As San Diegans consider empty homes tax, opponents point to a San Francisco court loss

Opponents of San Diego’s proposed empty homes tax are sounding the alarms, warning that the ballot measure is nearly identical to a tax that was struck down and ruled unconstitutional not long ago.

They’re referring to a case in San Francisco, where voters passed a similar initiative by a narrow margin in 2022. Officials there stopped collecting the tax two years later as they appeal the court’s decision. 

But that hasn’t stopped San Diego officials from bringing the question to voters in June: Should property owners who intentionally keep homes empty and off the market during a housing shortage be required to pay an additional tax worth thousands of dollars a year?

It’s a question that has divided San Diegans in recent months, from renters to property owners and businesses to union representatives. And it comes at a time when limited housing supply has kept rents high for years — in a region where more people fall into homelessness for the first time than leave the streets for housing.

San Diego Councilmember Sean Elo-Rivera, who has championed iterations of this proposal for the better part of the past year, said families can no longer afford to wait for leaders to take action on the housing crisis. He said an owner’s decision to keep a home vacant for more than half of the year in the middle of a housing shortage carries a real public cost and a tax should apply.

“That is a legitimate exercise of the city’s taxing authority and it is meaningfully different from what San Francisco tried to do,” Elo-Rivera said during a public meeting last month.  

He said the city hired outside legal experts to carefully review the proposal.

“While amateur legal analysts are throwing spaghetti at the wall because they know the people are broadly supportive of this proposal,” he added, “I’m very confident in the foundation we’ve built.”

Known officially as Measure A on the June ballot, the proposed tax would apply to vacant homes that are not claimed as a primary residence, totaling $8,000 for the first year beginning in 2027 and $10,000 every following year. Corporate-owned empty homes would have to pay a $4,000 surcharge the first year and $5,000 every following year. The tax and surcharge would be adjusted based on inflation beginning in 2029.

The city’s independent budget analyst projects the proposal could generate between $9 million and $21 million in the first year, and in the following year, between $10 million and $24 million. But it all depends on how property owners respond. There are more than 5,100 homes that would qualify for the tax — about 40 are corporate owned.

Several housing advocates and human rights groups, as well as labor unions, have come out in support of the ballot measure.

Stephen Russell, president and CEO of the San Diego Housing Federation, said the proposal is based on sound economic theory. It’s a step in the right direction that will produce more housing opportunities.

Those in opposition are “arguing against putting 5,100 homes on the market for San Diegans,” he added. “Even if they had absolute certainty that it was legal, they still wouldn’t support it.”

Some have formed committees to fight the ballot measure. That includes a group of realtors, and Republican Assemblymember Carl DeMaio’s Reform California, which has already spent at least $12,500.

The California Apartment Association, a statewide trade group that represents rental housing providers, told inewsource that it doesn’t matter if San Diego’s proposal offers exclusions, or if it’s attached to a crisis.

“At its core, the measure still targets owners who choose not to rent, either penalizing them for exercising that choice or effectively coercing them to give up that right to avoid significant financial penalties,” said Mallory Homewood, an attorney with the group.

“At a time when San Diego needs more housing, the city should focus on policies that increase the availability of affordable housing for families of all income levels, not punitive measures that raise serious legal concerns and are likely to end up in court.”

‘Walking into the buzz saw’

Despite the warnings, the San Diego City Council voted 8-1 last month to put this question before voters in June.

The lone “no” vote was Councilmember Raul Campillo, who at the time said he was disappointed that he never received a robust legal memo analyzing the proposal’s ability to withstand a lawsuit. In a recent interview with inewsource, he said he still hasn’t received that memo.

“You’re usually given a memo that is lengthy, extensive, explaining to the council members how we’re going to go about winning it, rather than just, ‘Our conclusion is we feel good about it,’” Campillo said. “For nothing to be provided to a council member who’s asking for it, truly, I’m shocked.”

He gave a hypothetical example of a property owner who decides to leave the rental housing business and then, seeing signs of future economic distress, waits to sell rather than taking a loss. 

“I feel that we’re walking into the buzz saw on this one,” he said. “And our own city attorney didn’t give me any reason to believe otherwise.”

When asked about this, a spokesperson for the City Attorney’s Office said the city’s proposal is “sufficiently different” from San Francisco’s tax. The office would not explain how or why.

The judge’s ruling in San Francisco hinged on two key legal issues: the Takings Clause of the Fifth Amendment to the U.S. Constitution and the state’s Ellis Act.

That means the government can’t force a property owner to give up use of their property without compensation, and it can’t force them to remain in the business of rental housing.

Both initiatives in San Diego and San Francisco impose a tax on vacant homes with specific exemptions. They cover different types of housing — San Diego’s proposal targets vacant homes that aren’t claimed as a primary residence, while San Francisco’s tax targets apartment buildings with three or more vacant units. 

But when pressed on what exactly sets San Diego’s proposal apart, Elo-Rivera’s spokesperson said it’s narrowly focused on homes left vacant for more than half a year during a housing shortage.

But that phrase — “during a housing shortage” — isn’t some magic wand that allows governments to bypass established legal rights, according to Chris Skinnell, an attorney with a Bay Area law firm known as Nielsen Merksamer. He represents the plaintiffs, including advocacy groups and individual property owners, in the lawsuit against San Francisco.

Specifically, he said, the Takings Clause already assumes that the government would have a good reason to force an owner to give up their property. And there’s no emergency exception to the state’s Ellis Act, he added.

“I don’t think the fact that you say it’s an emergency changes the legal analysis,” Skinnell said, adding that it misses the point.

Other cities, including Oakland and Berkeley, have successfully passed similar vacancy taxes.

However, folks in Berkeley are watching the San Francisco case closely, according to reporting from Berkeleyside. A representative with the local property owners association told a reporter if the lower court’s ruling is upheld — that the tax is unconstitutional — the association would take “immediate action” to challenge Berkeley’s tax.