Local Vacancy Taxes: A Tool but Not a Panacea

 Key takeaways

• Vacancy taxes come in two varieties: a tax on vacant housing or commercial units, or a tax on abandoned or blighted properties. These taxes are one way to tackle vacancy and abandonment, but they have not had dramatic effects on housing markets where they have been tried. Instead, they are a useful tool that should be paired with other strategies.
• Vacancy taxes raise modest revenues, but can be useful incentives for other goals.
• Taxes on empty housing or commercial units act as a regulatory tax on land speculation, intended to improve the number of available housing units. Vacant unit taxes can lower the number of vacant units, but do not generally lead to lower rents.
• As currently used, taxes on abandoned or blighted properties act as a penalty on negligent landlords or land speculators, intended to spur redevelopment. Blight taxes must be structured to avoid pushing low-income homeowners into tax foreclosure.
• Municipalities considering vacancy taxes must be aware of the geographic and housing context before adopting a vacancy tax that may be poorly targeted or fail to generate enough available housing units.

What We Mean When We Talk About Vacancies

Vacant properties are most easily described as properties no one is using. Residential and commercial properties can both be vacant. Persistent vacancies can create problems for property markets and long-term land management.¹ Vacancy taxes are a type of tax used to combat two land use problems that might best be described as two sides of the same coin: property speculation and abandonment.

The U.S. had between 15 and 16 million vacant residential units in 2024.² The Census Bureau defines seven categories of vacant residential units, many of which can be extended to the commercial property sphere. These include temporary vacancies related to moves, occasional use, temporarily unoccupied, or other uses.

The nationwide statistics obscure trends that vary widely by location. These categories do not clearly define when vacant, usable homes are held off the market for speculative purposes. Some local policymakers and housing advocates note that some unused housing units could more appropriately be used as permanent housing rather than sit vacant or be used as vacation rentals.

The “other vacant” category includes a variety of different uses³ but some of those properties might be best classified as abandoned.⁴ Abandoned properties are a subset of vacant properties in which the owner has walked away from responsibility for maintaining the property. This includes allowing the building or land to deteriorate, failing to pay mortgages or property taxes, or otherwise eschewing responsibility for property maintenance.⁵ Structures can become public health hazards that require demolition. Long-term vacant properties have also been linked with higher insurance premiums, higher violent and property crime rates, and cycles of neighborhood abandonment in which neighbors leave rather than continue to live or work next to long-term vacant properties.⁶

This framework can also apply to commercial properties. Office space and retail centers have suffered in the aftermath of the pandemic. A 2024 report from Moody’s estimated that over 20 percent of office space is vacant nationwide.⁷ A recent academic article estimated that over $550 billion in office building property values nationwide were lost during the pandemic.⁸ Retail vacancies remain high, with nearly 9 percent of nationwide mall space vacant, according to Colliers.⁹ Abandoned commercial properties can include brownfield properties with environmental damage, grayfield properties like abandoned retail or office properties, and other unused industrial or institutional properties.

Areas across the country deal with regionally distinct vacant property issues, and not all vacancies have the same causes or solutions. When considering what vacancies to tax, it is crucial that local policymakers know what vacancy issues exist in their area and which property owners would be affected by a tax.¹⁰

What Is a Vacancy Tax Supposed To Do?

There are two distinct tax policies that may both appropriately be called vacancy taxes. In the U.S., four midsize and large cities currently have vacancy taxes – Washington, D.C., San Francisco, Oakland, and Berkeley. Smaller localities, including Frederick, Maryland, have also adopted a vacancy tax. Dozens of localities over the past decade have considered these taxes to combat housing shortages, including cities like New York City, Los Angeles, Chicago, San Diego, Honolulu, and resort communities across the Mountain West. These taxes have a longer history in France and Canada.

The most important consideration for local governments is that generating revenue from vacant units and reducing the number of vacant units are at cross-purposes. There is an inherent tradeoff that means owners who choose to rent or sell a housing unit will not pay the tax, and alternatively that an owner will choose to pay the tax instead of renting or selling it. It is healthy for the market to have some temporary vacancy in it to accommodate people who are moving, so the target vacancy rate should never be zero.

Empty Homes Taxes

The first, more well-known, variety is a tax on vacant, usable units – sometimes also referred to as empty homes taxes. While the revenues they generate are important, empty home taxes exist in part as a regulatory tax on owning properties as assets rather than as housing units.

These taxes are intended as an economic nudge to get landlords to make units available. They operate more like tobacco or alcohol taxes, which are meant to discourage behavior, than traditional property taxes, which are benefit taxes.¹¹ Tax rates are usually set at a percentage of the total property value or expected rent, which would theoretically incentivize owners to lease or sell units rather than pay the tax. Many existing empty home taxes include exemptions, such as a recent sale or use by a person temporarily in the hospital or assisted care.

Another thesis suggests that investors interested in property as a financial asset may hold onto residential property as an investment vehicle not intending to use it at all, again keeping usable residential units off market.¹² Taxing the vacancy can push owners to sell or rent the units, making them available for housing.

Some vacation destinations may want to use these taxes to manage vacation or short-term rental properties. Vacation rental properties, including those listed on Airbnb and VRBO, are increasingly owned and operated by companies who use these properties exclusively for short-term rentals, taking long-term rental units off the market and profiting from the lucrative short-term rental market.

A vacancy tax alone may not be suitable for contending with vacation rentals, which likely require other interventions including treating those properties like hotels for tax and regulatory purposes.¹³ For instance, Honolulu recently doubled its property tax rate for homes used as vacation rentals, which sets the rate between the property tax rate for permanent residences and hotels.¹⁴ Cities including Boston, Vancouver, Honolulu, New York, Jersey City, and Portland, Maine, all use rental registries to help manage the industry.¹⁵

In many cases, revenues from empty homes taxes are set aside for affordable housing development. Advocates argue if property speculation takes some units off the housing market and indirectly increases housing costs, the taxes generated from that property speculation should be used to build housing for people to live in. Focusing on affordable housing development means that low-income residents are not being left out when new housing is built in hot housing markets, where the market rents for new properties can be higher than low-income renters can afford.

Abandoned or Blighted Vacancy Taxes

The second variety is a tax on abandoned or blighted properties. These target the owners of such properties, some of whom are absentee property owners who have walked away from underwater units, and some of whom are land speculators waiting to sell vacant or poorly maintained parcels to developers. There is substantial interest in adopting these taxes in places with high numbers of abandoned properties, as well as places dealing with vacant land speculation.

Taxes on abandoned or blighted properties are meant to incentivize owners to do something with a property or sell it. They are also often rationalized as a form of penalty on landowners who are waiting for property values to rise rather than redeveloping properties themselves, contributing to property speculation and gentrification. In many states, the property tax systems privilege vacant lots or vacant commercial properties over residential or occupied commercial properties, giving incentives to owners to keep properties vacant.¹⁶

Municipalities can also use blight taxes to help with the high cost of maintaining declining properties. Cities and counties can spend millions per year maintaining or demolishing abandoned properties, leading to additional costs for other taxpayers. Between 2014 and 2019, the city of Detroit spent over $34 million demolishing abandoned properties following the Great Recession.¹⁷ Toledo, Ohio spent nearly $4 million in 2020 on costs related to persistently vacant properties.¹⁸

Crucially, blight taxes should be part of a suite of policies for managing and redeveloping abandoned properties rather than as the sole lever for penalizing property owners.¹⁹ Other possibilities include addressing state laws around heirs’ properties, using tangled title programming to clarify who is the most appropriate owner of a piece of land, land banking, receivership, spot-use eminent domain, and targeted property tax foreclosure.²⁰ These policies can be used to redevelop properties into new housing, new commercial and industrial uses, parks, and other community uses.

Examining Vacancy Taxes in Vancouver, Washington, D.C., and the Bay Area

Vancouver’s Empty Homes Tax

Vancouver was the first North American city to adopt an empty homes tax. In the mid-2010s, rents and home prices were skyrocketing, driving long-term residents out of the city. Some raised concerns that investors, particularly foreign investors, were buying homes and condominiums as investment vehicles without intending to lease them out. Some housing advocates pushed the city to adopt this tax to combat those vacancies, and to use the funds generated to develop more affordable housing.²¹ Many advocates called for designing the tax like France’s suite of vacancy taxes, which led to a decrease in the number of vacant units in municipalities that opted in.²²

The Empty Homes Tax went into effect in November 2017, with taxes due the following year. Owners of vacant property pay a percentage of the total value of their property, like traditional ad valorem property tax, and only if the unit they own is empty for more than six months a year, with exemptions for specific types of uses.²³ The percentage paid started at 1 percent of the property value in 2018 and rose to 3 percent in 2021 where it has stayed since. Every owner of any residential property – homes, apartment buildings, and condominiums – must report vacancy to the city.

In 2017, the city determined nearly 8,000 properties were vacant, including 2,500 properties liable for the empty homes tax; over 5,000 properties qualified for an exemption. In 2023, only 5,003 units were listed as empty. Almost 1,100 properties were required to pay the tax; the remaining 3,900 qualified for an exemption. There were over 200,000 total housing units in the city, spread over 59,000 properties.

The city has collected over $202 million (Canadian dollars) in vacancy tax revenues since 2018. Over one-third of tax levied has gone unpaid due to noncompliance. The funds have been allocated to support affordable housing development, primarily through a nonprofit housing development program. However, it is a small fraction of the total city budget. In 2024, Vancouver collected over $3.1 billion in tax revenue – meaning that $32 million in vacancy taxes collected were about 1 percent of total revenues.²⁴ Collections have stayed relatively flat despite an increasing tax rate and a decline in taxable properties.

Since 2017, many other governments in Canada, including the province of British Columbia and the federal government, have adopted vacancy taxes and other penalties on foreign buyers.²⁵ It’s difficult to attribute increases in rental units and declines in vacancy to this tax alone, but the city’s calculations show a slight uptick in available housing units, particularly among condominiums and single-family homes. Despite widespread adoption of these regulatory tools to combat housing availability, residents in Vancouver continue to worry about affordability and neighborhood stability caused by vacancies.²⁶

A 2024 analysis from the C.D. Howe Institute showed that despite the declining vacancy rate and a slight uptick in the number of total units, home prices and rents in Vancouver stayed stubbornly high.²⁷ That analysis theorized that either landlords are willing to absorb the cost of the tax to attract higher-paying residents, or that a ”superstar effect,” due to the city’s destination status for high-income workers keeps rents high regardless of median incomes. A 2023 study found similar results, but theorized that housing developers had cooled on building new units for fear of having to pay the tax after completing a project, and before tenants move in.²⁸ Living in Vancouver remains out of reach for many and exceptionally expensive for the people who stay, indicating that more needs to be done to alleviate the financial burden on residents, including building new housing units and providing housing support like rental subsidies.

This model has been replicated in the U.S., but more frequently it has been considered and dropped due to objections from vacation rental owners about program design and concerns about enforcement.²⁹ For example, Honolulu considered adopting a vacancy tax in 2024,³⁰ but strong opposition from owners of short-term vacation rental properties watered down the proposal, removing an estimated $150 million from annual revenues. The city abandoned the idea in 2025, cancelling any further study.³¹ Voters in South Lake Tahoe, California soundly rejected the proposal in a ballot referendum in 2024 over worries about the tax‘s effect on vacation rental properties.³²

San Francisco and Berkeley

Two cities in the San Francisco Bay Area have adopted fees on vacant residential units, though one has been suspended. San Francisco’s Prop M was approved in 2022, and Berkeley passed its empty homes tax in 2022.³³ Both were designed as flat fees per property, with increasing rates based on how long properties were unoccupied. Restrictions in California’s Proposition 13 prohibit taxing properties at more than 1 percent of full cash value.³⁴

Property owners in San Francisco sued the city over this new tax, and as of October 2025 the city has been unable to implement the residential vacancy tax. The design of the fee only applied to the owners of multifamily apartment buildings who were seen as the problem in the public discourse, meaning owners of single-family homes could keep their homes vacant and not pay any tax. As of October 2025, litigation is ongoing between landlords and the city, and the city has never collected any money from residential landlords.³⁵

San Francisco voters also approved a commercial vacancy tax.³⁶ The pandemic led to widespread closures of businesses, particularly retail, and city leaders eager to boost sales tax revenues introduced a tax on vacant storefronts. This tax is a fee per linear foot of vacant frontage.

Early data from the city shows limited efficacy. Data from the Treasurer’s office shows that between 2022 and 2024, on average 85 percent of properties complied with requests from the city to self-report vacancies. Of properties that complied, only 5 percent reported a vacancy in 2022 and 2023; only 2 percent – 84 total properties – reported a vacancy in 2024.³⁷ This likely underestimates the true number of retail vacancies in the city.³⁸

Berkeley recently released 2024 data showing that of 54,000 housing units in the city, just 1.6 percent were vacant and likely subject to the city’s vacancy fee. The fee would collect an estimated $4 million. Reporting from Berkeleyside shows that some of the largest properties are uninhabitable and making them available on the market in the short term is unrealistic. Owners of the affected properties interviewed by Berkeleyside say they are resistant to the tax and have shown little interest in redeveloping the properties due to high costs of construction.³⁹

Oakland

Oakland’s vacancy tax was approved by voters in 2018.⁴⁰ Oakland charges flat fees ranging from $3,000 to $6,000 to owners of vacant residential units, vacant commercial units, and undeveloped vacant lots. All the funds are used to fight the homelessness crisis. Oakland’s vacancy tax has had limited success. Information obtained by ITEP via a Freedom of Information request to the city shows the city collected over $29 million between 2019 and 2023, of which $7 million was in 2023.

As of 2019, the majority of vacant parcel owners were exempt from the tax for a variety of reasons, despite the fact that city numbers showed more than half of owners of vacant lots did not live in Oakland.⁴¹ Implementation of the tax has been challenging for some purchasers due to the timing gap between when the vacancy occurs and when the tax is levied.

Washington, D.C.

Since 2011, Washington, D.C. has taxed vacant and blighted properties at a rate five to ten times higher than occupied properties – a method more commonly known as split roll property taxation.⁴² Properties are determined to be either vacant or blighted by the District’s Department of Buildings.

As of 2025, the city maintains a public database of vacant and blighted properties currently tracking 3,469 properties. Approximately 2,900 of those pay an elevated rate, with 500 exempt properties.⁴³ While the city has not disclosed how much money this has raised because it is part of the city’s property tax levy, the asset of split roll property taxation is that it can target different types of landowners – and in particular, can be used to lower rates for residential properties, as it is in D.C..⁴⁴

This system faces similar challenges in enforcement through self-registration. Because the city requires landlords to report vacancies, landlords can avoid the tax by failing to register. The Department of Buildings is empowered to do its own audits, and they may also respond to complaints from neighbors. In one notable case, a vacant property owner avoided nearly $400,000 in tax for 15 years by abusing the appeals system. The city won a $1.8 million judgment in 2024.⁴⁵

While this method has not been widely adopted, Georgia recently allowed counties to levy higher property tax rates on problem properties. Cities like Atlanta⁴⁶ and Warner Robins,⁴⁷ as well as Clayton County,⁴⁸ have adopted these higher rates to target long-term vacant properties owned by speculators. However, unlike in Washington, D.C., the higher rate may only be applied to problem owners by judicial order.

The benefit of adopting these taxes through the property tax system is that it is easier to manage these properties throughout the tax foreclosure process. If an owner is unwilling to pay a higher rate on their qualifying properties, the city or county can more easily take the deed to a problem property and redevelop it through a land bank or community land trust.

However, as Detroit has shown, using the property tax foreclosure process without discretion can wreak havoc on low-income homeowners who are behind on taxes. This can lead to endemic eviction and homelessness.⁴⁹ It is crucial for city and county leaders to focus penalties on abandoned or blighted property owners who can afford it, and not on those already struggling with home maintenance.

Recommendations for Municipalities

Municipalities that wish to adopt vacancy taxes need to have a well-designed and up-to-date index of what type and how much vacant housing they have. Vacancies due to housing market speculation, short term rentals, or abandoned and blighted properties will require different strategies. A poorly targeted tax will not improve housing availability, nor will it generate sufficient revenues.

In both forms of vacancy taxes, multifamily and single-family residences must be eligible. This will improve equity and fairness. Exempting single-family homeowners because some of them are low income lets owners of pieds-à-terre off the hook for occasionally using mostly vacant properties. The residents of multifamily properties are likely to feel the costs of some vacancy taxes in rent, and protecting renter residents must be a point of consideration for designing these policies. In addition, taxing high-value single-family properties is likely more efficiently done through mansion taxes.⁵⁰

For empty home or storefront taxes, tax rates should be set relatively low to minimize property owners gaming the system. These taxes should include reasonable exemptions for people in medical settings, active-duty military, active listings, and recently completed properties. Housing developers should not be held liable for vacancies of prior owners. These taxes should be paired with robust affordable and market rate housing development and possibly changes to state property tax codes to remove preferential treatment for vacant lots or units. Raising tax rates based on length of vacancy may also increase the rate at which units convert to occupied or exempt but might not bring in more revenue.

These are useful for vacation rentals as well. Those properties should also be subject to local hotel taxes to standardize treatment of tourists and visitors. Administering a property registry would assist in taxing these properties as hotels, and also as potentially vacant units.

For abandonment or blight taxes, tax rates should be set relatively high to appropriately target land speculators or otherwise uninvolved property owners. Though gaming the system may also happen in this sphere, the threats to public health and safety suggest that adaptive reuse of neglected properties should happen as soon as possible. Administering this tax through the property tax system also allows municipalities and counties to manage these properties through the property tax foreclosure system.

It is crucial to create release valves like property tax circuit breakers to avoid inappropriately penalizing homeowners who cannot afford to maintain their properties and renters who live in substandard housing. In addition, policies that allow owner-occupants to avoid property tax foreclosure must be created. Options include subsidies to low-income homeowners to do property maintenance, tangled title programming to clarify who owns a property, rental subsidies to allow renters to find adequate housing, and the use of landlord registries and interior inspections.

Set realistic expectations regarding revenue generation. The number of vacancies and the use of reasonable exemptions will remove properties from the rolls, reducing revenue generated. In addition, relying on all units to be converted to available units is unrealistic, as some wealthy property owners are more willing to pay the tax than make that unit available. These laws only change landlord behavior in the first few years and don’t tend to persistently reduce the number of vacant units.

Continue developing and protecting affordable housing. Though vacancy taxes can supplement the conversion of some vacant units to available long-term housing, cities and counties nationwide need to prioritize building safe and affordable housing for residents of all ages, family sizes, and abilities. This will benefit all residents and can improve the property tax base. Developments needed include market-rate units, permanent supportive housing, social housing, and cooperative housing.

Conclusion

Vacancy taxes are intended to put land and property into productive use, discouraging owners from letting properties deteriorate or holding on to properties indefinitely to speculate on future real estate prices. This makes homes and commercial properties unavailable, driving up the costs for consumers.

At the same time, these taxes only raise modest revenues. In the limited places where these taxes have been tried, they have made slight improvements in housing availability in France and Vancouver, but have had limited or no impact on housing affordability.

These taxes will not single-handedly solve problems in cities but are worth considering as a small part of a more comprehensive set of policies to address housing shortages, land use, and building thriving communities.