San Francisco Landlords Take Down City Vacancy Tax Without Trial

San Francisco property owners convinced a California trial court that the city’s new tax on vacant residential units is unconstitutional.

Proposition M, adopted by voters on the 2022 ballot, was slated to become effective in 2025 and would charge property owners an escalating amount for each residential unit that was vacant for more than half of the preceding year.

The California Superior Court for San Francisco County granted summary judgment to the property owners Tuesday, striking down the tax for violating the US Constitution’s Fifth Amendment takings clause by coercing the owners to rent out their property. It also violates landlords’ fundamental liberty interests in familial living arrangements by penalizing units rented to family members, and their privacy rights by seeking to compel them to share the properties they live in with strangers against their will, Judge Ronald E. Quinachay said.

The measure imposes taxes between $2,500 and $5,000, depending on the square footage, with increases each subsequent year the unit is vacant, subject to certain exceptions. Proceeds from the tax were earmarked to subsidize rent for individuals who are low-income or older than 60, and to create additional housing.

Several landlords and three trade associations representing owners of residential properties challenged the tax in a February 2023 complaint.

Two of the plaintiffs, brothers Eric and Andrew Debbane, pulled the building they co-own off the rental market to move their aging mother in with them. She has since died and they want to keep the rest of the building vacant for their personal use but face taxes of $7,500 in 2024, $15,000 in 2025, and more than $30,000 in subsequent years under the proposition, they alleged.

Another plaintiff, Robert Friedland, feels he is too old to continue to rent out the other three units in the building he lives in, and says the tax would effectively evict him because he can’t afford to pay, the complaint said.

And Natasa Zec spends half the year in a small condominium in San Francisco and half the year in Boston. “Going forward, if she continues to divide her time between the two small abodes as she historically has, she would be subject to a tax of $2,500 in 2024; $5,000 in 2025; and $10,000 annually thereafter,” the complaint alleged.

Nielsen Merksamer Parrinello Gross & Leoni LLP represents the plaintiffs.

The case is Debbane v. San Francisco City & Cnty., Cal. Super. Ct., No. CGC23604600, 11/26/24.