If you own a vacant residential unit in San Francisco, plan to pay a vacancy tax starting January 2024. San Francisco voters approved the Empty Homes Tax in November, which will tax property owners who leave their units vacant for more than 182 days. However, owners of single-family homes and duplexes are exempt.
If you own a condo, loft, TIC, or co-op in a 3-unit building or larger, you need to file with the city every year on your taxes. If you do not file, you will be assumed to be keeping your unit vacant, and you will be taxed. In a twisted way, you are presumed guilty until you prove your innocence every year for the next 29 years.
If you keep your property vacant for more than 182 days, whether consecutive or non-consecutive, you are subject to the tax. If you own a unit in a high-rise tower downtown, a loft building in SOMA, or even a 3-unit Victorian flat in Noe Valley or Pacific Heights, you will need to file. If you have a second home and you only live in your San Francisco unit part-time, you’ll need to live there for at least 182 days.
The tax is based on square footage and doubles each year of vacancy. For properties under 1,000 square feet, the tax is $2,500 the first year, $5,000 the second, and $10,000 the third. For properties under 2,000 square feet, the tax is $3,500, $7,000, and $14,000. For properties over 2,000 square feet, the tax is $5,000, $10,000, and $20,000.
The controller’s office estimates this will affect around 4,000 units per year, but there is no exclusion for condo owners in large buildings to file. Presumably, everyone who lives in any building with three units or more, which is a huge number of people, will have to file for an exemption from this vacant unit tax, even if you only own one unit. Revenue from this tax will go to subsidies for seniors and low-income households, as well as pay for the acquisition and rehabilitation of more affordable housing.
If you own a property in San Francisco and are wondering if you should rent it or sell it, or if you’re considering investing in the city or anywhere in the Bay Area to take advantage of these crazy low prices right now, give me a call. I will be happy to help