The affordable housing crisis is perhaps the most dire in the Bay Area. Now, one of the Bay Area’s biggest cities is taxing vacant units to make housing more affordable.
Oakland voters approved Measure W in November, which levies a $6,000 tax on any privately owned parcel of land that remains vacant. The revenue raised could be as high as $10.5 million per year, according to the San Francisco Chronicle. Measure W’s language stipulates that any money generated from taxing vacant units can only be spent on anti-homelessness programs, affordable housing, anti-blight and illegal dumping initiatives, and fighting lawsuits challenging its implementation and enforcement.
It’s hard to argue against a tax on vacant properties in a city as expensive as Oakland, where the average rent for a one-bedroom apartment is $2,300/month, according to real estate site RentCafe. 60 percent of all apartments in Oakland rent for more than $2,000/month, and only eight percent of all available apartments rent for less than $1,700/month.
However, the Chronicle reports that city leaders are running into various obstacles trying to implement the tax, from who gets exemptions from the tax based on the difficulty of developing vacant land, or if multi-family properties like town houses and apartment complexes count as multiple units, to what actually constitutes a vacant unit, and how long a unit must be vacant before the tax can be applied.
Oakland could perhaps look north to Vancouver, British Columbia (Canada), where the city’s tax on vacant units has successfully raised $38 million in its first year. Vancouver’s vacancy tax only applies to residential units that have gone unoccupied for more than six months in a given year, and instead of a flat rate, the unit is taxed at one percent of its assessed value.
San Francisco — just across the Bay from Oakland — is mulling the idea of a vacancy tax as well, with the average one-bedroom apartment renting for more than $3,200/month according to RentCafe’s data. Such a tax could also put a dent in homelessness in New York City, which ranks #1 in the country in homelessness. In a 2018 interview, then-candidate Alexandria Ocasio-Cortez told Grit Post that wealthy oligarchs were buying up real estate in New York and keeping it vacant, making it nearly impossible for working-class families and small business owners to survive.
“Over 50 percent of the luxury apartments in Midtown Manhattan are vacant. They’re being used by oligarchs to store and hide wealth. Even though they purchase these homes, they don’t live in them. This is Panama Papers, Paradise Papers-type stuff,” she said. “It’s turning this city into a ghost town. If you take a bus through midtown Manhattan, all you see are blocks and blocks of empty storefronts that are just anchored by a multinational bank. And now it’s spreading to other parts of the city working-class people used to be able to call home, like Brooklyn, the Bronx, and Spanish Harlem.”
Elsewhere in the United States, Governing magazine reported that Washington, DC’s vacancy tax raised nearly $10 million in revenue in 2016. However, the city couldn’t say with certainty how many vacant properties were leased, sold, or developed as a result of the tax. Still, a tax on vacant properties is still a big incentive for property owners to take action on their vacant land, according to Hayley Raetz, of the Terner Center for Housing Innovation.
“If approved by Oakland voters, the tax could act as a deterrent for speculation, and encourage owners of vacant parcels to sell or develop their land, ideally unlocking sites for housing,” Raetz wrote in a report prior to Measure W’s approval.
Tom Cahill is a contributor for Grit Post who covers political and economic news. He lives in Bend, Oregon. Send him an email at tom DOT v DOT cahill AT gmail DOT com.