10/month for a medicine, I'll make insurers pay the rest", a laughably condescending perspective that only shows that he believes enough people are too ignorant to make the connection of where exactly insurance pools come from, their indirect income. But many people glommed on to that.
Here's an example of Shkreli showing his real stripes:
A drug comes before the FDA for approval, and it is opened up for comment. Shkreli lodges an objection to approval of this drug.
Why? Because it's unsafe? No, trials thus far have shown it to be safer than existing drugs.
Why? Because it's less effective? No, it's also been shown to be more effective than existing drugs?
Perhaps it's more expensive? No, cost of R&D and production, and estimated retail costs are expected to be lower than existing drugs.
Huh, odd. So why did Shkreli oppose this drug getting to the market?
Because he and his company had just bought the patent to one of those 'existing drugs' recently, and this drug coming to market would torpedo demand for his drug, and torpedo the profitability of his investment in buying the patent.
Man of the people, fighting for healthcare rights, Martin Shkreli.
You were asking for a limiting principle and I gave you one. You're now making a weird insinuation that I think that limiting principle should morph into a tax policy that applies to people who don't own rental properties, which feels like a non sequitur.
But, my personal feeling is "at least some", because homelessness is fundamentally a housing supply problem and I think no one likes it, so it sounds like the kind of social ill that needs funding to address.
Not sure how. I am trying to understand your thinking. But the phrase "housing is a fundamental human need" can use some explication. What's the maximum for "at least some"? (Roughly, not trying to pin you down to a particular number.)
Pretty much all my tax policies boil down to getting rid of super corrupt breaks to energy and ag, and a 110% tax on income over 10 million, and Elizabeth Warren's wealth tax. Confident we can build some baller cribs on that kind of cheddar.
Sure, if voters elect politicians who enact taxes like that, the judicial branch shouldn’t stand in their way. The remedy for that problem would be the ballot box.
No, the judicial branch has the role to check that democracy does not become mob rule. There are some basic rights and liberties, but there are others not clear written on paper, but still not removable by vote.
Taxes on land and personal property in the US date back to colonial times. And tax policy often distinguishes between property utilized in different ways (eg. personal vs. business). I doubt you’d convince a judge that a tax that varies based on whether property is unused impinges on some fundamental right in a materially different way.
Not OP, but the limiting principle is democracy. That's what gets you off the slippery slope. A tax on vacant homes passed a referendum, but barely at 54.5%, and SF is probably the least landlord-friendly city in the US.
Nobody is proposing city taxes on unused guitars, boats, or graphics cards. That would never pass. There is no public policy benefit to doing so, other than generic tax revenue. And if it did, I would move and feel comfortable doing so because I would not want to live in a city whose majority voting population is bananas.
If society got pissed off enough about your unused guitar, you betcher ass they'd pass a law taxing it. It's not The Government you're up against--it's The People!
It's pretty coercive. Taxes are levied against transactions. A tax in the absence of a transaction is really just a fine. And fining people for not selling something violates most folks conception of basic property rights and privacy.
I get that the city is looking for a way out of 50 years of systematic underdevelopment, but this just feels wrong. I don't trust government overreach to fix decades of bad governance.
Most people don't think you should be able to buy up a precious thing and squander it. Locke--the guy who came up with life, liberty, and property, based the property right on the owner's ability and duty to improve. Leaving apartments vacant doesn't sound like improvement.
Taxes also aren't coercive; even SCOTUS hasn't held that. They've held that benefits can be, but not taxes. That's a right-wing anti-tax talking point that has no other principle. What amount wouldn't be coercive? Under what conditions would it be not coercive? What taxes are and aren't coercive: gas taxes, capital gains taxes, sales taxes? The idea is to just say "taxes are coercive" and close the book, which Grover Norquist might buy, but we've got a civilization to run so we need to do better.
> Taxes also aren't coercive; even SCOTUS hasn't held that
They are, and it has; see McCulloch v. Maryland, 17 U.S. 316 (1819). Coercion doesn’t generally make them unconstitutional (coercion is, ultimately, what governments do,the states under their broad general police powers, and the feds, Constitutionally, under more limited powers, but including explicit taxation poeers), though it can when, e.g., states attempt to tax federal institutions (as was the issue in McCulloch).
IDK if McCulloch established that. Maryland wanted to tax the Bank out of existence, and Marshall clearly addressed that use of taxation, not taxation in general:
"An unlimited power to tax involves, necessarily, a power to destroy; because there is a limit beyond which no institution and no property can bear taxation. A question of constitutional power can hardly be made to depend on a question of more or less. If the states may tax, they have no limit but their discretion; and the bank, therefore, must depend on the discretion of the state governments for its existence. This consequence is inevitable."
This is about destruction, not coercion. In this case, an example of a destructive tax would be "we levy a tax 100% of the value of your property. That isn't what's happening here.
FWIW governments do more than coerce. Ours does stuff like pay millions of teachers and explore space. That takes money, so governments raise revenue. That's not coercion, that's funding stuff we want and need.
No, McCulloch said taxation can be coercion, but not necessarily. Maryland wanted to tax every local branch of the national bank $15k/year, which is $350k/year in 2023 dollars. That was seen an unconstitutional state usurpation of a policy that had been approved by the US Congress.
> Most people don't think you should be able to buy up a precious thing and squander it.
What does it mean to "squander" and who decides? I'm pretty familiar as a renter and property owner with tenants rights in SF. If I were to buy a duplex in the city I would never ever ever rent out the extra unit. I'd lie about tenancy, ask a friend to pretend to rent it, or pay this proposed tax rather than rent it out. I'd recommend the same to everyone.
Tenants are a liability for landlords in SF. You cannot end a tenancy, not with any amount of notice. That's a big deal and a huge policy mistake. Really messes up incentives. Let's say you and your partner have a duplex with two 2B/2BA units. You eventually decide to have kids and your parents are retiring. You want them to move into that unit so they can be close by to retire and babysit now and again. You could evict, but it's going to be costly and time consuming especially if the tenants are protected. Lawyers are going to tell you to buy the tenants out. Tenant buyouts in the city are usually mid five figures and they end up restricting some of your uses of the property in the future. It will take months (maybe more than a year) and may end up creeping up towards six figures. You would've been better off never renting it out in the first place.
Most landlords are individuals that own a few units [1]. Maybe a couple decided to buy a second home instead of investing in the S&P500. That's a lot more common than you'd expect. These are the folks navigating renters protections. Large companies don't have issues with them. They hire professionals to follow the rules. Or they build newer buildings so those protections don't apply to them.
And really this is the bleak reality of heavy handed, top down market manipulations: They're not going to hurt the big guys. You're not going to get even with some multinational real estate syndicate somewhere. You're mostly going to transfer wealth between varying shades of middle class. And really largely, you're transferring it from folks that saved for a downpayment and risked a 30 year mortgage and financially put their ducks in a row and those that spent years and years renting while knowing full well they were getting an affordable monthly payment in exchange for not building equity.
My point in saying all this is that usually if you look at a market and see folks "squandering," you probably don't understand the market. There are probably competing incentives that cause that market to be inefficient.
See, the casual way you say "you could evict" makes me think you don't appreciate that that's someone's home, maybe even a family, and you're uprooting them for personal convenience. I think a law preventing that would be a good one.
Your argument sounds like, "if you let landlords evict as much as they like, they would rent their places out rather than treating them like pure investment vehicles." But how does that help renters? Great they can now maybe rent that vacant place, only to maybe get evicted with little to no notice, for any reason?
I think where we want to get to is a place where people who rent homes have stability, and don't get kicked out because their landlord's in-laws want to move in instead. You're not lending a bike or renting out lawn equipment. Families live in these places. Going full "I should be able to do whatever I want with my property" is at best insensitive.
I'll also say that SFs problems seem to be 100% supply related. The vacancy rate is 3% [0]?? That's crazy low. I don't think this is a complex market that's beyond my meager understanding; they just need more supply.
> the casual way you say "you could evict" makes me think you don't appreciate that that's someone's home...
It's their home and your property. I'm not advocating anything crazy. As that hypothetical landlord your tenants deserve dignity, but it's your property and that has to confer certain rights beyond their tenancy. Otherwise, you don't really own it. You should be able to ask your tenants to leave with some amount of notice. You should be able to plan on your parents living in that unit at some point. Make the amount of time and planning for that very large, say 2 or 3 or 4 years. Doesn't that seem pretty fair?
Restricting ending tenancy in good faith all together creates perverse incentives. It pits your interests as a landlord against your tenants. If you bought a duplex in SF today, it would be in your best interest to do everything you could not to rent out the other unit. That is the problem.
I mean, not being able to do literally anything with my property doesn't mean I don't own it. You can't run a meth lab in your house--you still own it. Etc. IDK if I'm making a straw man here, but just want to say there's always limits.
I think a year or two is reasonable, but I generally don't like the mechanism of eviction. I live in the Netherlands and they do either fixed term or indefinite contracts here. Details are here [0], but the gist is that tenants get some stability while landlords can chance a vacancy period and raise rents while they're vacant and not rent controlled.
> It's pretty coercive. Taxes are usually levied against financial transactions. Taxing not selling something violates most people's conception of basic property rights.
First off, it isn't taxing "not selling something," it is taxing "buying a 2nd/3rd/999th home that nobody will live in and holding it vacant as an investment strategy." It is a financial transaction in that sense.
Second, baseline property taxes have existed for some time in every US state. If you own a home, you must pay taxes in alignment with how your locality has decided it will tax houses to maintain and operate itself. More expensive houses get taxed more, independent of how much of the local budget is spent on serving the house. SF decided that unoccupied 2nd/3rd/999th houses get taxed more than those that don't.
What if they raised taxes for everyone, but gave tax breaks to homes occupied by owners or renters, with a 1 year grace period? That is effectively the same as this bill.
That seems like the fairest way to do it, make it part of your property taxes. Before, your property taxes are $T. Now, your property taxes are $T + $T x F x M, where M is the number of months in the year the property is unoccupied, and F is some factor. For everyone whose home is actually lived in, your property taxes don't change. A supercharged version of the homestead exemption.
I posted something to this effect elsewhere, so forgive me for repeating myself. I do want to get your take though.
First, the implementation of the fine isn't so important as the fine itself. Most landlords are individuals that own a few units [1]. Maybe a couple decided to buy a second home or a duplex instead of investing in the S&P500. That's a lot more common than you'd expect. These are the folks navigating renters protections. Large companies don't have issues with them. They hire professionals to follow the rules. Or they build newer buildings so protections don't apply to them. We're not going to get even with some multinational real estate syndicate somewhere through a vacancy tax. We're mostly going to transfer wealth between varying shades of middle class. And really largely, we're transferring it from folks that saved for a downpayment and risked a 30 year mortgage and financially put their ducks in a row and those that spent years and years renting while knowing full well they were getting a comparatively affordable monthly payment in exchange for not building equity.
Second, I'm pretty familiar as a renter and property owner with tenants rights in SF. If I were to buy a duplex in the city I would never ever ever rent out the extra unit. I'd lie about tenancy, ask a friend to pretend to rent it, or pay this proposed tax rather than rent it out. I'd recommend the same to everyone.
Tenants are a liability for landlords in SF. You cannot end a tenancy, not with any amount of notice. That's a big deal and a huge policy mistake. Really messes up incentives. Let's say you and your partner have a duplex with two 2B/2BA units. You eventually decide to have kids and your parents are retiring. You want them to move into that unit so they can be close by to retire and babysit now and again. You could evict, but it's going to be costly and time consuming especially if the tenants are protected. Lawyers are going to tell you to buy the tenants out. Tenant buyouts in the city are usually mid five figures and they end up restricting some of your uses of the property in the future. It will take months (maybe more than a year) and may end up creeping up towards six figures. You would've been better off never renting it out in the first place.
I guess what I'm trying to say here is that most owners letting their properties sit vacant are probably doing it because of bad policy that deprives them of fair use of their property. Not because they don't already realize they're missing out on rental income and would see the light if they had to pay a little more tax each year.
> Maybe a couple decided to buy a second home or a duplex instead of investing in the S&P500.
Just want to address this particular point. That’s the problem. People want to use houses as an investment vehicle rather than a place to actually to live in. You want a buy a second, third , or even fourth house fine. But what should not happen is others are unable to live in the same city because people wanted to make more money from a fundamental need.
People buying a second home are not the problem. A healthy housing market needs rental housing stock. We have to have places for people in transitory phases of life, for people struggling, for retirees that want to live off the value of their house after downsizing or divorcees or folks trying the city on for size.
Supply is the problem and bad governance created it. Why do we keep turning it around on individuals that made rational investment decisions as though they've done something predatory? It seems absolutely backwards.
Build more housing stock. This is it. There's no bad guy, no magic bullet, no righteous fight. We just need to build more.
You've framed tenants as a liability rather than an important part of the housing ecosystem, combined with treating second/third/fourth homes as investment vehicles instead of alternatives. I sympathize with how eviction policy creates bad incentives on both sides, but I also recognize that this is largely also about supporting a healthy city of a blend of homeowners and renters.
While I think normalizing vacant properties is a worthy goal, I do think there's other ways of achieving this goal, such as other commenters have suggested around instead of an additional tax, reducing tax write-offs for vacancy, along with a better definition of what a vacancy is. For example your suggestion, the having your friend move in loophole for some non market exchange. This has the potential to subvert the principle of the referendum.
Again they aren't compelling anyone to rent anything. That would take the form of "rent your property or forfeit it" or "rent your property or go to jail". No matter how bad you think taxes are, surely you think this vacancy tax (which is something like $200-$400/mo lol) is way better and materially different than losing the property altogether or imprisonment.
Which still isn't happening. There are at least 4 options here: (1) pay the tax, (2) inhabit the property yourself, (3) sell the property, (4) rent the property.
You're not required to rent, but you would pay the tax if the property is unrented. You still have the option of not renting, but that's no longer a cost free choice.
People automatically equate taxation with fines and coercion, but they're separate concepts. The best example is the income tax. If we slap taxes on things we don't want people to do, then why do we literally tax work, a thing we want almost everyone to do?
So taxes aren't fines or fees, and they don't force you to stop doing something you want to do or do something you don't want to. People still buy groceries despite sales taxes (which, again, we want people to buy stuff).
Thus, the argument that a vacancy tax compels rental property owners to rent their places falls. I'm not compelled by income tax to be unemployed, nor am I compelled by sales taxes to purchase no goods, nor are owners compelled to rent their places.
The authority to establish speed limits is based on what Amendment? The authority for States to proscribe abortion is based on what Amendment? The authority of States to proscribe selling alcohol to minors is based on what Amendment? The authority of States to require that you enter a contract with an insurer before operating a vehicle is based on what Amendment?
(Sorry these textualist posts are just extremely tedious. 300m people in the richest country in history aren't governed solely by a document that is literally a pamphlet. There's case law and statutes. Your best bet here if this is a good faith question is to ask Google)
I'm not arguing against this tax or its legality but find the rest of your comment interesting.
>The authority of States to proscribe selling alcohol to minors is based on what Amendment?
Commerce clause says congress has the right to regulate commerce.
>The authority of States to require that you enter a contract with an insurer before operating a vehicle is based on what. Amendment?
Little know fact, states only have the right to require insurance if a vehicle is being used for commerce. Personal use transportation does not legally require DMV registration or insurance but the vast majority of people dont know this and voluntarily opt-in to being regulated by laws specifically created to protect paying passengers (taxis) and paid cargo carriers (semis) from accidents.
> Commerce clause says congress has the right to regulate commerce.
The _Federal_ govt can regulate _interstate_ commerce. The way they enforce minimum alcohol age and speed limits is by threatening to withhold highway subsidies.
The way States have the authority is the 10th Amendment + there's not a Constitutional right to ingest whatever you want (actually seems like a core freedom, but let's not get sidetracked). Generally this creates a system where States are free to restrict "rights" the Constitution is silent on.
> Little know fact, states only have the right to require insurance if a vehicle is being used for commerce. Personal use transportation does not legally require DMV registration or insurance
This is super wrong. Here's Indiana's statute [0]. Nothing about commercial use only. States have total authority here as long as their constitutions permit it.
>This is super wrong. Here's Indiana's statute [0]. Nothing about commercial use only.
The key is in the terminology used. A "motor vehicle" is distinctly different from "personal/private transport" from a legal standpoint. The former describes a form of transport used for commercial purposes. It's also why these commercial licenses and registrations are issued by an organization called the DMV.
Traveling on roads is a right defined in common law, only doing so in a commercial capacity is a privilege that can be regulated using licenses. Hard to believe, I know.
>Payne v. Massey (19__) 196 SW 2nd 493, 145 Tex 273. “The court makes it clear that a license relates to qualifications to engage in profession, business, trade or calling; thus, when merely traveling without compensation or profit, outside of business enterprise or adventure with the corporate state, no license is required of the natural individual traveling for personal business, pleasure and transportation.”[0]
>American Mutual Liability Ins. Co., vs. Chaput, 60 A.2d 118, 120; 95 NH 200 Motor Vehicle: 18 USC Part 1 Chapter 2 section 31 definitions: “(6) Motor vehicle. – The term “motor vehicle” means every description of carriage or other contrivance propelled or drawn by mechanical power and used for commercial purposes on the highways…” 10) The term “used for commercial purposes” means the carriage of persons or property for any fare, fee, rate, charge or other consideration, or directly or indirectly in connection with any business, or other undertaking intended for profit. “A motor vehicle or automobile for hire is a motor vehicle, other than an automobile stage, used for the transportation of persons for which remuneration is received.”[0]
Taxation is very much used to incentivize certain behaviors and penalize others.
Hence why we have tax efficient retirement savings, why certain expenses are tax deductible whilst others aren’t and why certain goods such as tobacco and alcohol might have additional taxes levied on them.
It's like the ACA. It was never illegal to not have health insurance. You wouldn't go to jail. Technically you weren't even penalized. You were just taxed at a higher rate. SCOTUS was on board with that, since Congress has the power to tax.
It's not illegal to not have kids. You won't go to jail. You're not penalized. You're just taxed at a higher rate.
It's not illegal to be employed. You won't go to jail. You're not penalized. You're just taxed at a higher rate.
It's not illegal to keep a vacant rental. You won't go to jail. You're not penalized. You're just taxed at a higher rate.
All of those are compelling in the same way: "Do this thing and we'll tax you less."
The Supreme Court has demonstrated that it doesn't really care about the lawful basis of cases; it's just a question of supplying an argument in the hope that they'll legislate the Heritage Foundation's roadmap for you.
A landlord can’t unilaterally opt out of the vacancy tax though. It takes a tenant to agree to rent it and if society has done a shit job collectively to make the area viable for tenants (due to lack of crime or amount of foot traffic or tenants working from office) then the landlord is penalized with taxes for something the landlord can’t control.
Paying income taxes is the “cost” of having income. You can opt out unilaterally.
> The landlord can move into the property themselves, sell the property, or make the property more appealing to rent.
The Landlord occupying vast swathes of vacant space in its portfolio is the same as it being vacant. You realize landlords don’t have 1 employee for every employee it’s tenant has, right? That doesn’t scale.
Selling just transfers the issue to someone else.
Making the property more appealing isn’t as groundbreaking a proposition as you might think it is. Every landlord with vacancies in the country is trying to do just that.
Implicit in your entire statement is that somehow Landlords are choosing to keep space vacant, against their own business interests, to… what? Spite the community? It makes no sense what you are saying. They are being punished with this tax while already paying property taxes, utilities, security, maintenance, etc, when the issue is that a pandemic hit and everyone started working from home. Now they should be punished with another tax because the angry masses want to shift the tax burden to them. Democracy at its worst.
All kinds of industries have regulations. You can't go into the medical devices industry and get super pissed at the FDA when they tell you you can't sell your stuff without their approval. You could argue "hey it's my property and I'll sell it if I want to", but that won't work and for good reason.
Becoming a landlord is going into business, and there are regulations and risk. Sometimes you go bust. That's life. If you picked up a property that's somehow unrentable in SF you should sell tickets, I'm sure a lot of people would love to see what kind of insane hellhole you couldn't get someone to rent for even $1 to avoid the tax.
This isn’t a regulation about how business can be operated. Yes it is risk, and it is punishing someone for already being on the losing end of that risk.
It’s like taxing startups for not having found product-market fit and not making sales. Do you support that?
You know, call me an optimist but I think humanity could muddle through without us SWEs. But, kinda do need that housing though. Confident 10/10 people would choose house over software engineer. Especially anyone whose identity was stolen in a breach, whose kids are addicted to or victimized by social media, or scammed by crypto, etc etc etc.
> A vacancy tax no more compels someone to rent their property than an income tax compels me to be unemployed
This is a bad analogy because an income tax is supposed to be for raising revenue, and it is generally understood that it should not be too high that it discourages too much economic activity. On the other hand, the Proposition M vacancy tax is explicitly intended to “disincentivize prolonged vacancies” by taxing up to $20k per unit per year (https://voterguide.sfelections.org/en/tax-keeping-residentia...), which the plaintiffs argue violates the Ellis Act which says that homeowners have the right not to be in the business of being a landlord (https://www.courthousenews.com/wp-content/uploads/2023/02/sm...).
> On the other hand, the Proposition M vacancy tax is explicitly intended to “disincentivize prolonged vacancies”
Disincentivizing (hopefully not an actual word) is not compulsion.
> the plaintiffs argue violates the Ellis Act which says that homeowners have the right not to be in the business of being a landlord
This may be true; my legal knowledge is limited to being overzealously pre-law so I'm not an expert in CA law. That said, this sounds like a stupid law corrupted by landlords to duck housing rental regulations... OK checked Wikipedia and that's confirmed. Anyway I don't dispute this claim, just the Takings Clause argument, which again is very very bad.
Yes, the vacancy tax encourages economic activity, which is the opposite of the income tax which has a side-effect of reducing economic activity. Another reason that camgunz’s analogy is flawed.
According to the plaintiffs, the problem with the vacancy tax is that the city is not supposed to force homeowners into the business of renting that they do not want (Ellis Act https://leginfo.legislature.ca.gov/faces/codes_displayText.x...). It is similar to the Obamacare individual mandate, which also forced people to enter the marketplace, which Congress is not allowed to do by the Commerce Clause of the US Constitution. But in National Federation of Independent Business v. Sebelius, the US Supreme Court said that the individual mandate is just a tax and not a compelled transaction, since “It may often be a reasonable financial decision to make the payment rather than purchase insurance, unlike the “prohibitory” financial punishment in Drexel Furniture” (https://supreme.justia.com/cases/federal/us/567/519/)
> Yes, the vacancy tax encourages economic activity, which is the opposite of the income tax which has a side-effect of reducing economic activity.
I feel like everyone replying with some version of "well actually taxes do disincentivize blah blah blah" is responding to someone else. Taxation is not compulsion. I'll say it as many times as I have to.
> It is similar to the Obamacare individual mandate, which also forced people to enter the marketplace
Here it is again. Taxing someone if they don't do something is not forcing them to do that thing. The case you cite says so! National affirmed Federal power to tax behavior or non behavior. It supports, rather than undercuts my argument.
> Another reason that camgunz’s analogy is flawed.
My point with taxes is that oftentimes the main goal is to raise revenue or address an externality. That's actually what the income tax does and what this tax does as well. The income tax (and payroll taxes) addresses income inequality and uses the proceeds to build a social safety net. SFGate notes that the vacancy tax in Vancouver helped to lower vacancy rates and funds affordable housing initiatives. Also Vancouver's vacancy rate is greater than zero! Looks like no one's being forced to do anything.
Like regular citizens around the globe that are taxed for any reason the government wants. Taxes were also used as a way to express the power of the mighty during most of the history, the original meaning of an income source for shared public services (aka "government") was long lost. If one thinks about universal oppression, discretionary taxes would be number one.
I'm pretty familiar as a renter and property owner with tenants rights in SF. If I were to buy a duplex in the city I would never ever ever rent out the extra unit. I'd lie about tenancy, ask a friend to pretend to rent it, or pay this proposed tax rather than rent it out. I'd recommend the same to everyone.
Tenants are a liability for landlords in SF. You cannot end a tenancy, not with any amount of notice. That's a big deal and a huge policy mistake. Really messes up incentives. Let's say you and your partner have a duplex with two 2B/2BA units. You eventually decide to have kids and your parents are retiring. You want them to move into that unit so they can be near and babysit now and again. You could evict, but it's going to be costly and time consuming especially if the tenants are protected. Lawyers are going to tell you to buy the tenants out. Tenant buyouts in the city are usually mid five figures and they end up restricting some of your uses of the property forever. It will take months (maybe more than a year) and may end up creeping up towards six figures. You would've been better off never renting it out in the first place.
Landlords aren't idiots and they aren't evil, at least not more so than anyone else. Put yourself in their shoes and figure out how the incentives would cause you to act. IMO it's as simple as fixing the policy issue: Landlords can terminate tenancies in good faith with two years notice. Seems very fair for everyone and I bet you get reduced vacancies without needing to increasingly ratchet up heavy handed market interventions that are themselves prone to unintended consequence.
I mean, very few of them are; SF's vacancy rate is crazy low. If the dynamic you're describing exists, very few people are doing it. Places with even stronger renters rights regimes have higher vacancy rates. SF's problem is just supply.
The vacancy rate doesn't tell the whole story. Short term rentals and self reporting likely mask the effect I've mentioned.
I generally agree, SFs problem is 100% supply. But I think that ends up being caused by slow approval processes and highly restrictive tenants rights. Why would you ever subdivide your property in SF to add another dwelling unit? You can't give a tenant any amount of notice to end a tenancy. You can't ever merge those units back together. SFs property market is really crazy in this regard: older buildings with lots of units are often worth less than large single family houses. Properties with tenants sell for 25-50% less than vacant comparables.
But then why own property beyond your primary residence ? Them's the rules. If you don't want the hassle, sell and move on. The fundamental issue is lack of liquidity in the market coupled with artificially low supply. This applies to both buying and renting. Nobody moves because everyone has a sweet deal (renters locked in rent control, owners locked in low property tax rates).
According to the article, as the owner of the duplex, you would not be subject to the vacancy tax ("It applies to buildings with three or more units, not to single-family homes or duplexes").
As for your other points, yes, the government is trying to incentivize that inventory back on to the market (by disincentivizing keeping it off). Yes, they are doing it in response to a situation they took part in creating. Is this more or less likely than tenant termination freedom to result in more housing being available? That sounds like every market de-regulation argument ever.
This is the crux of it. Maybe individualsamd organizations should be capped on the number of single family residences they can own in a city. Real estate is a unique property and we should all have a place to live.
I don't own multifamily property in SF, so I'm not whining about my ability to do anything.
When tenants rights are restrictive enough property owners view tenants as a liability and that sets up perverse incentives that cause inefficient markets and underdevelopment. Occupied multifamily properties sell at steep discounts compared to their vacant counterparts. Property owners price in the potential longterm loss of use caused by a tenant. Do we want to heavily incentivize property owners to sell their properties without tenants? Do we want a housing market where multifamily properties sell for the same amount as much smaller single family homes? Do we want a development market where subdividing property is inadvisable and actually lowers property value?
At the end of the day, everyone deserves dignity. Part of that means acknowledging property owners take significant risk tenants do not and as such deserve fair use of their property. That means owners need to be able to give notice to end a tenancy amicably without eviction -- maybe that required notice is measured in years. That's plenty of time for any tenant to find another place. It means we need to stop conflating romantic ideals of "home" with actual ownership. If tenants watched themselves priced out over a decade, they're going to have a hard time. City programs should provide safety nets there, but it isn't their landlords burden to take carry them like a dependent. Tenancy is a very simple proposition: renters don't have to come up with downpayment, if the city goes to shit they can leave in a month, if the foundation gets water damage or an electrical fire breaks out they have no liability, their monthly payment is significantly less than a comparable mortgage payment. Tenants trade optionality for equity. As a tenant I never lost a single night of sleep worrying about electrical fires or new sewage pipes or the heater going out. I'd never have the gall to squat on a place for 10 years while paying inflation adjusted rent (far under market rate) and come out the other side with my hand held out for a tenant buy out. I would be absolutely ashamed of myself as a tenant in such a situation. If I'm being honest, I suppose I'd still do it and find ways to justify it. I'd tell myself it was after all "my home" and the landlord had more than one house so it was only fair. The story is just all too common in SF.
Yep, If you don’t want to manage a rental, don’t own one. If later you need 2 properties instead of 1 + 1 rental, sell the duplex and buy somewhere else.
There are schemes to knock a tenant out, but generally in SF county, 12-month leases roll over into monthly terms with very little the landlord can do as long as the tenant keeps paying and abiding by the terms of the original lease.
Now, raising the rent (in a non-rent controlled unit) and then renegotiating the lease are options but if the tenant does not comply and keeps paying the original lease's rent there are a LOT of protections in favor of the tenant.
Won't comment on if these are all fair or not, but there has been lots of bad behavior on both sides to cause regulation to come up. Being a landlord in SF is not easy, but simultaneously, finding a place to live which is affordable is tough as well as a renter.
Vacancy taxes are good but not enough by themselves. S.F. needs more housing, including middle housing, three or four story buildings with multiple units. The market dynamics that apply to shampoo and fridges apply to housing as well. Prices are elevated because of an imbalance between supply and demand. Supply must rise to match demand. Let investors and speculators snatch up new housing units, at least at first. Investors do not have access to unlimited capital. If $100B worth of new housing hit the market overnight, it would be impossible for investors to buy them all. Keep building housing until investors run out of money and normal people can start buying them.
That's not true. By restricting supply, they raise property values for all housing owners, whether they rent out their properties or live in them. NIMBYs and landlords should be natural allies as such.
Regardless of politics, landlords who deliberately keep empty apartments off-market are a menace to society. If CA can't sue these people into infinity I don't know another state that can and no rent-control isn't the answer here...
It's literally a bigger problem facing the working class or anyone without a mommy and daddy check than the diamond industry creating false scarcity and still propping up the price of "natural" diamonds over lab stones...
It's their property, they are free to use it (or not) as they see fit.
The solution for all this issues on lack of housing is easy, let people build more. SF is famous for its Kafkaesque regulations and zoning for building.
Remove them, let apartment buildings be built everywhere, and the problem will solve itself.
IMO it's a zoning problem. If you build residential it should be occupied, in theory if you build it that's the entire point. Mixed use / commercial is another story. If implemented correctly, this could also solve the issue of foreign nationals buying up tons of property just to sit on as an investment - which is a net negative for anyone actually living in the city where these properties are built.
It is just another form of property tax, you can keep your units vacant and keep paying “vacant property tax”, or you can let people live in and collect rent and pay reduced taxes
The problem is the difficulty of the eviction process, collecting rent, and regulation disincentivizes optimal use of land. To mitigate high risk tenants, landlords require huge, multi-month deposits and extensive credit checks, but this means fewer renters will qualify, hence vacancy. It's a problem that cannot be blamed just on landlords.
Acquiring property is a rather involved process which is rather difficult to do accidentally. If one wants to avoid all of those challenges, it's rather easy to simply not buy houses which one doesn't intend to occupy. If one already finds themselves facing those challenges, one could also stop being a landlord by selling the house, and avoid them in the future. I hear the property market is pretty hot in SF, so selling the house doesn't seem like it would be an enormous challenge.
I don't live in SF and don't have a home to rent, yet I just don't understand the rationale behind this law.
I absolutely support rent control and various other provisions, but there could be many reasons for a person not wanting to rent.
Next, will I be forced to rent my car to those who don't have one, or forced to rent rooms in my house if not enough people in my household etc. This is a very slippery slope.
NOTE: I agree with the intent of what this seems to want to do, but not the implementation.
The housing problem in SF is entirely due to lack of supply. There is a limited amount of land in SF, you can't just go and build more land and because of that it is very difficult to solve the supply problem. Disincentivizing vacancy is one method of increasing housing supply. If you don't want to rent your property you should sell it to someone who is.
> If you don't want to rent your property you should sell it to someone who is.
What if I'm old and don't want the hassle of renters OR perhaps my house is not in a condition that it can be rented without substantial investment in fixing it which I can't afford right now OR am just keeping the house to sell later to pay for my retirement or to give to my kids as inheritance OR any number of reasons.
I shouldn't be forced to pay a tax on top of the property tax nor should I be forced to sell it.
Yes you should. Your actions are causing considerable harm to society. It is completely reasonable to use taxes to incentivize actions that improve society. Improperly utilizing high value land is very harmful, we don't have to just sit here and let you do it without consequences.
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[ 2.6 ms ] story [ 229 ms ] threadIt’s a great place in a lot of ways, that could be great in a lot more.
(No particular opinion on this tax as I intend to leave regardless).
Maybe because right wing media has constantly stated this opinion over years you think it's just a fact.
In a sane place we'd simply adjust property taxes but that's not possible in California.
I broadly share your view of San Francisco's civic culture. But what are the unexpected consequences of a vacancy tax? Practically every problem I think of, e.g. developers getting hit when the market goes down being forced to fire sell, has a simple solution (renting on short-term leases). The only failure mode is market breakdown, i.e. where homeowners trying to rent cannot find tenants at any price.
- social situation untenable (too much homelessness or crime?)
- earthquake or natural disaster making the area uninhabitable
- massive glut of housing available (lol)
https://sfstandard.com/wp-content/uploads/2022/02/Empty-Home...
There are many, but I'll list just one for that great SF flavor. You can exclude a vacant residence if it is currently waiting for a building permit. But the exclusion only lasts one year, no matter how long SF takes to approve the permit. If there are multiple permit cycles, only the first year of any can be excluded.
Build a new large apartment, and it takes more than a year to lease out? As a nice thank-you from SF for your building contribution, you can now pay that vacancy tax.
There is a more general problem here though. This whole thing suffers from Smart Person syndrome, where Smart People will continue tweaking every little detail of life without realizing that they have created a system that is more and more complicated and more and more impossible to deal with.
I don't really know how they are going to be able to tell that these units are vacant. Maybe owners should just lie to avoid the expense and hassle of tracking this. That's also not great.
A vacancy tax no more compels someone to rent their property than an income tax compels me to be unemployed. Feels like the kind of lazy argument you'd lob up just to give your fellow rich people an opportunity to bail you out in a hyper undemocratic way.
That’s circular. This discussion of GPUs started when tomcam asked why a tax on unused housing was OK, and whether or not it could be extended to a tax on unused GPUs.
In particular, a vacancy tax seems to force people to rent out property rather than merely posses it. Can the same law be used to force people to enter into other rental agreements? I have a bunch of old computer parts, including motherboards, cpus, and gpus sitting around unused. I dare say that I could build two or three working computers out of them. Should I be taxed for owning these unused computers?
I have a few thousand books that I’m not currently reading, what about them? Should we tax people for having more books than they can carry? What about your bed, which is currently going unused approximately 16 hours out of the day? Can the government one day force you to rent that out too? Hot bunking would certainly “solve” any housing problem a city might face. Where is the distinction?
Simply stating that no law has been passed to force you to rent out your unused GPUs is not stating a guiding principle, because that’s merely a matter of time.
But to steelman the strawman you're putting up here, economics tries really hard to maximize the efficiency of markets, the idea being if you've got something you can make money with (e.g. a CPU/GPU/book/bike/car/bed you could rent out) you should, and thereby someone gets to use your thing and you get to make a little money. You paint this as some kind of hyper-communistic dystopia, but this is actually the world that hyper-capitalist companies like Uber and Airbnb are working pretty hard to create right now.
This is critical to understanding the anti-democratic underpinnings of this landlord action. There's nothing unconstitutional going on here--it's basic market regulation that States and the US have been doing for literally hundreds of years. There's nothing wrong with policies aimed at making markets more efficient, that's why we have regulations and antitrust.
And besides, rental housing is a market. Hogging supply to artificially inflate market prices is generally a crime. Suppliers in this market are suspected of doing that, so the people of SF are taking action to make them stop. They're lucky they're getting off with a tax.
That said, I'm not a fan of this policy in this case. SF's vacancy rate is super low, and I think that indicates this tax won't result in meaningful revenue or vacancy rate increases. This seems like purely a supply problem. I know there are other places (Vancouver, Toronto, NYC) where "property as investment" has gotten out of hand and municipalities are passing laws to try and address it, but they had way higher vacancy rates than SF.
I could be wrong though. Others have made the argument that SF's market is secretly inefficient, that for one reason or another landlords are reporting their units as occupied when they in fact aren't. In that case, this tax might motivate those landlords to rent their places. I don't buy this though, in particular I don't think many people would leave > $30k a year on the table just to have the option of one day letting their parents move into a unit.
For example, we would all be justifiably outraged if the government declared that SF buyers are only allowed to buy AMD graphics cards, while those living in Oakland are allowed only Nvidia, and the rest of the people in the area are not allowed graphics cards at all.
And yet, while many like me dislike land zoning, which is basically equivalent to the graphics card example, no one is calling it a fundamentally illegal and unconstitutional practice.
I understand having a vacation/family home (not in crowded cities however), but having more than one and leaving it empty just to raise the price of similar unit feel really scammy to me.
Is there a dearth of this happening? SF vacancy rates are roughly the same as they are across the country.
Also, from a balance sheet standpoint: if you raise the rent of a similar unit, then the rent lost on your empty unit goes up. You're actually losing more money (potential rent - rent received).
I think the question posed is quite relevant, and FWIW my take is that property rights are a concern here. The answer is that there are other concerns in tension with this — including the desire to have more affordable housing in The city and voters apparently consider this to be more important in this case.
I agree, access to healthcare is a fundamental human right. Shkreli might have liked to act like Robin Hood, "You'll only ever pay $10/month for a medicine, I'll make insurers pay the rest", a laughably condescending perspective that only shows that he believes enough people are too ignorant to make the connection of where exactly insurance pools come from, their indirect income. But many people glommed on to that.
Here's an example of Shkreli showing his real stripes:
A drug comes before the FDA for approval, and it is opened up for comment. Shkreli lodges an objection to approval of this drug.
Why? Because it's unsafe? No, trials thus far have shown it to be safer than existing drugs.
Why? Because it's less effective? No, it's also been shown to be more effective than existing drugs?
Perhaps it's more expensive? No, cost of R&D and production, and estimated retail costs are expected to be lower than existing drugs.
Huh, odd. So why did Shkreli oppose this drug getting to the market?
Because he and his company had just bought the patent to one of those 'existing drugs' recently, and this drug coming to market would torpedo demand for his drug, and torpedo the profitability of his investment in buying the patent.
Man of the people, fighting for healthcare rights, Martin Shkreli.
Not sure what that means in practice. If I pay for my own house, what percentage of my income should be set aside to pay for other people's houses?
But, my personal feeling is "at least some", because homelessness is fundamentally a housing supply problem and I think no one likes it, so it sounds like the kind of social ill that needs funding to address.
Not sure how. I am trying to understand your thinking. But the phrase "housing is a fundamental human need" can use some explication. What's the maximum for "at least some"? (Roughly, not trying to pin you down to a particular number.)
Why not 125% or 200%? Or save even more souls at 500%?
Summer: "You're right!"
Morty: "What! No! I was using ghoulish overkill! Ghoulish overkill Summer!"
Nobody is proposing city taxes on unused guitars, boats, or graphics cards. That would never pass. There is no public policy benefit to doing so, other than generic tax revenue. And if it did, I would move and feel comfortable doing so because I would not want to live in a city whose majority voting population is bananas.
I get that the city is looking for a way out of 50 years of systematic underdevelopment, but this just feels wrong. I don't trust government overreach to fix decades of bad governance.
Taxes also aren't coercive; even SCOTUS hasn't held that. They've held that benefits can be, but not taxes. That's a right-wing anti-tax talking point that has no other principle. What amount wouldn't be coercive? Under what conditions would it be not coercive? What taxes are and aren't coercive: gas taxes, capital gains taxes, sales taxes? The idea is to just say "taxes are coercive" and close the book, which Grover Norquist might buy, but we've got a civilization to run so we need to do better.
They are, and it has; see McCulloch v. Maryland, 17 U.S. 316 (1819). Coercion doesn’t generally make them unconstitutional (coercion is, ultimately, what governments do,the states under their broad general police powers, and the feds, Constitutionally, under more limited powers, but including explicit taxation poeers), though it can when, e.g., states attempt to tax federal institutions (as was the issue in McCulloch).
"An unlimited power to tax involves, necessarily, a power to destroy; because there is a limit beyond which no institution and no property can bear taxation. A question of constitutional power can hardly be made to depend on a question of more or less. If the states may tax, they have no limit but their discretion; and the bank, therefore, must depend on the discretion of the state governments for its existence. This consequence is inevitable."
This is about destruction, not coercion. In this case, an example of a destructive tax would be "we levy a tax 100% of the value of your property. That isn't what's happening here.
FWIW governments do more than coerce. Ours does stuff like pay millions of teachers and explore space. That takes money, so governments raise revenue. That's not coercion, that's funding stuff we want and need.
What does it mean to "squander" and who decides? I'm pretty familiar as a renter and property owner with tenants rights in SF. If I were to buy a duplex in the city I would never ever ever rent out the extra unit. I'd lie about tenancy, ask a friend to pretend to rent it, or pay this proposed tax rather than rent it out. I'd recommend the same to everyone.
Tenants are a liability for landlords in SF. You cannot end a tenancy, not with any amount of notice. That's a big deal and a huge policy mistake. Really messes up incentives. Let's say you and your partner have a duplex with two 2B/2BA units. You eventually decide to have kids and your parents are retiring. You want them to move into that unit so they can be close by to retire and babysit now and again. You could evict, but it's going to be costly and time consuming especially if the tenants are protected. Lawyers are going to tell you to buy the tenants out. Tenant buyouts in the city are usually mid five figures and they end up restricting some of your uses of the property in the future. It will take months (maybe more than a year) and may end up creeping up towards six figures. You would've been better off never renting it out in the first place.
Most landlords are individuals that own a few units [1]. Maybe a couple decided to buy a second home instead of investing in the S&P500. That's a lot more common than you'd expect. These are the folks navigating renters protections. Large companies don't have issues with them. They hire professionals to follow the rules. Or they build newer buildings so those protections don't apply to them.
And really this is the bleak reality of heavy handed, top down market manipulations: They're not going to hurt the big guys. You're not going to get even with some multinational real estate syndicate somewhere. You're mostly going to transfer wealth between varying shades of middle class. And really largely, you're transferring it from folks that saved for a downpayment and risked a 30 year mortgage and financially put their ducks in a row and those that spent years and years renting while knowing full well they were getting an affordable monthly payment in exchange for not building equity.
My point in saying all this is that usually if you look at a market and see folks "squandering," you probably don't understand the market. There are probably competing incentives that cause that market to be inefficient.
1. https://www.pewresearch.org/fact-tank/2021/08/02/as-national...
Your argument sounds like, "if you let landlords evict as much as they like, they would rent their places out rather than treating them like pure investment vehicles." But how does that help renters? Great they can now maybe rent that vacant place, only to maybe get evicted with little to no notice, for any reason?
I think where we want to get to is a place where people who rent homes have stability, and don't get kicked out because their landlord's in-laws want to move in instead. You're not lending a bike or renting out lawn equipment. Families live in these places. Going full "I should be able to do whatever I want with my property" is at best insensitive.
I'll also say that SFs problems seem to be 100% supply related. The vacancy rate is 3% [0]?? That's crazy low. I don't think this is a complex market that's beyond my meager understanding; they just need more supply.
[0]: https://www.sfgate.com/bayarea/article/how-many-vacant-homes...
It's their home and your property. I'm not advocating anything crazy. As that hypothetical landlord your tenants deserve dignity, but it's your property and that has to confer certain rights beyond their tenancy. Otherwise, you don't really own it. You should be able to ask your tenants to leave with some amount of notice. You should be able to plan on your parents living in that unit at some point. Make the amount of time and planning for that very large, say 2 or 3 or 4 years. Doesn't that seem pretty fair?
Restricting ending tenancy in good faith all together creates perverse incentives. It pits your interests as a landlord against your tenants. If you bought a duplex in SF today, it would be in your best interest to do everything you could not to rent out the other unit. That is the problem.
I think a year or two is reasonable, but I generally don't like the mechanism of eviction. I live in the Netherlands and they do either fixed term or indefinite contracts here. Details are here [0], but the gist is that tenants get some stability while landlords can chance a vacancy period and raise rents while they're vacant and not rent controlled.
https://www.iamexpat.nl/housing/netherlands-rentals/rental-c...
First off, it isn't taxing "not selling something," it is taxing "buying a 2nd/3rd/999th home that nobody will live in and holding it vacant as an investment strategy." It is a financial transaction in that sense.
Second, baseline property taxes have existed for some time in every US state. If you own a home, you must pay taxes in alignment with how your locality has decided it will tax houses to maintain and operate itself. More expensive houses get taxed more, independent of how much of the local budget is spent on serving the house. SF decided that unoccupied 2nd/3rd/999th houses get taxed more than those that don't.
What if they raised taxes for everyone, but gave tax breaks to homes occupied by owners or renters, with a 1 year grace period? That is effectively the same as this bill.
First, the implementation of the fine isn't so important as the fine itself. Most landlords are individuals that own a few units [1]. Maybe a couple decided to buy a second home or a duplex instead of investing in the S&P500. That's a lot more common than you'd expect. These are the folks navigating renters protections. Large companies don't have issues with them. They hire professionals to follow the rules. Or they build newer buildings so protections don't apply to them. We're not going to get even with some multinational real estate syndicate somewhere through a vacancy tax. We're mostly going to transfer wealth between varying shades of middle class. And really largely, we're transferring it from folks that saved for a downpayment and risked a 30 year mortgage and financially put their ducks in a row and those that spent years and years renting while knowing full well they were getting a comparatively affordable monthly payment in exchange for not building equity.
Second, I'm pretty familiar as a renter and property owner with tenants rights in SF. If I were to buy a duplex in the city I would never ever ever rent out the extra unit. I'd lie about tenancy, ask a friend to pretend to rent it, or pay this proposed tax rather than rent it out. I'd recommend the same to everyone.
Tenants are a liability for landlords in SF. You cannot end a tenancy, not with any amount of notice. That's a big deal and a huge policy mistake. Really messes up incentives. Let's say you and your partner have a duplex with two 2B/2BA units. You eventually decide to have kids and your parents are retiring. You want them to move into that unit so they can be close by to retire and babysit now and again. You could evict, but it's going to be costly and time consuming especially if the tenants are protected. Lawyers are going to tell you to buy the tenants out. Tenant buyouts in the city are usually mid five figures and they end up restricting some of your uses of the property in the future. It will take months (maybe more than a year) and may end up creeping up towards six figures. You would've been better off never renting it out in the first place.
I guess what I'm trying to say here is that most owners letting their properties sit vacant are probably doing it because of bad policy that deprives them of fair use of their property. Not because they don't already realize they're missing out on rental income and would see the light if they had to pay a little more tax each year.
1. https://www.pewresearch.org/fact-tank/2021/08/02/as-national...
Just want to address this particular point. That’s the problem. People want to use houses as an investment vehicle rather than a place to actually to live in. You want a buy a second, third , or even fourth house fine. But what should not happen is others are unable to live in the same city because people wanted to make more money from a fundamental need.
Supply is the problem and bad governance created it. Why do we keep turning it around on individuals that made rational investment decisions as though they've done something predatory? It seems absolutely backwards.
Build more housing stock. This is it. There's no bad guy, no magic bullet, no righteous fight. We just need to build more.
While I think normalizing vacant properties is a worthy goal, I do think there's other ways of achieving this goal, such as other commenters have suggested around instead of an additional tax, reducing tax write-offs for vacancy, along with a better definition of what a vacancy is. For example your suggestion, the having your friend move in loophole for some non market exchange. This has the potential to subvert the principle of the referendum.
It's the threat of imprisonment if you do not comply.
This analogy doesn’t make sense to me. Perhaps you can clarify.
So taxes aren't fines or fees, and they don't force you to stop doing something you want to do or do something you don't want to. People still buy groceries despite sales taxes (which, again, we want people to buy stuff).
Thus, the argument that a vacancy tax compels rental property owners to rent their places falls. I'm not compelled by income tax to be unemployed, nor am I compelled by sales taxes to purchase no goods, nor are owners compelled to rent their places.
(Sorry these textualist posts are just extremely tedious. 300m people in the richest country in history aren't governed solely by a document that is literally a pamphlet. There's case law and statutes. Your best bet here if this is a good faith question is to ask Google)
>The authority of States to proscribe selling alcohol to minors is based on what Amendment?
Commerce clause says congress has the right to regulate commerce.
>The authority of States to require that you enter a contract with an insurer before operating a vehicle is based on what. Amendment?
Little know fact, states only have the right to require insurance if a vehicle is being used for commerce. Personal use transportation does not legally require DMV registration or insurance but the vast majority of people dont know this and voluntarily opt-in to being regulated by laws specifically created to protect paying passengers (taxis) and paid cargo carriers (semis) from accidents.
The _Federal_ govt can regulate _interstate_ commerce. The way they enforce minimum alcohol age and speed limits is by threatening to withhold highway subsidies.
The way States have the authority is the 10th Amendment + there's not a Constitutional right to ingest whatever you want (actually seems like a core freedom, but let's not get sidetracked). Generally this creates a system where States are free to restrict "rights" the Constitution is silent on.
> Little know fact, states only have the right to require insurance if a vehicle is being used for commerce. Personal use transportation does not legally require DMV registration or insurance
This is super wrong. Here's Indiana's statute [0]. Nothing about commercial use only. States have total authority here as long as their constitutions permit it.
[0]: https://codes.findlaw.com/in/title-9-motor-vehicles/in-code-...
The key is in the terminology used. A "motor vehicle" is distinctly different from "personal/private transport" from a legal standpoint. The former describes a form of transport used for commercial purposes. It's also why these commercial licenses and registrations are issued by an organization called the DMV.
Traveling on roads is a right defined in common law, only doing so in a commercial capacity is a privilege that can be regulated using licenses. Hard to believe, I know.
>Payne v. Massey (19__) 196 SW 2nd 493, 145 Tex 273. “The court makes it clear that a license relates to qualifications to engage in profession, business, trade or calling; thus, when merely traveling without compensation or profit, outside of business enterprise or adventure with the corporate state, no license is required of the natural individual traveling for personal business, pleasure and transportation.”[0]
>American Mutual Liability Ins. Co., vs. Chaput, 60 A.2d 118, 120; 95 NH 200 Motor Vehicle: 18 USC Part 1 Chapter 2 section 31 definitions: “(6) Motor vehicle. – The term “motor vehicle” means every description of carriage or other contrivance propelled or drawn by mechanical power and used for commercial purposes on the highways…” 10) The term “used for commercial purposes” means the carriage of persons or property for any fare, fee, rate, charge or other consideration, or directly or indirectly in connection with any business, or other undertaking intended for profit. “A motor vehicle or automobile for hire is a motor vehicle, other than an automobile stage, used for the transportation of persons for which remuneration is received.”[0]
[0] https://wearechange.org/u-s-supreme-court-says-no-license-ne...
Because we don't have a choice. You need resources to survive, you need to work to acquire resources.
The government wouldn't hesitate to tax breathing if they were confident we wouldn't hang them for it.
Hence why we have tax efficient retirement savings, why certain expenses are tax deductible whilst others aren’t and why certain goods such as tobacco and alcohol might have additional taxes levied on them.
It's not illegal to not have kids. You won't go to jail. You're not penalized. You're just taxed at a higher rate.
It's not illegal to be employed. You won't go to jail. You're not penalized. You're just taxed at a higher rate.
It's not illegal to keep a vacant rental. You won't go to jail. You're not penalized. You're just taxed at a higher rate.
All of those are compelling in the same way: "Do this thing and we'll tax you less."
You are of course free to not run Windows on your computer, but you will have to pay a tax for that.
Paying income taxes is the “cost” of having income. You can opt out unilaterally.
The analogy is wrong.
There is plenty the landlord can control. What this tax does is say the landlord can't just sit on empty properties without penalty.
Heck, the landlord could even work collectively with society to make the area viable for tenants!
The Landlord occupying vast swathes of vacant space in its portfolio is the same as it being vacant. You realize landlords don’t have 1 employee for every employee it’s tenant has, right? That doesn’t scale.
Selling just transfers the issue to someone else.
Making the property more appealing isn’t as groundbreaking a proposition as you might think it is. Every landlord with vacancies in the country is trying to do just that.
Implicit in your entire statement is that somehow Landlords are choosing to keep space vacant, against their own business interests, to… what? Spite the community? It makes no sense what you are saying. They are being punished with this tax while already paying property taxes, utilities, security, maintenance, etc, when the issue is that a pandemic hit and everyone started working from home. Now they should be punished with another tax because the angry masses want to shift the tax burden to them. Democracy at its worst.
Becoming a landlord is going into business, and there are regulations and risk. Sometimes you go bust. That's life. If you picked up a property that's somehow unrentable in SF you should sell tickets, I'm sure a lot of people would love to see what kind of insane hellhole you couldn't get someone to rent for even $1 to avoid the tax.
It’s like taxing startups for not having found product-market fit and not making sales. Do you support that?
Like talented engineers that could be put to other social use, just like those empty buildings?
This is a bad analogy because an income tax is supposed to be for raising revenue, and it is generally understood that it should not be too high that it discourages too much economic activity. On the other hand, the Proposition M vacancy tax is explicitly intended to “disincentivize prolonged vacancies” by taxing up to $20k per unit per year (https://voterguide.sfelections.org/en/tax-keeping-residentia...), which the plaintiffs argue violates the Ellis Act which says that homeowners have the right not to be in the business of being a landlord (https://www.courthousenews.com/wp-content/uploads/2023/02/sm...).
Disincentivizing (hopefully not an actual word) is not compulsion.
> the plaintiffs argue violates the Ellis Act which says that homeowners have the right not to be in the business of being a landlord
This may be true; my legal knowledge is limited to being overzealously pre-law so I'm not an expert in CA law. That said, this sounds like a stupid law corrupted by landlords to duck housing rental regulations... OK checked Wikipedia and that's confirmed. Anyway I don't dispute this claim, just the Takings Clause argument, which again is very very bad.
Seems to discourage the lack thereof.
According to the plaintiffs, the problem with the vacancy tax is that the city is not supposed to force homeowners into the business of renting that they do not want (Ellis Act https://leginfo.legislature.ca.gov/faces/codes_displayText.x...). It is similar to the Obamacare individual mandate, which also forced people to enter the marketplace, which Congress is not allowed to do by the Commerce Clause of the US Constitution. But in National Federation of Independent Business v. Sebelius, the US Supreme Court said that the individual mandate is just a tax and not a compelled transaction, since “It may often be a reasonable financial decision to make the payment rather than purchase insurance, unlike the “prohibitory” financial punishment in Drexel Furniture” (https://supreme.justia.com/cases/federal/us/567/519/)
I feel like everyone replying with some version of "well actually taxes do disincentivize blah blah blah" is responding to someone else. Taxation is not compulsion. I'll say it as many times as I have to.
> It is similar to the Obamacare individual mandate, which also forced people to enter the marketplace
Here it is again. Taxing someone if they don't do something is not forcing them to do that thing. The case you cite says so! National affirmed Federal power to tax behavior or non behavior. It supports, rather than undercuts my argument.
> Another reason that camgunz’s analogy is flawed.
My point with taxes is that oftentimes the main goal is to raise revenue or address an externality. That's actually what the income tax does and what this tax does as well. The income tax (and payroll taxes) addresses income inequality and uses the proceeds to build a social safety net. SFGate notes that the vacancy tax in Vancouver helped to lower vacancy rates and funds affordable housing initiatives. Also Vancouver's vacancy rate is greater than zero! Looks like no one's being forced to do anything.
https://www.sfgate.com/bayarea/article/how-many-vacant-homes...
I'm pretty familiar as a renter and property owner with tenants rights in SF. If I were to buy a duplex in the city I would never ever ever rent out the extra unit. I'd lie about tenancy, ask a friend to pretend to rent it, or pay this proposed tax rather than rent it out. I'd recommend the same to everyone.
Tenants are a liability for landlords in SF. You cannot end a tenancy, not with any amount of notice. That's a big deal and a huge policy mistake. Really messes up incentives. Let's say you and your partner have a duplex with two 2B/2BA units. You eventually decide to have kids and your parents are retiring. You want them to move into that unit so they can be near and babysit now and again. You could evict, but it's going to be costly and time consuming especially if the tenants are protected. Lawyers are going to tell you to buy the tenants out. Tenant buyouts in the city are usually mid five figures and they end up restricting some of your uses of the property forever. It will take months (maybe more than a year) and may end up creeping up towards six figures. You would've been better off never renting it out in the first place.
Landlords aren't idiots and they aren't evil, at least not more so than anyone else. Put yourself in their shoes and figure out how the incentives would cause you to act. IMO it's as simple as fixing the policy issue: Landlords can terminate tenancies in good faith with two years notice. Seems very fair for everyone and I bet you get reduced vacancies without needing to increasingly ratchet up heavy handed market interventions that are themselves prone to unintended consequence.
I generally agree, SFs problem is 100% supply. But I think that ends up being caused by slow approval processes and highly restrictive tenants rights. Why would you ever subdivide your property in SF to add another dwelling unit? You can't give a tenant any amount of notice to end a tenancy. You can't ever merge those units back together. SFs property market is really crazy in this regard: older buildings with lots of units are often worth less than large single family houses. Properties with tenants sell for 25-50% less than vacant comparables.
As for your other points, yes, the government is trying to incentivize that inventory back on to the market (by disincentivizing keeping it off). Yes, they are doing it in response to a situation they took part in creating. Is this more or less likely than tenant termination freedom to result in more housing being available? That sounds like every market de-regulation argument ever.
"This is my house. I own it. I should be free to kick anyone out at any time for any reason or no reason."
One's reaction to the above sentence probably shows which side of the fence one is on fairly quickly.
When tenants rights are restrictive enough property owners view tenants as a liability and that sets up perverse incentives that cause inefficient markets and underdevelopment. Occupied multifamily properties sell at steep discounts compared to their vacant counterparts. Property owners price in the potential longterm loss of use caused by a tenant. Do we want to heavily incentivize property owners to sell their properties without tenants? Do we want a housing market where multifamily properties sell for the same amount as much smaller single family homes? Do we want a development market where subdividing property is inadvisable and actually lowers property value?
At the end of the day, everyone deserves dignity. Part of that means acknowledging property owners take significant risk tenants do not and as such deserve fair use of their property. That means owners need to be able to give notice to end a tenancy amicably without eviction -- maybe that required notice is measured in years. That's plenty of time for any tenant to find another place. It means we need to stop conflating romantic ideals of "home" with actual ownership. If tenants watched themselves priced out over a decade, they're going to have a hard time. City programs should provide safety nets there, but it isn't their landlords burden to take carry them like a dependent. Tenancy is a very simple proposition: renters don't have to come up with downpayment, if the city goes to shit they can leave in a month, if the foundation gets water damage or an electrical fire breaks out they have no liability, their monthly payment is significantly less than a comparable mortgage payment. Tenants trade optionality for equity. As a tenant I never lost a single night of sleep worrying about electrical fires or new sewage pipes or the heater going out. I'd never have the gall to squat on a place for 10 years while paying inflation adjusted rent (far under market rate) and come out the other side with my hand held out for a tenant buy out. I would be absolutely ashamed of myself as a tenant in such a situation. If I'm being honest, I suppose I'd still do it and find ways to justify it. I'd tell myself it was after all "my home" and the landlord had more than one house so it was only fair. The story is just all too common in SF.
Now, raising the rent (in a non-rent controlled unit) and then renegotiating the lease are options but if the tenant does not comply and keeps paying the original lease's rent there are a LOT of protections in favor of the tenant.
Won't comment on if these are all fair or not, but there has been lots of bad behavior on both sides to cause regulation to come up. Being a landlord in SF is not easy, but simultaneously, finding a place to live which is affordable is tough as well as a renter.
Always funny to see this taken at face value. SF doesn’t “need” housing. People want to pay less for housing. Not the same thing at all.
Actual issues with lack of housing include traffic congestion as people are forced into longer commutes.
Are there any examples of a similar tax in other parts of CA or elsewhere in the USA?
It's literally a bigger problem facing the working class or anyone without a mommy and daddy check than the diamond industry creating false scarcity and still propping up the price of "natural" diamonds over lab stones...
Remove them, let apartment buildings be built everywhere, and the problem will solve itself.
I absolutely support rent control and various other provisions, but there could be many reasons for a person not wanting to rent.
Next, will I be forced to rent my car to those who don't have one, or forced to rent rooms in my house if not enough people in my household etc. This is a very slippery slope.
NOTE: I agree with the intent of what this seems to want to do, but not the implementation.
What if I'm old and don't want the hassle of renters OR perhaps my house is not in a condition that it can be rented without substantial investment in fixing it which I can't afford right now OR am just keeping the house to sell later to pay for my retirement or to give to my kids as inheritance OR any number of reasons.
I shouldn't be forced to pay a tax on top of the property tax nor should I be forced to sell it.
Wait, I think communist countries already tried that and failed.
Anyway, let's just agree to disagree and move on with our lives.
> [from elsewhere on the web] ...property owners with at least three units that have been vacant for more than 182 days (six months) will be taxed...
This is not enforceable. It will be dodged by the dishonest and thereby drive compliant, honest landlords out of business.
ooooh.... so creepy