LA Vacancy Tax Proposal Shelved Until 2022

LA Vacancy Tax Proposal Shelved Until 2022
A 'for-rent' sign is posted in front of an apartment building in Los Angeles on Feb. 1, 2017. (Justin Sullivan/Getty Images)
Chris Karr

An effort to create a vacancy tax in Los Angeles that would penalize property owners who don’t rent empty units has been postponed after failing to earn City Council approval in time for inclusion on the November ballot.

Despite enthusiasm from several councilmembers, a last-minute attempt to qualify the measure for the Nov. 3 election lacked enough specificity, especially regarding revenue estimates, to squeeze through by the July 1 deadline.

City Council voted June 16 to have city attorneys draft a measure to increase revenue by penalizing empty rental units, but they were unable to iron out the details in time. The 15-member Council voted unanimously to postpone the measure at a June 24 meeting and angle instead for 2022.

A vacancy tax is a penalty that would apply to units that are not in use for a specified amount of time in a calendar year, and would generate tens of millions of dollars annually that could be applied to the city’s burgeoning homeless problem and mounting housing crisis, proponents say.

A Los Angeles Housing + Community Investment Department (LAHCID) report, delivered to the Council on June 11, estimated a citywide vacancy rate of 6 to 7 percent, or approximately 85,000 to 100,000 vacant units. If the city pursued a flat fee of $3,000 for each penalty and conservatively estimated 50,000 taxable units, a vacancy tax could generate $150 million per year, the report stated.

The report added that a disproportionate number of vacancies are high-end or expensive units, while mid- or low-end units have lower vacancy rates. According to the 2019 Greater Los Angeles Homeless Count, there are 36,000 homeless individuals that could benefit from affordable housing that the tax would create, the report said.

Opponents cited the high cost of placing the measure on the ballot, estimated at $12 million, as contributing to the measure’s failure to proceed.

“The city of Los Angeles has no business wasting $12 million for placement on the ballot in furtherance of yet another tax on property when so many property owners in the city are suffering today because of uncollected rent due to the City’s eviction moratorium, or due to the loss of their full-time jobs or infliction with the coronavirus themselves,” Daniel Yukelson, executive director of the Apartment Association of Greater Los Angeles (AAGLA), told The Epoch Times.

“Now is not the time to assess more taxes,” he said. To do so “makes the City Council look like a bunch of pigs.”

Fred Sutton, a senior vice president at the California Apartment Association (CAA), told The Epoch Times that the proposal failed because the Council “tried to rush this [measure] through in two weeks.”

“They hadn't even studied what vacancy taxes do in other cities, or if this actually helped lead to new housing,” Sutton said.

The LAHCID report cited Vancouver, Canada; Washington, D.C.; and Oakland, California, as cities that currently have a vacancy tax. Oakland's tax—applied to units occupied fewer than 50 days each year—is expected to raise $10 million annually for the next 20 years, the report says.

Councilman Paul Koretz thought the current proposal was ready to move forward. He said at the June 24 meeting that the “greatest likelihood” of passing the tax would occur this November—not two years from now.

“I think the electorate that will turn out in 2022 will be considerably less motivated, probably not as progressive as all the people turning out to defeat Donald Trump [in 2020],” he said.

He called the progressive voters likely to turn out this November a “more tax-willing electorate,” and said he believed the current measure would have passed—even if it’s not perfect.

“In two years, we'll have less of a chance to pass. And so I would prefer that we give it that one chance,” he said.

Councilman Mike Bonin said he didn’t think the current proposal “would achieve any of the objectives” that he had initially hoped when he introduced the measure in 2019. He said the desired annual revenue estimate “would be significantly greater than what we have now.”

“This measure before us, as written, would be very problematic, and not help us solve any of those problems,” Bonin said at the June 24 meeting.

Deputy City Attorney Charles Hong cited several parameters that contributed to the measure’s failure, including the impact of potential exemptions that were not clearly defined.

“The more exemptions you include or exclude, you're either expanding or narrowing the tax base,” Hong said. “That's critical in determining who and what is taxed.”

 A "For Rent" sign is seen on a building Hollywood, Calif., on May 11, 2016. (Robyn Beck/AFP/Getty Images)
A "For Rent" sign is seen on a building Hollywood, Calif., on May 11, 2016. (Robyn Beck/AFP/Getty Images)
 The downtown skyline of Los Angeles on Oct. 12, 2017. (Frederic J. Brown/AFP via Getty Images)
The downtown skyline of Los Angeles on Oct. 12, 2017. (Frederic J. Brown/AFP via Getty Images)
 Demonstrators call for a rent strike during the COVID-19 pandemic as they pass City Hall in Los Angeles, Calif., on May 1, 2020. (Frederic J. Brown/AFP via Getty Images)
Demonstrators call for a rent strike during the COVID-19 pandemic as they pass City Hall in Los Angeles, Calif., on May 1, 2020. (Frederic J. Brown/AFP via Getty Images)

Citizens Weigh In

The proposal for a vacancy tax received support from advocacy groups such as Housing Is A Human Right, a division of AIDS Healthcare Foundation. The organization sent a letter to the Council on June 11, lauding it for addressing “the profiteering of our housing at the expense of our communities.”

In the letter, the organization cites a report from the city's Chief Legislative Analyst that states there are nearly 20,000 unoccupied residential units in the city, while the estimated unhoused population is over 40,000. “We have to do more to address the crisis, and a vacancy tax would be one option,” the letter states.

CAA also spearheaded a letter-writing campaign from concerned housing providers; they sent 13,500 emails to the Council opposing the measure.

“The Council should stop focusing on punitive measures such as vacancy taxes, and focus on spurring and incentivizing housing in the region,” CAA’s Sutton said.

Yukelson said the proposal is “the definition of insanity” and “poorly conceived.”

“The City Council continues to propose ideas that expand upon more-of-the-same, decades-old housing regulations, expecting a different result,” he said.

Matt Williams, president of Williams Real Estate Advisors, told The Epoch Times that the proposal could have plunged most small property owners into a “no-win” conundrum.

“Do I take this poor renter and not pay the vacancy tax? Or pay the vacancy tax and not take the poor rent[er]?” he asked.

“It is as though an owner can't win. They treat their asset as an investment," he said. Pressuring owners to rent this way, "only helps them make a poor decision.”

Williams said there are over 600,000 properties with at least seven units each in the Los Angeles metropolitan area—and that passing a law “to get an estimated 19,000 units on the market seems to be a shortsighted solution to a much bigger problem.”

“Passing rent control in 1978 didn't solve the housing crisis. Passing this vacancy tax won't solve it either,” he said. “All it does is put another financial burden on property owners.”

Chris Karr is a California-based reporter for the The Epoch Times. He has been writing for 20 years. His articles, features, reviews, interviews, and essays have been published in a variety of online periodicals.