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.
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.
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...
You are of course free to not run Windows on your computer, but you will have to pay a tax for that.
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.
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."
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?
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.
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.