Tax on Vacant Properties Emerges for November Ballot

Supervisor Aaron Peskin alluded to a showdown with real estate groups, who have been criticized for keeping properties empty for years.

A man walks past a vacant storefront near the intersection of Balboa Street and Sixth Avenue in the Richmond District on Friday, June 1, 2018. (Kevin N. Hume/S.F. Examiner)

A vacancy tax for residential and commercial properties is shaping up for the November election as part of a citywide strategy to relieve the housing and retail crisis.

Supervisors Aaron Peskin announced on Wednesday that he is developing a ballot measure to discourage property owners from keeping storefronts and housing units empty by hitting them where it hurts: their wallets. Landlords owning residential properties with three or more units that are vacant for six consecutive months would pay $250 per unit each day until leased. 

The same conditions would apply to properties in Neighborhood Commercial Districts where stores — empty and operating, alike — are clustered in areas like Downtown or Parkside. Should the Board of Supervisors approve the measure, it would be placed on the November ballot and needs a two-third majority to pass. In November, Oakland passed a vacancy property measure that institutes taxes on properties used less than 50 days a year.

“This is not designed to be a revenue generator for San Francisco,” Peskin said at the press conference, outside the long-shuttered Italian restaurant and saloon Gold Spike. “This is designed to be a behavior changer for certain problematic landlords. If we can add several hundred units back to the rental stock, this will have been worth it.”

Vacant storefronts have gained attention in recent years as local groups survey their own neighborhoods to counter the mere 25 registered by the Department of Building Inspection in 2016 and 40 in 2017. In April, Supervisor Sandra Lee Fewer led a crowdsourced count that spotted 156 vacancies in the Richmond.

North Beach had 38 vacancies in 2018, up from about 15 in 2015, according to Peskin.

Fewer, who spoke at the announcement with Peskin, introduced her own legislation in December to require building owners to register their own empty storefronts. Instead of a 270-day grace period, they would pay the $711 registration fee within 30 days or face another charge of $2,844 if they don’t comply after receiving a warning. 

“It’s all complaint driven. That system just is not working,” Fewer said. “Clearly there are some bad actors here.”

Building owners find loopholes to avoid vacant registration by putting up a ‘for rent’ sign if even for years on end, Fewer added. The upcoming budget process will figure into Fewer’s proposal, as DBI would need to adjust their staff levels and responsibilities. 

Supervisor Vallie Brown, too, has legislation related to empty storefronts but directed at speeding up the permit process for new businesses. Mayor London Breed also announced in December she would direct $1 million to aid small businesses and investigate empty spaces.

The potential tax brings in residential properties to tackle both the housing and storefront crisis in a unified approach. What criteria count as a landlord acting in bad faith is still being determined by Peskin and DBI.

Peskin alluded to a fight with real estate interests who stand to face the tax but promised the measure would be fair and reasonable. Good Earth Realty, which owns several storefronts on Columbus Avenue alone and on Clement Street, owns the building where Gold Spike once stood. Veritas Investments, dubbed the city’s largest landlord and which owns several dozen retail buildings, faces frequent criticism for poor treatment of tenants and deadening once-thriving commercial blocks like Church Street.

“Let us not assume that there are not powerful interests out there that do not want Supervisor Fewer’s registry to pass and they certainly do not want the vacancy tax to pass,” Peskin said. “How are we going to do that? With organizing and people power.”

Fewer and Peskin expect each of their legislative efforts to come up at the Board of Supervisors in February. 

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