A voter-approved ballot measure called the vacancy tax – intended to tax owners of San Francisco apartments that have been vacant for six months or more – violates property owners’ rights under California law, a state appeals court has ruled.
The 1st District Court of Appeal in San Francisco upheld a judge’s decision that has prevented Proposition M from taking effect since 54.5% of the city’s voters approved it in November 2022. It was supported by the Democratic Party, tenants’ advocates and labor unions, and opposed by business groups and apartment owners, the San Francisco Chronicle reported.
Supporters called it a “vacancy tax” and noted that about 10% of the city’s 406,000 rental housing units had been vacant in 2019. The tax, ranging from $2,500 to $20,000 per unit depending on its size and the duration of the vacancy, was to have been used for affordable housing and low-income rent subsidies.
But the appeals court said Prop M conflicts with the Ellis Act, a 1985 state law backed by property owners that prohibits any requirement for an owner “to offer, or to continue to offer, accommodations in the property for rent or lease.”
It was passed to counter a state Supreme Court ruling upholding a law in Santa Monica that required property owners to seek approval from the city before demolishing rental units or converting them to other uses.
The Ellis Act grants property owners both ”the right to enter the rental market” and “the right to exit the rental market” and to remain out of it, Justice Kathleen Banke wrote in the 3-0 ruling.
Both supporters and opponents of Prop M agreed, Banke said, that it was intended to “require owners of residential properties, on pain of significant taxation, to put such properties to residential use and keep them in such use.”
But that conflicts with the purpose of the Ellis Act “to prevent owners from being compelled to rent their residential property by the actions of public entities,” said Banke, an appointee of Gov. Arnold Schwarzenegger. She was joined by Justices Monique Langhorne Wilson and Charles Smiley, both appointed by Gov. Gavin Newsom.
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