Vacancy Tax Study Is Giving City Officials Déjà Vu

Government

Vacancy Tax Study Is Giving City Officials Déjà Vu

San Diego City Council members want to study whether the city can pay for low-income housing by charging property owners who leave their homes vacant. If the idea sounds familiar, it’s because the Housing Commission decided in 2019 to study that very issue – but never did.

Photo courtesy of Studio E Architects

If some City Council members get their wish, San Diego will soon study whether it can pay for low-income housing by charging property owners who leave their homes vacant. Nearly two years ago, other city leaders asked the San Diego Housing Commission to study that very topic, but that didn’t happen.

Now, the Housing Commission says it’s on the verge of starting a study first requested some 20 months ago. But that’s a study the City Council won’t have at its disposal as it brings a new sense of urgency to combating the region’s housing affordability crisis.

Members of the Council’s land use committee last month discussed policy priorities they hoped to pursue in 2021 to preserve and add affordable housing, address homelessness and more.

Among those was a familiar idea by Councilwoman Vivian Moreno: to explore whether the city could pursue a vacancy tax to spur property owners and landlords to fill homes rather than leave them sitting empty, or generate revenue for low-income housing if they don’t.

“Revenues received through this tax can go to rental assistance, legal services for tenants and tenant outreach,” Moreno said at the Jan. 21 meeting. “We should request that staff conduct a feasibility study and to present the results of that study to this committee by the end of the year.”

The Union-Tribune reported two other Council members have also said they are interested in studying a potential vacancy tax, and Councilman Stephen Whitburn, who chairs the land use committee, is also interested in exploring the issue further too, said Juan Carlos Leyva, Whitburn’s land use committee consultant.

But if the Housing Commission had acted on a request by two of its board members two years ago, the city wouldn’t need to discuss whether to start exploring the issue this year.

In June 2019, Housing Commissioners Stefanie Benvenuto and Ryan Clumpner directed the agency to study the viability of a vacancy fee.

Benvenuto, who chairs the commission’s board, told staff to launch a study to identify housing that was vacant for at least six months a year.

“I’d like to consider a more specific policy proposal if it’s appropriate, if it’s deemed there is a large number of units held offline, figuring out the best way to reactivate those as active housing, and or find out as they’ve done in other locations, to levy a fee – and we can determine from this dais – what would be appropriate, and then use that money to further fund affordable housing,” Benvenuto said.

Clumpner backed up Benvenuto – and suggested the Housing Commission was uniquely suited for the task.

“One of the strengths of this agency I’ve come to see is its ability to be nimble, and quickly study problems and generate new ideas,” Clumpner said. “This issue of underutilized existing housing is complex and there’s not much hard data, so it’s a natural fit for us to work on bringing clarity and new ideas to this conversation.”

The agency turned out not to be so nimble. Bureaucratic roadblocks kept it from ever starting the study, let alone generating new policy ideas from what it found.

“I’m glad to hear it’s finally moving forward, although the delays are very frustrating,” Clumpner said. “It feels like we’ve been slow-rolled.”

Moreno reiterated the importance of pursuing a tax that could encourage property owners to make any vacant units available for rent.

“We would also like to receive input from the Housing Commission, which committed to a study on the viability of a vacancy tax two years ago,” she said.

When the request was made in 2019, though, Housing Commission CEO Rick Gentry said he supported the proposal and was eager for the agency’s new policy team to get to work on it. He said it was the right time in the organization’s development to begin leading the way on policy initiatives.

Two months after Benvenuto’s proposal in 2019, the Housing Commission issued a request for proposals that said interested consultants should be prepared to kick off the study in fall 2019. The document urged contractors to consider data sources including utility and self-reported data from property owners and listed 10 other places – from Los Angeles to Scotland – where vacancy taxes have been considered or instituted as potential guides for how to track the number of vacant homes.

But Housing Commission spokesman Scott Marshall told VOSD that the agency never awarded a contract after reviewing bids. Instead, the Housing Commission decided it should seek data to support the research project since the consultants that responded to the initial request didn’t have utility data the agency decided it wanted to use – and getting it would take a while.

Marshall wrote in an email to VOSD that the Housing Commission staff have done an expansive review of research and methods other jurisdictions have used. In October 2019, Marshall said, the agency began communicating with San Diego Gas & Electric about the possibility of getting residential utility usage data. He said the coronavirus pandemic slowed the information-gathering process.

“Communication continued into May 2020 as the agencies narrowed the parameters of the data [the Housing Commission] needed to obtain and formalized the request for the data,” Marshall wrote.

Last July, the Housing Commission issued another request for proposals. The latest request noted that the agency has obtained about 86 million anonymized records of residential utility usage in the city from January 2015 through 2019 to facilitate the study.

The new request called for a new timeline: “The project must be able to kick off October 2020, depending on approval requirements.”

October came and went. The commission has yet to formally award the work to any contractors. Marshall said the agency now expects to finalize them this month. He said he could not share details on the contracts or consultants the Housing Commission selected.

In the meantime, other cities have already progressed from where they were on the topic when Benvenuto and Clumpner first urged the Housing Commission to consider it.

Los Angeles was at the time considering a 2020 ballot measure to implement a vacancy tax; the Council then pushed the measure to 2022, where voters are now scheduled to weigh in on it. Clumpner and Benvenuto in 2019 cited Vancouver’s then 2-year-old vacancy tax, which has since been tripled after the initial rate hadn’t coaxed landlords to fill as many units as hoped.

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