Should property owners pay a tax when their apartments sit empty?
That’s the question Los Angeles City Councilmember Mike Bonin wants to pose to voters next year. He announced last week that he’s requesting a report from the city’s chief legislative analyst on options for an “empty homes penalty” that would be placed on the ballot in November 2020.
Bonin’s request will be vetted by the City Council’s housing committee. He calls it a “bold” and “aggressive” step that would “confront one of the root causes of the homelessness crisis in Los Angeles.”
Landlords, he says, are keeping “housing units empty while tens of thousands of Angelenos are forced to live on the streets because of the high cost of housing.”
Percentage of Vacant Homes
About 4 percent of rental units in the Los Angeles metro area (which includes Long Beach and Orange County) sat empty in 2018, according to census data. The American Community Survey estimates about 93,535 homes are vacant in the city of Los Angeles, a figure that includes second homes and vacation units.
Experts say “healthy” rental markets have vacancy rates of 7 to 8 percent. When the rate is lower, apartments are in short supply, which gives landlords leverage to charge higher rental prices.
CoStar pegs the current vacancy rate at 4.1 percent. “It bottomed out at 3.9 percent in early 2018 and has risen slightly since then, but we’re still close to the lowest vacancies we’ve seen in over a decade,” says managing analyst Steve Basham.
Basham says CoSar predicts the rate will shoot up to about 5 percent by the end of 2021.
“That’s due to a combination of an uptick in development and predictions for a slowing economy,” he says.
How Many Are ‘Intentional’
David Graham-Caso, a spokesperson for Bonin, says one of the goals of the motion is to suss out information about how many “absentee” owners intentionally keep their units vacant as investments.
Oakland, Vancouver, and Washington D.C. have adopted vacancy taxes, and, according to the San Francisco Chronicle, county supervisors in San Francisco are considering one too.
Voters in Oakland approved the tax in November; it applies to properties that are not “in use” for 50 days or more per year, and the fee is $6,000 per parcel. It’s projected to generate as much as $10 million each year for homeless services, new affordable housing, and blight remediation, according to KQED.
In February, the city officials announced that the number of vacant homes in Vancouver had dropped 15 percent under its “empty homes tax.” Vancouver Mayor Kennedy Stewart called the numbers “very encouraging.”
But last month, CityLab published a story on Vancouver’s housing problems (it’s one of the most expensive cities in the world to live) and concluded that even with taxes and building quotas, “affordability will always remain a challenge in Vancouver.” It implies that a key part of the solution is building more affordable housing.
That’s a huge problem in Los Angeles too. It’s estimated that countywide, LA needs to build 516,946 affordable units to meet existing demand from low-income renters.