Oppose SB-789: San Francisco's Failed Vacancy Tax Goes Statewide

SB-789 proposes a $5-per-square-foot tax on commercial properties vacant longer than six months. Though intended to address vacant storefronts, this bill ignores clear evidence from similar initiatives in cities like San Francisco that have failed to achieve their intended outcomes.

Five years ago, San Francisco enacted a nearly identical vacancy tax. Rather than reducing vacancy rates and improving business conditions, the city's commercial vacancy rates have actually increased and the tax has failed to generate the anticipated revenue. Despite well-intentioned efforts, this punitive approach proved ineffective at best, and counterproductive at worst.

SB-789 incorrectly assumes that imposing additional punitive taxes on property owners will somehow overcome the deeper barriers businesses face today – public safety concerns, burdensome regulations, and challenging market conditions that continually discourage occupancy. Rather than repeating past mistakes, California should reject SB-789 and instead adopt solutions that genuinely support property owners, small businesses, and their communities.

No tax imposed on property owners can counteract the factors pushing businesses out of our cities, such as rising operational costs, complex permitting processes, persistent retail theft, and concerns about neighborhood safety. Similarly, vacancy taxes alone will not create more supportive conditions or lower the existing barriers to entry for small and new businesses looking to occupy commercial spaces.

SB-789 Fails to Recognize:

• A tax on property owners does nothing to solve the deeper problems of crime, safety concerns, or other barriers preventing occupancy.

• Vacancy taxes do not create more attractive business conditions or simplify the permitting and regulatory hurdles businesses face.

• Punitive taxes unfairly penalize property owners who are actively looking for tenants in a challenging market.

• The bill ignores market-driven realities like sector downturns and supply-chain disruptions beyond property owners' control, especially impacting warehouses and larger commercial properties.

  
  

Alternatives to SB-789:

California has an opportunity to proactively address commercial vacancy and simultaneously tackle our urgent housing needs through practical solutions and incentives:

• Offer incentives to convert vacant commercial spaces into housing, simplifying zoning rules and permit processes to quickly address California’s urgent housing shortage.

• Streamline city permits and zoning approvals to make it easier, quicker, and less costly for businesses to move into vacant spaces in cities like San Francisco, Oakland, and Los Angeles.

• Cut excessive red tape and regulations to lower bureaucratic barriers and administrative expenses that disproportionately impact small business owners looking to occupy commercial spaces.

• Create tax credits and financial incentives to encourage property owners and small businesses to use vacant spaces for housing or new business occupancy instead of relying on punitive taxes.

• Prioritize flexible zoning and adaptive reuse policies to make it easier to transition underused commercial buildings into residential units, promoting neighborhood renewal and additional housing opportunities.

I will provide public comment in Sacramento opposing SB-789 at the Senate Standing Committee on Revenue and Taxation hearing scheduled for Wednesday, April 23rd at 9:30 AM.