Even if California cities fine companies that own vacant housing, it’s not clear how many homes would open up or how many people might be helped.
California has a housing shortage, so the idea of a big, faceless corporation keeping thousands of homes empty for months is pretty frustrating. But a new proposal in California is aimed at changing that by allowing cities and counties to impose vacancy fines.
The intent is to let local governments levy charges on corporate-owned homes left unoccupied for more than 90 days, as well as to use eminent domain — expropriation rights — to take possession of such homes to use as affordable housing. Existing law requires that properties be declared blighted before cities can confiscate them.
“In this type of crisis, when we have so many people either unhoused or in housing insecurity, there’s no justification for a residential unit to be vacant,” said state Sen. Nancy Skinner, the Berkeley Democrat behind the proposal. “(I’m) trying to make sure that every bit of residential property is being used for that purpose — to house people.”
According to 2018 census data, there are more than 1.2 million vacant homes in California, a number that includes homes owned individually and by corporations, apartments, vacation homes and dwellings for rent or sale. There’s no way of knowing how many would be subject to penalties. It’s also unclear how many owners would make vacant homes available rather than pay a fine, or how many people could be newly housed in those places.
Nor is it clear how much money would be generated by such charges to fund local housing programs, as Skinner’s measure would require.
No state law prohibits vacancy taxes, but Skinner wants to enshrine fines as an option along with expanded eminent-domain rights. The League of California Cities has not taken a position on the bill, which would apply to corporate-owned single-family homes, condos and completely empty apartment buildings.
Skinner’s proposal also includes right of first refusal for community land trusts and other nonprofit groups: Corporations would have to give them the first shot at purchasing the vacant homes. With foreclosed homes, tenants would have initial buying rights.
The first-refusal provisions evoke a situation in Oakland involving a group of homeless and housing-insecure mothers, Moms 4 Housing. Members occupied an abandoned home owned by corporate property-flipping giant Wedgewood Inc.as a protest against gentrification, displacement and a lack of affordable housing.
Moms 4 Housing was evicted in January. But in a last-minute deal yet to be finalized, the group would be allowed to move back in. Wedgewood would sell the house to the nonprofit Oakland Community Land Trust and give the trust the first opportunity to buy any future homes the company sells in Oakland.
After the Great Recession, investment firms snapped up hundreds of thousands of foreclosed homes across the country and have come under fire in recent years for jacking up rents, imposing fees and neglecting maintenance. One of the most prolific corporate landlords is Invitation Homes, which owns and rents out almost 80,000 single-family dwellings.
In California, purchases by big investment firms have slowed in recent years as housing prices have skyrocketed. But these companies still own and rent out a lot of homes — nearly 25,000, according to data from the Anti-Eviction Mapping Project. Invitation Homes sits at the top of the heap with 13,563 for rent across the state.
How many corporate-owned houses are actually sitting vacant for more than 90 days? That’s not clear.
The Canadian city of Vancouver has a vacancy tax, with mixed results.
In response to a citywide housing crunch and skyrocketing housing costs, the west coast city imposed a yearly 1% vacancy tax in 2017 on any residential property — not just corporate-owned — that has been empty for at least 6 months. Two years later, the province of British Columbia, where Vancouver is located, imposed an additional half-percent for Canadian owners and permanent residents and 2% for foreign owners.
The results? The number of vacant homes dropped: Vancouver had 1,989 empty residences subject to the tax in 2018, a 22% drop from 2017 — but that’s only a slice of the total vacancies.
Both the city and the province have laundry lists of exemptions, including renovations, legal proceedings, hospitalizations and estate sales — to the point that the number of exempt vacant Vancouver homes was more than double the number taxed in 2018.
And Vancouver’s overall vacancy rate is pretty small anyway — around 1%, indicating an incredibly tight rental market. British Columbia’s is similar at 1.5% (California had a statewide vacancy rate of 8.44% in 2018). Even filling more vacant homes doesn’t necessarily mean rents become more affordable.
Still, there’s lots of new tax money for affordable-housing projects— Vancouver collected nearly $40 million Canadian dollars ($28.8 million U.S.) in 2018 and the province pulled in at least $115 million ($88 million U.S.) in 2019.
Vacancy fines “certainly don’t represent a silver bullet by any stretch,” said Josh Gordon, an assistant professor at Vancouver’s Simon Fraser University who studies the city’s housing market.
Targeting only corporate-owned homes, Gordon said, seems too narrow.
“The lesson from British Columbia is that the tax needs to be applied in a fairly broad manner, and enforcement has to be done diligently, and the penalties for leaving properties vacant have to be fairly substantial,” he said. “Short of that, you’re not going to get much movement in the rental market.”
Skinner’s bill doesn’t specify a penalty amount, but that could be added. The senator said she doesn’t expect her bill to be a cure-all, but everything helps in a crisis.
“Maybe we get 100,000 units that get back onto the market,” she said. “But when you look at the nature of our crisis, we can get 100,000 vacant units back into use far quicker than we can construct 100,000 units.”
Carroll Fife is the director of the Alliance of Californians for Community Empowerment Oakland, an advocacy organization that worked closely with Moms 4 Housing, and a supporter of Skinner’s bill as a “positive first step.”
“Corporations are not people, and they should not be allowed to buy up the housing stock,” Fife said. Skinner’s bill is “starting to course-correct where we’ve gone off track.”
But expanding a vacancy charge beyond corporate owners would be challenging, Fife said, because people have strong feelings about property rights, as they do about guns.
“It’s similar to the Second Amendment,” she said.
The eminent-domain provision of Skinner’s proposal may be the most controversial. Debra Carlton represents the California Apartment Association, a lobbying group for landlords. She said the eminent-domain element is “unconscionable.”
“I don’t think eminent domain was ever intended to be used in that way,” Carlton said. “That’s almost theft — taking somebody’s property … corporate owner, mom and pop, it doesn’t matter.”
But in a housing crisis, Fife said, there’s a need for bold solutions.
“I just wish that there was that same kind of fervor around eminent domain reclaiming black neighborhoods in service of business interests and municipal interests,” Fife said. “You don’t see that kind of opposition in West Oakland when the city comes and says, ‘We want to put a post office here’ or, ‘We’re gonna build a freeway through your neighborhood.’ ”
But as for the penalty itself? Carlton said it could be negotiated — her group would want a longer permissible vacancy period as well as exemptions similar to what Oakland has for its recently implemented vacant-land tax and Vancouver and British Columbia have for vacancies.
And first-refusal rights? “If there’s a tenant in the property, they would have the first right to purchase it.” Carlton said. “That makes sense. That’s fine.”
Others, however, see the whole bill as an attack. Wedgewood spokesperson Sam Singer called it an “economy killer” and “an assault on property owners in California.”
But he also said that the bill would have no effect on Wedgewood’s business model, as the company doesn’t keep homes vacant for more than 90 days.
“By the very nature of the house-flipping business, you buy it, you fix it, you sell it,” Singer said. “The redistribution of either corporate-owned homes or individually owned homes is a very dangerous path for California.”
Invitation Homes said it, too, would be unaffected. In an emailed statement, spokesperson Kristi DesJarlais said the company never keeps homes vacant, as that would “undermine our business model” and be “irresponsible given the housing shortage.”
DesJarlais said Invitation Homes’s California occupancy hovers around 97% and that the best solution to the state’s housing crisis is building more housing.
High occupancy is commendable, said Skinner.
“If their business model is to get homes occupied before 90 days, I say great; more power to them,” the lawmaker said. “And if they don’t, then my bill will affect them.”