Too many empty homes in San Jose? There could be a penalty tax for that
A view of San Jose from the East/Evergreen side of the city. Photo by Kyle Martin.

As California’s housing crisis rages on, two San Jose housing commissioners are looking for ways to put residents back into the thousands of vacant homes sitting in the city’s housing stock.

Commissioners Alex Shoor and Huy Tran on Thursday will propose that city officials consider a tax on vacant properties to penalize homeowners for keeping them empty. Data from the U.S. Census indicates that in 2017, San Jose had 11,952 vacant units – a rate that is one of the lowest in the country among large cities. In the San Jose, Sunnyvale and Santa Clara area, the data shows 28,846 homes are empty, and Shoor and Tran say their research suggests that at least 30 percent may be vacant by choice.

They said the number of vacant homes in San Jose has risen by 42 percent in the past five years.

“Housing prices are impacted by supply, and if there are thousands of homes that sit unused, even a fraction of that becoming available will have a real impact on prices,” Tran said. “We are looking at these ideas because we are in a housing crisis, and that requires us to put all solutions on the table and figure out what makes sense.”

Shoor and Tran are proposing that the tax revenue supports funding affordable housing projects as San Jose struggles to build enough affordable housing to meet state-mandated goals. In 2018, San Jose issued 1,446 affordable housing permits – only 61 percent of the way to the goal of 2,370 permits. For market-rate housing, however, the city issued 1,527 permits – 94 percent of its 1,617 goal.

“It’s a policy that is literally designed to hope no one pays it,” Shoor said. “The empty homes tax’s goal would be to work itself out of existence. It creates a disincentive that’s big enough that no home owner leaves its home vacant.”

Shoor and Tran have studied how other cities are combatting vacancies. Vancouver charges one percent of the home’s assessed value. And according to a recent article from the Vancouver Sun, the tax is working. From 2017 to 2018, the number of vacant homes has gone down by 15 percent – and of the 163 units put back on the rental market, more than over half have new tenants.

In neighboring Oakland, voters approved a similar tax in November that will go to fund homeless services and other resources to address blight. The city plans to annually tax $6,000 per parcel and $3,000 for condominiums that are used less than 50 days per year.

City officials are estimating that the tax will generate between $6.5 and $10.5 million per year.

While the measure passed with 70 percent of the vote, it didn’t have the support of planning organizations like SPUR. In the 2018 voter guide, SPUR recommended voting no on the tax, citing concerns about the ability to implement the tax effectively.

“The definition of what constitutes vacancy is very broad, and as such it may be difficult to determine when a parcel is ‘in use’ or not,” read SPUR’s recommendation. “The exemptions are also very broadly defined, such as an owner being unable to develop a parcel due to a ‘demonstrable hardship that is not financial’ or to an ‘exceptional circumstance.’ This vague language would make it very difficult for staff to implement the tax fairly.”

Back in San Jose, Shoor and Tran say there is still more work to do to find out why so many housing units are empty.

“Ultimately, we don’t know enough about this issue, which is why our proposal asks the City Council to direct Housing staff to study the issue of vacant homes,” Tran said. “There have been suggestions that AirBnB contributes to this issue, but we need to study this to have a better understanding.”

Shoor added that homeowners may be holding on to vacant properties for investment purposes, something he called “a travesty.”

“You just buy a property and you sit on it and you’ll make money,” he said. “When we have the conditions that we do now where the supply and demand are completely out of whack with each other, it allows more bad actors to enter the game and to take advantage.”

The Housing and Community Development Commission meets 5:45 p.m. Thursday in City Hall Wing Rooms 118-119, 200 East Santa Clara Street in San Jose.

Contact Grace Hase at grace@sanjosespotlight.com or follow @grace_hase on Twitter.

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