VACANCY TAX: Fair in Rent Control Areas?

So recently there was news that San Francisco is toying with the idea of implementing a vacancy tax on commercial and residential property. While single family homes or duplexes would not be impacted, residential property with three or more units could face a $250 per day fee until leased if left vacant for six consecutive months.

I understand the sentiment for the tax, it seems unjust to have homes just sitting vacant when there is a housing shortage in San Francisco.

However, I struggle with such a tax when a community like San Francisco already has very strict rent control regulations and I suspect that this is part of the reason some owners prefer to leave their property vacant rather then rent them out.

In San Francisco you must have “just cause” to evict a tenant and then there are formulas for how much money you must pay the tenant(s) in relocation fees. Often, if a landlord wants to sell their property, they cannot evict the tenants, they must instead pay them tens of thousands of dollars to leave – if they leave at all! I met one person in SF that inherited a house from their mother and let it sit vacant for three years because she was trying to decide what to do with it (sell it, rent it, or move into it?). She knew that if she rented it out and later decided to sell it, the property’s loss of value could far exceed any rent collected because the majority of buyers are not interested in purchasing a rented out single family home.

I also hope that if any such tax plan is implemented that they have exceptions for the death of an owner or a DIY landlord.

Families need time to grieve and go through the personal possessions of a parent, sibling or other family member that has passed. Sometimes, the only relative of the deceased property owner will live out of the area and have normal life obligations like a job and/or young children. This means that it may take well beyond 6 months before the home is cleared out. Additionally, estates can sometimes take a couple years to even make their way through probate court.

Then there’s the Do it Yourselfer property owner. Someone with big dreams, maybe stretched themselves out a bit financially to own property and has a regular job, but can’t really afford to pay a contractor to remodel a unit. They intend to do it themselves, but it will take months to a year because of their life obligations. Will they be penalized $250/day? Will SF landlords then become only people/corporations with deep pockets and not necessarily even members of the community?

Is a vacancy tax even Constitutional?

This may all be moot anyway. Just a couple days ago the United State Supreme Court ruled unanimously in Timbs v. Indiana that the Constitution’s ban on excessive fines applies to the states as well. This ruling was focused primarily on police seizing property from suspects, which could amount to an excessive fine; like seizing an expensive car. However, at $250/day, an owner of a vacant property would be fined $91,250/year; this seems like an excessive fine where no crime was committed and infringes on private property rights.

So is a vacancy tax fair? Is it fair in communities with strong rent control laws already in place?

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