City of Sacramento
Law and Legislation Committee Report
915 I Street Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2023-00183 3/7/2023 Discussion Item 5.
Discussion of Taxes and Other Options to Incentivize Development or Improvement of Vacant Parcels and Buildings
File ID: 2023-00183
Location: Citywide
Recommendation: Review and comment on taxes and other options to incentivize development or improvement of vacant parcels and buildings.
Contact: Greta Soos, Associate Planner, (916) 808-2027, [email protected], Community Development Department; Matt Hertel, AICP, Principal Planner, (916) 808-7158, [email protected], Community Development Department Presenter: Greta Soos, Associate Planner, (916) 808-2027, [email protected], Community Development Department
Attachments:
1-Description/Analysis
2-Summary Table of Vacancy Taxes Implemented or Considered in Other Jurisdictions Description/Analysis
Issue Detail: The topic of vacant parcels and properties has been of interest in recent years due to concerns of blighted vacant properties, empty buildings and vacant storefronts, and a lack of development on vacant parcels over prolonged periods of time. A formal discussion of the topic and potential solutions was requested by City Council on January 31, 2023. Exploring ways to incentivize development or activation of vacant properties and buildings will support infill development, strengthen neighborhoods and commercial corridors, and increase the economic vibrancy of the city.
The City has already taken several steps to incentivize the development of vacant properties. In May 2018, the City established a Vacant Lot Program (VLP) to prevent blight and ensure proper
File ID: 2023-00183 3/7/2023 Discussion Item 5.
maintenance of vacant properties. The VLP requires property owners to register their vacant undeveloped property annually, pay an annual program fee of $65, and designate a local contact representative. In September 2022, the City also launched an online Housing Development Toolkit that provides a one-stop resource for information on incentives, processes, and procedures to develop housing and activate vacant lots. Information about this resource is being mailed to vacant lot registrants in the coming months.
Beyond these existing programs, additional measures may be warranted. Many jurisdictions in California are now implementing or considering various forms of special taxes on vacant properties and/or buildings. These include variations of taxes on vacant parcels, vacant buildings, vacant storefronts or commercial properties, and/or vacant residential buildings or units. A summary of these can be found in Attachment 2- Summary Table of Options Implemented or Considered in Other Jurisdictions. While commonalities among them exist, each tax listed varies in tax amount, application of the tax, and identified use of revenues. These are tailored to the unique goals and objectives of that jurisdiction.
The objectives of such a tax would need to be clearly defined for Sacramento and the proposed tax fully vetted through all departments prior to the development of a recommended approach. Special taxes such as those identified in Attachment 2 have the potential to provide significant sources of revenue for purposes specified by the approving ordinance. Examples of revenue uses in other jurisdictions include the provision of services for houseless individuals, affordable housing gap financing, and small business assistance.
Policy Considerations: The consideration of additional incentives to develop or improve vacant properties and/or buildings is consistent with the following General Plan Policies:
· H-1.4 Facilitate Infill Housing Development. The City shall facilitate infill housing along commercial corridors, near employment centers, near high-frequency transit areas, and in all zones that allow residential development as a way to revitalize commercial corridors, promote walkability and increased transit ridership, and provide increased housing options. · H-2.5 Create Additional Local Funding for Affordable Housing. The City shall strive to create additional local funding for affordable housing. · LU 1.1.5 Infill Development. The City shall promote and provide incentives (e.g., focused infill planning, zoning/rezoning, revised regulations, provision of infrastructure) for infill development, reuse, and growth in existing urbanized areas to enhance community character, optimize City investments in infrastructure and community facilities, support increased transit use, promote pedestrian- and bicycle-friendly neighborhoods, increase housing diversity, ensure integrity of historic districts, and enhance retail viability.
File ID: 2023-00183 3/7/2023 Discussion Item 5.
· LU 2.6.3 Revitalization Strategies. The City shall employ a range of strategies to promote revitalization of distressed, under-utilized, and/or transitioning areas, including:
· Targeted public investments.
· Development incentives.
· Public-private partnerships.
· Revised development regulations and entitlement procedures. · Implementation of City-sponsored studies and master plans. · ED 3.1.2 Land Readiness. The City shall work with property owners to remove obstacles to development on identified opportunity areas.
Economic Impacts: A special tax may incentivize property owners to develop or sell properties, leading to revitalization and potential increases in housing development and City revenue; however, they may also pose a hardship to certain property owners. Exemptions should be considered to equitably administer the tax.
Environmental Considerations: The request for discussion of incentives to develop or improve vacant lots and/or buildings consists of an administrative activity such as general policy making and is not a project under the California Environmental Quality Act (CEQA), per Guidelines Section 15378 (b)(4) and 15378(b)(5).
Sustainability: Development of infill properties is in alignment with smart growth principles and has the potential to reduce greenhouse gas emissions due to increased proximity of housing, jobs, and services.
Commission/Committee Action: Not applicable.
Rationale for Recommendation: Considering additional measures for owners of vacant property and/or buildings is in alignment with City policies. A vacant parcel or building tax has the potential to generate significant revenues to support the objectives of the tax, address blight and code compliance, and spur much needed infill housing and commercial development.
Financial Considerations: A vacant parcel or building tax would generate revenues to support the objectives of the tax. Staff will consider the staffing resources necessary to implement to the program. The amount of revenues has not been projected or explored as there is no specific policy direction at this time.
Local Business Enterprise (LBE): Not applicable.
Summary Table of Vacancy Taxes Implemented or Considered in Other Jurisdictions CITY OF OAKLAND: VACANT
PROPERTY TAX
SAN FRANCISCO:
COMMERCIAL VACANCY TAX
SAN FRANCISCO: EMPTY HOMES TAX CITY OF BERKELEY:
EMPTY HOMES TAX
STATUS - Approved November 2018
- Effective January 2019
- Approved March 2020
- Effective January 2022
- Approved November 2022
- January 1, 2024
- Approved November 2022
- Effective January 2024
TAX
AMOUNT
Annual tax rate:
- $6,000 for residential, non-
residential, and undeveloped
properties
- $3,000 for condos, duplexes,
and town homes.
- $250 per linear foot of
Frontage
- Tax ranges from $2,500 to $5,000 per vacant unit,
depending on the unit’s size.
- Each year, the tax would increase to a maximum of
$20,000 if the same owner kept that unit vacant
for consecutive years.
- The tax will be adjusted for inflation
Tiered:
First year: $3,000 for residential units in duplexes,
condominiums, single-family homes, and
townhouses
Subsequent years: $6,000
-------------------
First year: $6,000 for all other residential units
Subsequent years: $12,000
*rates adjusted annually by increase in Consumer
Price Index for the region
PURPOSE Spur new development, increase
housing production
- Stimulate the rehabilitation of
long-term retail vacancies
- Reinvigorate commercial
corridors and stabilize
commercial rents
Not stated Ensure long term affordability; spur economic activity and decrease blight; fund the operation of
housing services and programs; fund and pay for
municipal services.
APPLICATION
OF TAX
- Applies to any privately-owned
property (both developed and
undeveloped) that is not “in use”
for more than 50 days in a
calendar year
- Does not apply to individual
residential units
- Long list of exemptions
Applies to street-facing
commercial space in certain
commercial districts that is
vacant for more than 182 days
in a calendar year.
Applies to any residential unit that is vacant for
more than 182 days in a tax year.
Exceptions to the tax include:
Single-family homes, two-unit buildings, primary
residences, short term rentals, and units owned by
nonprofit or government entities.
In addition, the tax does not apply during certain
periods of time following: (i) a building permit
application; (ii) City issuance of a building permit;
(iii) a natural disaster that severely damages a
residential unit; (iv) City issuance of a certificate of final completion and occupancy; and (v) the death or
medical absence of an owner-occupant of a
residential unit.
Annual tax applied to residential units vacant
more than 182 days per year. Substantial increase
between first year and subsequent years.
Several of exemptions.
CITY OF OAKLAND: VACANT
PROPERTY TAX
SAN FRANCISCO:
COMMERCIAL VACANCY TAX
SAN FRANCISCO: EMPTY HOMES TAX CITY OF BERKELEY:
EMPTY HOMES TAX
USE OF
REVENUE
To provide services and programs
to homeless people, to reduce
homelessness, and to support
the protection of existing and
production of new housing
affordable to lower income
households
Small Business Assistance Fund,
the Vacancy Tax will also assist
small businesses and provide
relief to those small businesses
adversely affected by blight,
crime, and other negative
impacts
Will establish a Housing Activation Fund. The Fund
would provide rental subsidies and fund the
acquisition, rehabilitation, and operation of multi-
unit buildings for affordable housing.
Deposited in the General Fund to be used for any
municipal purpose.
REVENUE 2019:
$6,447,000 total ($1,732,259
unpaid)
2020:
$8,028,000 total ($1,913,293
unpaid)
2021:
$6,447,000 total (2nd installment
due 4/10/203)
Per City Controller, could result in over $20 million in revenues annually. However, if the tax achieves its
stated purpose of reducing the number of
residential vacancies, it will result in lower revenue. $3.9-5.9 Million per year projected
LINKS City Code
Main page
City code
Main page
Measure M
JD Supra Article
City Attorney Analysis
Notes on other jurisdictions that have considered Vacant Property Taxes:
City of Los Angeles: Empty Homes Tax
o Drafted in 2020
o Updated analysis and framework in 2022 (no action taken yet) o Draft ordinance policy options (staff report June 2020) o Updated Analysis (2022)
City of Santa Cruz: Empty Homes Tax
o Measure N did not pass in November 2022 (No 54%; Yes 46%) o Annual tax on residential parcels that are in use less than 120 days within a calendar year $6,000 per residential parcel with 6 or fewer units
$3,000 per vacant unit (condo or townhome)
$3,000 per vacant unit (multifamily 7+)
o Empty Homes Tax Initiative
City of Richmond: Vacant Property Tax
o City Council looked at placing on June or November ballot but did not move forward. Tried to pass in 2018 (Measure T) but failed. o March 2022 City Council meeting materials
Pending proposals in other jurisdictions: Simi Valley, Honolulu, and New York.