City of Sacramento
Law and Legislation Committee Report
915 I Street Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2023-01578 12/5/2023 Discussion Item 3.
Vacancy Tax Proposal
File ID: 2023-01578
Location: Citywide
Recommendation: 1) Receive a report on options for a potential Vacancy Tax; and 2) pass a Motion directing staff to conduct outreach on one of the recommended options and return to return to the Law and Legislation Committee with a draft ballot measure for consideration.
Contact: Greta Soos, Associate Planner, (916) 808-2027, [email protected]; Matt Hertel, AICP, Long Range Planning Manager, (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-Vacancy Research Findings
3-Potential Vacancy Tax Options
4-Summary Table of Vacancy Taxes Implemented or Considered in Other Jurisdictions 5-2024 Vacancy Tax Outreach Timeline
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, and staff brought a discussion item to the Law and Legislation Committee on March 7, 2023. At the March 2023 meeting, Committee members requested that staff return with additional information for consideration before moving forward with potential actions. This report includes a report back on the information requested by the Committee and recommendations for a potential vacancy tax framework.
It should be noted that the City has already taken several steps to incentivize the development of
File ID: 2023-01578 12/5/2023 Discussion Item 3.
vacant properties. In May 2018, the City established a Vacant Lot Program to prevent blight and ensure proper maintenance of vacant properties. 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 was mailed to owners of vacant lots twice, in April and September of this year.
Beyond these existing programs, additional measures may be warranted. As highlighted in the March 2023 Law and Legislation Committee meeting, many jurisdictions in California are now implementing or considering various forms of special taxes on vacant properties and/or buildings. A summary of these can be found in Attachment 4-Summary Table of Options Implemented or Considered in Other Jurisdictions. In addition to learning from what other jurisdictions are implementing or considering, research on existing vacancies in the city can be found in Attachment 2-Vacancy Tax Research Findings. This research has informed the development of a potential framework for consideration by the Law and Legislation Committee, which is found in Attachment 3- Potential Vacancy Tax Options.
Staff is recommending that the Committee provide direction on an option listed in Attachment 3 as well as any outreach considerations. These options are as follows:
Pursue a tax for:
· Vacant parcels only;
· Vacant parcels and vacant commercial and mixed-use buildings (entire building must be vacant) (staff recommendation); or
· Vacant parcels, vacant buildings, and vacant individual units.
If directed to move forward and conduct outreach, staff will return to the Committee in the Spring 2024 with the results of the outreach and recommended next steps.
Policy Considerations: The City-County Sacramento Affordable Housing Plan, adopted on October 14, 2023, provides direction to explore adoption of a vacant property tax to support the development of permanent supportive housing.
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
File ID: 2023-01578 12/5/2023 Discussion Item 3.
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. · 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 tax has the potential to spark the development or activation of many vacant lots or buildings and 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 and administration of the tax. Staff will consider the staffing resources necessary
File ID: 2023-01578 12/5/2023 Discussion Item 3.
to implement to the program.
Local Business Enterprise (LBE): Not applicable.
Attachment 2-Vacancy Research Findings
1 Vacancy Research Findings
Number and Location of Vacant Lots in The City of Sacramento There are 3,671 parcels privately owned vacant parcels in the City of Sacramento (see map on page 3).
Table 1. Number of Vacant Parcels by Council District (sorted from smallest to largest numbers)
Table 2. Number of Vacant Parcels by Community Plan Area (sorted from smallest to largest numbers) Community Plan Area # of Vacant
Parcels
East Sacramento 36
Pocket 59
Arden Arcade 69
Land Park 184
Central City 225
North Natomas 245
South Natomas 284
South Area 399
Fruitridge/Broadway 641
North Sacramento 988
District # of Vacant Parcels
7 159
4 251
8 291
3 338
6 357
5 489
1 804
2 982
Attachment 2-Vacancy Research Findings
2 Map 1. Privately Owned Vacant Parcels by Council District
Attachment 2-Vacancy Research Findings
3 Number and Location of Vacant Buildings in City of Sacramento For this discussion, water consumption data was collected to determine vacancies of buildings in Sacramento. To understand the extent of vacancies in Sacramento, the scenario of 0 water consumption for 12 consecutive months (May 2022-April 2023) was used.
Table 3. Number Of Vacant Buildings by Type Using Water Consumption Data (May 2022-April 2023) Property Type Number of Properties Using No
Water 1 year
Mobile Home Park 2
Triplex 4
Fourplex 9
Apartment Complex 11
Mixed Use - Res & Com 12
Multiple Res. Structures 9
Duplex 14
Commercial Office 43
Commercial Warehouse 49
Commercial Retail 96
Single Family Dwelling 202
Total 451
0 50 100 150 200 250
Mobile Home Park
Triplex
Fourplex
Apartment Complex
Mixed Use - Res & Com
Multiple Res. Structures
Duplex
Commercial Office
Commercial Warehouse
Commercial Retail
Single Family Dwelling
Number of Properties by Type Using No Water for 1 year (May 2022-April 2023)
Attachment 2-Vacancy Research Findings
4 Map 2. Vacant Building Locations by Council District
Attachment 2-Vacancy Research Findings
5 Table 4. Number Of Vacant Buildings by Council District (May 2022-April 2023) Council District Number of Buildings Using 0
CCF/month for 1 year
1 9
2 75
3 20
4 136
5 88
6 65
7 28
8 13
1 Attachment 3-Potential Vacancy Tax Options
Vacancy Tax Recommendation
There are over 3,600 privately owned vacant lots in the City. Unmanaged vacant land can affect property values, quality of life, and even public health and safety if not maintained. While the City implements a Vacant Lot Program to aid in abating the most problematic vacant lots, there is not an economic incentive to encourage property owners to improve or sell their vacant properties.
Additionally, 451 buildings were vacant for a yearlong period from May 2022 through April 2023. When looking at the number of buildings that were vacant for 6 consecutive months in the same timeframe, 738 buildings were vacant. About half of the buildings in either scenario contain more than one unit (commercial or residential).
There are many approaches that could be taken to taxing vacant property, as shown in Attachment 4- Summary Table of Vacancy Taxes Implemented or Considered in Other Jurisdictions. The below table shows a menu of options that could be considered for implementation in Sacramento, ranging from least restrictive to most-restrictive. With existing water metering and data availability, it would be difficult to monitor vacancy of individual units. For this reason, if vacant buildings are considered for this program, it is suggested that individual units are not included in the tax. In addition to the previously stated findings and recommendations, it should be noted that the City and County of San Francisco is currently undergoing a legal challenge to their empty homes tax, making uncertain the legality of taxing vacant buildings. For this reason, an individual residential unit tax is not included in the staff recommended option.
Option A Option B
(Staff recommendation)
Option C
Tax Application Vacant parcels only Vacant parcels and vacant commercial and mixed-use
buildings (entire building
must be vacant)
Vacant parcels, vacant
buildings and vacant
individual units
Benefits and/or
Challenges
Incentivization of
land maintenance,
exchange, or
development
High revenue
potential
Incentivization of land
maintenance, exchange,
or (re)development
Higher revenue potential
(nominally)
Incentivization of land
maintenance, exchange,
(re)development, and/or
residential unit occupancy
Highest revenue potential
(nominally)
Difficult to monitor
individual residential units
Legal challenge currently
underway for SF Empty
Homes Tax
Estimated
potential annual
revenue (based
on illustrative
tax rate table on
$17.6 Million $19-22 Million
$19-22 Million +
(Unknown increased
increment due to current
lack of data)
2 Exemptions
While the main intent of a tax is to spur development, activation, or sale of vacant properties, exemptions are an important component of a vacant property tax program. A list of exemptions for consideration could include:
A. Active construction
B. Building permit application (up to 1 year)
C. Non-profit organization
D. Substantially complete application for planning (up to 2 years) E. Urban agriculture or community garden
F. Art installation or other site activation
Use of Revenues
A vacant parcel or vacancy tax would be considered a special tax or a general fund tax which requires
66.7 percent voter support per Proposition 218. Use of revenues would need to be specified in the measure. Uses of the tax could include, but are not limited to:
Affordable housing
Funding for code compliance of vacant properties
Technical assistance for vacant lot owners to develop properties Infrastructure funding for housing
Tax Rate and Application Options
The City of Sacramento can establish its own tax rates and applications to suit its needs and goals. For examples of tax rates used in other jurisdictions, see Attachment 4. In the City of Sacramento, vacant parcels vary widely in size. Thus, a tax could be graduated based on the size of the property under the assumption that larger parcels have greater impacts on the surrounding neighborhood or community. An illustrative example is provided below:
Property Size Potential Annual Tax Rate
5,000 sq ft or less (.11 ac) $3,000
5,001-10,000 sq ft (.11-.23 ac) $4,000
10,001-25000 sq ft (.23-.57 ac) $5,000
25001-43560 sq ft (.57-1 ac) $6,000
43,560 sq ft or more (1 ac) $10,000
Property Size # of Vacant
Properties
Potential Annual Tax
Rate
Annual Revenue Example
5,000 sq ft or less 1,413 $3,000 $4,239,000
5,001-10,000 sq ft 896 $4,000 $3,584,000
10,001-25000 sq ft 542 $5,000 $2,710,000
25001-43560 sq ft 268 $6,000 $1,608,000
43,560 sq ft or more 552 $10,000 $5,520,000
3,671 $17,661,000
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:
$ 7,821,000 total (2nd installment
due 4/10/2023)
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.
Attachment 5-Vacancy Tax Proposed Project Timeline and Outreach
January/February Stakeholder Outreach:
Housing Policy Working Group
Online Community Workshop
Focus Groups
o Real estate professionals
o Development community
o Property and Business Improvement Districts
o Housing advocacy organizations
March/April Law and Legislation and City Council Vote on Draft Ballot Measure May Voter Polling
June Last Council meeting date to call election/argument authors August Measure Ballot Language Can Be Submitted to the County November General Election