A coalition of property owners and real estate groups has convinced a Superior Court judge to strike down a residential vacancy tax approved by San Francisco voters in a 2022 ballot measure.
Judge Charles Haines issued a summary judgement order on Thursday in favor of plaintiffs who challenged what is known as the Empty Homes Tax, including the San Francisco Apartment Association and the San Francisco Association of Realtors as well as individual property owners, the San Francisco Business Times reported.
The Empty Homes Tax imposes annual taxes—starting at $2,500 to $5,000 per vacant unit and escalating to as much as $20,000 annually for larger properties—on residential units left vacant for more than 182 days in buildings with three or more units. Under the measure, the tax rate is higher for larger units and increases the longer a home is vacant.
Also known as Proposition M, the Empty Homes Act was approved by 54.5% of San Francisco voters in November 2022. The measure took effect on January 1, 2024, with the first filing deadline for owners of vacant homes scheduled for April 20, 2025.
Attorneys for the plaintiffs in the lawsuit, which was filed in February 2023 and named the city and county as defendants, argued that the Empty Homes Act violated the U.S. Constitution’s Takings Clause as well as California’s Ellis Act, which protects property owners’ right to remove units from the rental market.
Supervisor Dean Preston, who spearheaded the campaign to pass the Empty Homes Tax, said he expects the Court of Appeals to reverse Haines’ ruling and “follow the will of the voters.”
“We do not accept a broken status quo where every night over ten homes sit vacant for every person who sleeps on our streets,” Preston said, in a statement emailed to the Business Times. “Our groundbreaking Empty Homes Tax is a powerful tool to fill thousands of vacant homes that are being hoarded and held off the market by real estate investors in San Francisco.”
In August, San Francisco became the first city to ban the sale or use of revenue management software that deploys algorithms to set multifamily rents or manage occupancy levels.
Supervisor Aaron Peskin, who introduced the ban, compared revenue management software to “automated price-fixing” and alleged in a statement that the software “has exacerbated our rent crisis and empowered corporate landlords to intentionally keep units vacant.”
Peskin estimated that up to 70% of the rental housing stock in San Francisco was controlled by companies using revenue management software.
In June, RealPage posted a statement on its website responding to what it called “false allegations” regarding its YieldStar revenue management software.
“RealPage customers decide their own rent prices, always have 100% discretion to accept or reject software price recommendations, are never punished for declining recommendations, and accept recommendations at widely varying rates that are far lower than has been falsely alleged,” the company said.
“RealPage revenue management software never recommends that a customer withhold vacant units from the market. In fact, properties using our revenue management products consistently achieve vacancy rates below the national average,” the RealPage statement said.
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