Council hears legal warning on vacancy tax; asks staff to pursue alternatives

City Attorney Miss Burgess told the council that a recent California Court of Appeal ruling in Deain v. City and County of San Francisco undercuts vacancy taxes that target residential property only, because such measures can conflict with the state Ellis Act. "The court determined ... those particular types of taxes as applied to residential properties are a violation of the Ellis Act," Miss Burgess said, adding that ordinances that apply to both commercial and residential property may be more legally defensible.

Council members pressed staff on enforceability, exemptions and likely revenue. Several residents urged caution: one commenter noted the administrative cost of enforcement and recommended a voluntary donation program while another urged a focus on commercial vacancies as a revenue source. "If it's 500 per home, 300 homes, that's a million," public commenter Bill Miley said, urging an analysis of likely yield versus enforcement cost.

The council did not adopt a tax ordinance tonight. Instead it directed the city attorney and staff to return with additional options and a scoped estimate for legal review and implementation. Possible follow‑ups enumerated in the discussion included a second‑home tax (which would apply regardless of vacancy), a commercial vacancy category, a documentary transfer tax and a not‑to‑exceed budget for a deeper legal dive. Staff noted some tax measures may require voter approval under state law and Prop 218.

Why it matters: Council members framed the problem as twofold — preserving housing stock for year‑round residents while generating revenue for affordable housing — and concluded that further legal and financial detail is necessary before any ordinance is drafted.

What’s next: Staff will report back with cost and enforcement estimates, legal defensibility analysis, and options that could include director‑level exemptions for small extractions, commercial vacancy measures, or a transfer tax.