There’s no more vivid image of San Francisco’s inequality: thousands sleep on the streets each night, while thousands of luxury condos sit empty above them.

Now, this progressive rallying cry has led to a concrete policy proposal as a signature-gathering effort gets underway to put an empty homes tax on the November ballot. The measure, put forward by Supervisor Dean Preston, would tax property owners who leave their units vacant for more than six months. At a time when housing is in short supply, the levy would generate tens of millions annually for affordable housing and encourage some owners to rent out their empty units.

“The idea of an empty homes tax is to provide a disincentive for investors holding property vacant for prolonged periods of time,” Preston said. “This is a problem that’s been growing.”

San Francisco had more than 40,000 vacant homes in 2019, representing about 10% of the housing stock, according to a Budget and Legislative Analyst (BLA) report that formed the basis of Preston’s ballot measure.

But since it was announced earlier this month, the proposed tax has garnered criticism for excluding single-family homes and duplexes, and sparked a broader conversation about the meaning of San Francisco’s vacant home data.

The top-line 40,000 home figure belies a more complex picture. Some empty homes serve as investment properties and pieds à terre, others are on the market for sale, while many await renovation or are vacant for other reasons. Some homes that were vacant in 2019, when the BLA data was taken, are likely occupied now, while other units have since become vacant.

The ballot measure is inspired by existing vacancy taxes in Vancouver and Oakland, Preston said, as well as The City’s commercial storefront vacancy tax, which voters passed in 2020. Supporters have until July 11 to gather nearly 9,000 valid voter signatures.

Preston and co-sponsors Democratic Socialists of America – San Francisco and Faith in Action Bay Area opted for an excise tax based on unit size and the duration of vacancy. The smallest units would see a $2,500 bill for the first year of vacancy, while the largest units would see a $5,000 bill. Those figures would rise to $10,000 and $20,000, respectively, by the third year of a unit being vacant.

As for enforcement, each year subject property owners would have to send a declaration to the Assessor Recorder demonstrating that their unit is not vacant.

The tax is expected to generate approximately $38 million a year for affordable housing, and bring about 4,500 units, or 12% of vacant units, back on to the market.

Housing policy experts typically support vacancy taxes as a way to increase housing supply and reduce prices overall.

“A good vacancy tax can help move some units onto the market that might not otherwise have been, or at least generate funding for affordable housing,” said Sarah Karlinsky, a housing policy analyst for SPUR who wrote a 2014 report on residential vacancy in San Francisco. While SPUR has not yet taken a position on the ballot measure, the urban planning think tank has supported similar policies in the past.

Andy Yan, a professor of urban studies at Simon Fraser University in Vancouver, also supports the concept.

“It has been a net good for the city,” he says of Vancouver’s vacancy tax, adding the policy has resulted in approximately 2,500 fewer vacant homes, representing a 10% decline since 2016.

However, Yan cautions, “This type of vacant homes tax by itself will not solve the issue of affordable housing in San Francisco, just as much as it didn’t solve the problem of affordable housing in Vancouver. But it is part of that toolkit.”

Unlike the vacancy taxes in Vancouver and Oakland, San Francisco’s proposal would exempt single-family homes and duplexes — a provision that caught some observers by surprise.

“I don’t really understand that from a policy perspective,” Karlinksy said. While there are higher concentrations of vacant units in and around downtown, Karlinsky added, vacant homes are spread “throughout The City, and also in places that are characterized by single-family homes. Why would you exempt Pacific Heights from a vacancy tax?”

“It goes into principles of fairness,” Yan said. “I guess it’s probably adaptive to what the local political conditions are.”

Preston said the tax is targeted at the housing types where vacancy is highest. “We look at the problem and see it overwhelmingly in larger condo buildings and smaller apartment buildings,” Preston said. “One only needs to walk around some of the new construction South of Market and downtown and you just see so many vacant units.”

Commentators like California YIMBY policy analyst Darrell Owens have speculated the tax omits single-family homes to improve the odds of the ballot measure passing. When asked about this, Preston replied, “It’s certainly no secret that the real estate industry will use single-family homeowners… to try to beat back taxes they oppose.”

Single-family homes and duplexes are less likely to be vacant than multifamily condo buildings, accounting for nearly a quarter of vacant homes in The City, according to the latest census data. However, there are indications single-family homes could be driving growth in residential vacancy, which increased by 20% between 2015 and 2019, according to the BLA report.

The report found that nearly all of the growth in vacant homes in recent years came in the “sold but not occupied” category, and that these units were themselves concentrated in neighborhoods with large numbers of single-family homes and duplexes.

“The most common neighborhoods with vacant units sold but not yet occupied included the Mission (621 units), Sunset/Parkside (565 units), Noe Valley (434 units), Castro/Upper Market (348 units), West of Twin Peaks (307 units), and Inner Sunset (294 units) neighborhoods,” the report reads.

Preston said these neighborhoods — which are are a mix of multifamily and single-family homes — are among the places where his office is “hearing reports of speculators holding multi-unit buildings off the market.” While granular geographic data is not available, 2019 census data shows that of the sold but not occupied homes, 45% of are single-family houses or duplexes.

Karlinsky called the sold but not occupied category the “weirdest” part of the BLA report, noting that vacancies in that category grew ten-fold between 2012 and 2019. “You would think a foreign princess is just buying them and storing her international capital there, but then you look at where they are… If there are hundreds of units that are in those neighborhoods that are used as investment properties, it just doesn’t seem right to me.”

One possible explanation for this geography is that people are buying homes and leaving them empty while they wait for a contractor to be available for a renovation — yet another symptom of the construction labor shortage.

When it comes to vacancy, Yan said, “We may know the what, but we may not know the why.”

S.F.’s plan to tax 40,000 empty homes under scrutiny

A sales banner hangs from a building in the Mira SF condo complex at Folsom and Spear streets in the South of Market area. Units that have been sold but not yet occupied contribute to the vacancy rate in The City. (Kevin N. Hume/The Examiner)