Proposition M in San Francisco: A Critical Examination of Housing Policies

Proposition M, a vacancy tax on landlords passed in November 2022, is slated to take effect on January 1, 2024. While most people are sleeping in after ringing in the new year, any San Francisco property owner with at least three units that have been vacant for more than 182 days (six months) will be preparing to stroke a check. You might be asking yourself, What’s the big deal, and what is Proposition M anyway?

The Basics of Proposition M

Proposition M, also known as the Empty Homes Tax, made its way onto the November 2022 ballot as an attempt to address San Francisco’s housing issues. According to the U.S. Census Bureau's American Communities Survey, there are 52,600 vacant units in the city. Proposition M targets those vacant units, requiring property owners to pay for units that are vacant for more than six months out of the year. Initially, penalties will range between $2,500 and $5,000 per empty unit, but in the coming years, they may increase up to $20,000 per unit. 

Not only does this tax prompt landlords to fill their empty units, but it will also generate upwards of $20 million in annual revenue–and that money can fuel the city’s affordable housing efforts. 

Let’s take a look at the type of units that are exempt from Proposition M:

• Homes used as primary residences
• Leased properties or homes intended for tourists (e.g., corporate or short-term rentals)
• Nonprofit and government-owned units
• Single-room occupancy hotels without kitchens
• Units in nursing homes or residential care facilities

Proponents and Opponents of Proposition M 

The pressing issue of affordable housing has long haunted San Francisco. Some saw Proposition M as a creative solution to this problem while others opposed it, viewing it as ineffective and problematic.

Proponents of Proposition M highlighted the dire need for increased housing availability. They argued that numerous units remained unoccupied due to reasons such as speculative investments or owners choosing not to rent out these spaces. This surplus of vacant units contributed significantly to rising rents and limited housing options for residents, exacerbating the city's affordability concerns. They believed that property owners would be motivated to list their spaces for rent, effectively boosting the city’s housing supply.

However, opponents of Proposition M expressed reservations about its potential unintended consequences. They feared that the measure might disproportionately impact certain property owners, such as those temporarily keeping units vacant for genuine reasons like renovations or personal circumstances. Additionally, opponents cautioned that the tax might not comprehensively address the underlying complexities of San Francisco's housing predicament.

Conclusion

Proposition M stands as a pivotal and controversial step in addressing San Francisco’s housing issues. Ultimately, the impacts of Proposition M are yet to be seen. In January, penalties will begin, and it will take years to see the full scope of how this tax will affect the city’s housing dilemma.

Need help navigating the San Francisco housing market? At Willowmar Real Estate, we are here to help. Send us an email at [email protected] with any questions or for more information.