August 2019

“I hit him with the left… and then again… and then again.
Once he focused on my left, I knocked him out with the right.
He never saw it coming.”
— Anonymous Boxer

As California cities, counties, and the state grapple with how to address the affordable housing approach, many property owners are more concerned with the solutions not being vetted. Bills like AB 1482 will cap rent at seven percent + CPI, while only allowing one rental increase in a calendar year. Yet, the bigger concern is how the state will respond when they realize a rental cap does not actually increase housing for those in need.

In fact, some studies suggest that rent caps actually increase gentrification; which means the housing package being offered is not the end of the discussion. On the contrary, it is far more likely that the state will then find a way to force rental owners into these new parameters. How? I think it will come in the form of a vacancy tax.

A vacancy tax is a way for local governments to generate more revenue (when have they ever opposed more taxes?) while also shifting the focus of the housing crisis on the rental owners. This new form of retribution against those with homes to provide for rent is being simply known as the vacancy tax. As it sounds, the tax would “only” apply to rental owners who have unoccupied units, regardless of the justification, size or cost of the units to maintain.

Areas like Washington D.C. have engaged in these forms of taxes for years; receiving over $9.4 million in taxes in 2016 alone. That was three years ago, but a 2017 report was still unable to draw a link between the tax and any increasing housing results. The only real gain was providing local governments with a new attractive option for kicking the proverbial can down the road.

In California, voters in Oakland approved a vacancy tax in 2018 that applies to all privately-owned properties in the city—including residential, commercial and empty lots. If the property has not been in use for more than 50 days, it becomes subject to an annual tax of $6,000 per parcel, regardless of size or value. For a condo or duplex, the tax equivocates to about $3,000 per year. And while there are ten possible exemptions, most would be subject to the tax. In Los Angeles County, there are reports of over 93,000 vacant homes. Never mind the circumstances that led to these vacancies, or that it amounts to merely 4.4 percent of the housing stock in the area.

The L.A. City Council is far more interested in silencing advocates and critics by placing a band-aid over an already bandaged wound… and to increase revenue for their personal pet projects. Experts already predict the tax would net over $10 million in its first year alone. What experts will not state is whether it will actually improve the rental housing stock because it’s too difficult to ascertain. As owners, we don’t need data to know what will happen next. At some point, all this becomes a headache for mom and pop shops and they eventually need to make decisions to protect themselves which in the end also funnels dollars away from local communities and further consolidates power away from the middle class. Just like in boxing, it’s not the first punch that gets you… it’s the knockout, friends.