Storefront Vacancy Tax



Across San Francisco, our neighborhood commercial districts are suffering from vacant storefronts. Many of these vacancies are being artificially created by a handful of commercial landlords who are holding out for exorbitant rent increases.

The Storefront Vacancy Tax provides incentives for these commercial landlords to fill vacant storefronts and remove the dark eyesores of graffiti and garbage that are blighting neighborhoods from North Beach to the Outer Sunset.

The Storefront Vacancy Tax is an avoidable tax provided that a landlord takes basic steps to fill the vacancy – for example, by applying for a building permit to rehabilitate or improve leasable space, or by applying for necessary City approvals.

The Storefront Vacancy Tax would not be assessed during periods of normal turnover or as the result of delays caused by the City and County of San Francisco. The Storefront Vacancy Tax would not be assessed if delays were caused by the City’s failure to promptly respond to building permit applications or applications for Conditional Use authorization.

Here’s how it works. The Storefront Vacancy Tax would:

  • Assess a tax at a rate of up to $1,000 per linear foot of ground floor store frontage per year against property owners or lessees who leave their storefronts vacant for more than 182 days in any given tax year;

  • Tax Acceleration: In year one of the tax being assessed, the amount would be calculated at $250/foot; in year two, at $500/foot; and in year 3 and beyond, at $1000/foot.

  • Exemption for 501(c)(3) Nonprofit Entities: In consideration of unique incentives for nonprofits to lease commercial space (e.g., to finance above-ground affordable housing, and to comply with other federal nonprofit requirements), nonprofit property owners would be exempt from assessment of the tax.

  • Provide a Two-Year “Disaster Period” for properties that are rendered vacant and unusable due to a fire or other natural disaster;

  • Provide a One-Year Construction Period exemption for property owners who have been issued a building permit for repair, rehabilitation, construction or other improvement, during which time the storefront would not be deemed vacant;

  • “Building Permit Application Period.” In addition to the One-Year Construction Period, the tax would not be assessed during the time period from the submission of a Building Permit application up until the Department of Building Inspection’s issuance of the permit, during which period the property would not be deemed vacant.

  • Provide a Six-Month “Conditional Use” Period if a storefront is inactive due to a prospective business’ application for a conditional use permit from the City, during which period the storefront would not be deemed vacant.

  • City Deadline for Processing Conditional Use. If the City fails to grant or deny an application for Conditional Use within 6 months from the date of submission of a complete application, the subject property would not be deemed vacant for the tax year in which the six-month deadline-to-act occurs.

  • Re-start the vacancy “clock” at time of lease. Calculation of the term of vacancy would restart and all one-time exemptions would be restored at the time that the property owner or landlord enters a lease with a tenant.

  • Prevent assessment of the Storefront Vacancy Tax for remainder of lease term of a business that fails: If a business goes under with more time on their lease, they would not be assessed the tax for the rest of the term of their lease.

If the Storefront Vacancy Tax is assessed, proceeds from the Tax would be deposited into a first-ever Small Business Assistance Fund to “assist the maintenance and operation of small business” in San Francisco. “Maintenance and operation” assistance may include, without limitation:

  • Mitigation funds for impacts of capital construction projects;

  • Compliance with ADA and seismic safety requirements;

  • Assistance with lease negotiations and renewals;

  • Small business incubation and technical assistance;

  • Non-redundant Legacy Business grant funding; and/or

  • Façade or other tenant improvements.

The Storefront Vacancy Tax requires a two-thirds vote at the ballot. If passed, the Board of Supervisors would be authorized to amend the Storefront Vacancy Tax by a two-thirds vote of that body.

Storefront Vacancy Tax – Additional Context for Proposal

What causes retail storefront vacancies?

In 2018, the Budget & Legislative Analyst of the City and County of San Francisco issued a Policy Analysis Report titled “Preventing and Filling Commercial Vacancies in San Francisco.” The Report lists the 10 main factors that contribute to commercial vacancies, as follows:

  1. Normal turnover;

  2. Building Code compliance issues;

  3. Lack of tools or resources for Property Owners to find appropriate Tenants;

  4. Property Owners using retail space for uses not allowed under the Planning Code;

  5. Speculation by Property Owners seeking increased commercial rents;

  6. Absentee landlords;

  7. Neighborhood conditions;

  8. City regulations and zoning;

  9. Disputes among partnerships or family ownerships as to how much to invest or what rent to charge; and

  10. Landlords not willing to improve property to make it more marketable.

Of the above ten factors, the Storefront Vacancy Tax aims to address the six italicized factors that contribute to commercial vacancies. The remaining factors can – and are – being addressed separately through Citywide programs and legislation.

What other measures can the City pursue to create a more welcoming environment for San Francisco’s small business community?

San Francisco policymakers can – and must – do more for San Francisco’s small business community. While the Storefront Vacancy Tax requires approval by the voters, there is plenty that we may do legislatively, including:

  • Forthcoming legislation from Supervisor Peskin to provide immediate relief from myriad City fees that are routinely assessed against small businesses who are either unable to pay or struggling to stay afloat;

  • Streamline consideration of permit applications by the Department of Building Inspection & Planning Department;

  • Urge City departments to coordinate more effectively, so that small businesses are not subject to multiple redundant inspections and conflicting determinations;

  • Enhance the City’s existing Vacant Storefront Registry with resources and contact information for property owners and small businesses seeking to activate storefronts.

Other Jurisdictions

More than 1,900 U.S. cities have enacted vacant property registration fees. Some jurisdictions have adopted commercial vacancy taxes, including Washington, D.C. and Oakland. The Washington, D.C. tax is calculated at a value of 5% of a building’s assessed value, which would violate the California Constitution’s current tax limit of 1% of a property’s assessed value. Oakland’s Vacant Property Tax applied to residential, commercial and vacant lots and was approved by the voters in 2018 by 70.04% of the vote.

“Preventing and Filling Commercial Vacancies in San Francisco (2018 Update), Budget and Legislative Analyst, City and County of San Francisco.

Map of Article 7 Named Neighborhood Commercial Districts and Neighborhood Commercial Transit Districts (courtesy of the San Francisco Planning Department).

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