Tax on vacant housing, storefronts proposed for November ballot

By Joshua Sabatini, The San Francisco Examiner

Plans are in the works to place a vacancy tax on the November ballot for both residential and commercial properties as part of a citywide plan to address empty storefronts that is set to be announced today by Supervisor Aaron Peskin.

The proposal is intended to free up units that are being kept off the market during San Francisco’s housing crisis and encourage property owners to lease out empty retail spaces.

Peskin remains in talks with various groups about the measure, but intends to introduce it early next month after considering the idea for more than a year.

“Having a little bit of a stick won’t hurt,” Peskin said.

Details are still being worked out, but the intent is to apply the tax to residential properties with three or more units. After six consecutive months of a vacancy, the property owner would pay $250 a day until the unit is leased.

The tax on commercial properties would only apply in Neighborhood Commercial Districts. The rate would likely fluctuate based on square footage but $250 a day would serve as a baseline.

The measure would need six votes from the board to get on the ballot and two-thirds voter approval since Peskin wants the tax revenue to go the Office of Economic and Workforce Development and the Mayor’s Office of Housing to help businesses and tenants.

Fernando Martí, co-director of Council of Community Housing Organizations, which represent nonprofit low-income developers, said that “a vacancy tax is conceptually something we support as an idea.”

He said that “we can’t speak to a specific proposal we haven’t seen yet.” But Marti, who discussed the proposal with Peskin Tuesday, said the council views the tax as a means to “discourage bad behavior,” such as people holding onto housing units only for investments, and free up critical housing.

The pro-development group YIMBY Action has not been involved in the discussion with Peskin, but signaled its support of the idea Tuesday.

“The idea of a vacancy tax is sound and YIMBY would strongly agree that it would be a great tool to add to the toolkit,” YIMBY Action executive director Laura Foote told the San Francisco Examiner in an email. She noted that there may be some enforcement challenges. “How will we be able to establish whether it is occupied?” Foote said.

Those details are still being worked out.

Peskin’s vacancy tax announcement will come as part of a press conference Wednesday afternoon with the North Beach Business Association, Telegraph Hill Dwellers and North Beach Neighbors on what the media advisory calls “the blighted 500 block of Columbus Avenue,” where he will discuss his “comprehensive plan to address long-term storefront vacancies.”

The groups, which track vacancies in the area, say that in the past three years vacancies have doubled to 38 and the current 10 percent vacancy rate is the highest since 1986.

The uptick is attributed to recent construction in the area, and property owners who have left retail space vacant.

Peskin refuted any suggestion vacancies are being caused by neighborhood restrictions like a decade-old chain store ban, which he said remains broadly supported by North Beach residents.

“They don’t want to be anywhere U.S.A and they don’t want to have Starbucks,” Peskin said. “Landlords need to adjust their expectations of rent accordingly.” He added, “The chain store ban is as popular today as it was when passed a decade ago.”

Danny Sauter, president of North Beach Neighbors, agreed the chain store ban was good, but thought other restrictions ought to loosen up. “The zoning controls in North Beach (more specifically the North Beach Neighborhood Commercial District) are the strictest of any neighborhood,” Sauter wrote in an email to the Examiner. “New businesses have to budget months if not years of planning and paperwork before opening.”

Sauter said he was open to the idea of a vacancy tax. “It’s incredibly disheartening to walk by the same storefronts and see them empty month after month, year after year,” he said. “We need to fill these storefronts up with life again. We’re open to hearing any and all ideas to achieve that.”

Kathleen Dooley, of the North Beach Business Association, which is pushing to “resolve the vacancy crisis,” said community members want to call public attention to two owners of multiple buildings that account for a large number of the vacancies in the area.

Unlike Sauter, Dooley was in strong support of a tax. “I just feel like we’ve done everything in the past years to use the carrot and not the stick and it has been unsuccessful,” Dooley said.

Another element of the plan is legislation introduced by Supervisor Sandra Lee Fewer, that would close a loophole in the city’s storefront vacancy registry, increase fines for those who do not register and require building owners to pay for annual inspections of their properties to make sure they meet required conditions of vacant buildings. Only a handful are actually registering under the current law, as was reported earlier this month by the San Francisco Examiner.

Other ideas include better promotion of The City’s legacy business program, improved city assistance for those buildings that suffered fire damage and roundtables to be hosted by the Office of Small Business in every district to discuss recruitment and retention of local small businesses.