Knock Knock

Carmel City Councilmember Jeff Baron is exploring the idea of a vacancy fee for homes that are unoccupied more than half the year. Such a fee would likely have to go to voters for approval.

SECOND HOMES ARE UBIQUITOUS IN POPULAR SEASIDE VACATION COMMUNITIES LIKE CARMEL AND PACIFIC GROVE, which means a certain percentage of the housing stock sits empty most of the year. At the same time, there aren’t enough homes to go around for everyone who needs one. The 2020 U.S. Census identified over 40 percent of Carmel’s 3,000 units as vacant, and over 16 percent of Pacific Grove’s 8,120 units as such. Around 10 percent of Monterey’s housing stock is considered vacant.

Feeling the crush of the housing crisis, it’s not surprising that at some point the people who live and work full-time in the cities where vacant homes proliferate turn their eyes toward those homes and wonder: Is there some way to turn those unoccupied homes into opportunities to house the people who need to live and work in the community full-time?

It was those questions that led people in Vancouver, British Columbia to what they believed was a potential answer, the Empty Homes Tax, also called a vacancy tax, enacted in 2017. It was the first city in North America to adopt such a tax, although it was not a new concept, having been used in Europe for years.

The drive to create the tax was due to Vancouver hitting the unenviable thresholds of a less than 1-percent vacancy rate, meaning over 99 percent of available units were occupied, and some of the highest rents in Canada. With hopes of turning those stats around, the city imposed an annual 1-percent tax on assessed value in 2017 on vacant homes, which rose to 1.5 percent in 2020, then 3 percent in 2021. That means a second homeowner pays $30,000 on a place worth $1 million.

Vancouver officials say there is evidence the tax is working, both to encourage property owners to rent out units and also generating revenue. A city report released in November 2021 stated that the number of vacant units in Vancouver decreased by 26 percent. Meanwhile, the tax brought in more than $86.6 million in net revenues, which is set aside for creating affordable housing.

Those kinds of results have led to a rising wave of interest in the U.S. in either vacancy taxes or imposing fees on homes that are empty for most of all of each year. In California, Oakland has a fee, San Francisco appears headed for a November ballot measure for a tax and proponents of a tax in Santa Cruz just got a measure qualified for the Nov. 8 ballot.

The wave hasn’t crested in Monterey County – yet – but there is strong interest. Carmel residents have been discussing the possibility of a fee in community meetings hosted earlier this year by Carmel City Councilmember Jeff Baron. “Fewer people live here, and it’s becoming an issue for those of us who do live here,” he says. As the community continues to thin out, it means “less economic diversity, less centering of the culture of the town around the downtown because the businesses don’t cater to residents,” he says.

In Monterey, Councilmember Tyller Williamson, who is running for mayor in November, says residents in community meetings have expressed interest in pursuing a vacancy tax ballot measure.

“There’s a moral issue that a vacancy tax addresses, that there are these vacant units in our communities that are bringing no value to our community members. If anything, it’s bringing harm because we don’t have enough units for the community,” Williamson says.

Housing activists in Monterey are not ready to bring anything to voters yet, but they’ll be keeping a close watch on cities that have gone before them or, like Santa Cruz and San Francisco, will possibly be adopting vacancy taxes or fees very soon.

In Vancouver, the owners of what are classified as “Class 1” residential properties are required to report annually if their homes in the previous year were occupied or unoccupied, meaning vacant more than six months of the calendar year. In 2020, 195,012 were required to declare.

Exemptions are allowed for renovations, transfers in ownership or condo properties with rental restrictions.

With over $86 million in tax revenues dedicated toward affordable housing and a decrease in the number of vacant units, Vancouver’s leaders appear to be convinced that levying the Empty Homes Tax – and increasing the tax twice since 2017 – was the right move. So much so, on April 26 the Vancouver City Council voted 7-0, with three councillors absent, to raise the tax to 5 percent.

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“It’s a good move, I’ve loved the Empty Homes Tax from the beginning,” said Green Party Councillor Adriane Carr during the discussion. “The whole point of this was to ensure homes don’t sit empty in a city that’s desperate for housing, and it has achieved that. The secondary consequence is that the tax itself has helped fund homes that are affordable for people who are in deep need of affordable housing. It’s a win-win situation as far as I’m concerned.”

In one example of how the city is using revenues for affordable housing, the council created the Community Housing Incentive Program, or CHIP, a multi-year $25 million program, to offer grants to nonprofit housing developers and co-op housing providers. The grants serve as matching funds for federal and provincial funding programs. Last year the council approved a capital grant of $5.4 million toward construction of 81 units proposed by the Vancouver Native Housing Society, according to the November tax report.

Another $12 million was approved last year for more multi-year housing grants, and $8.3 million was added to the city’s housing capital budget to develop housing on city land.

As bullish as members of the council are on the tax, it is not without its critics who say the tax hasn’t helped add enough long term rentals nor helped low-income families who need help with housing the most. Some have argued focusing on new construction would be more helpful than a tax. As proof they point to Vancouver’s rental prices that continue to be high.

THE LEADER OF THE GRASSROOTS MOVEMENT SANTA CRUZ EMPTY HOMES TAX IS CYNDI DAWSON, who also serves as chair of the Santa Cruz Planning Commission. She has researched Vancouver, as well as other cities with vacancy taxes. In the end, the group chose a flat rate for its proposed annual tax, $6,000 for single family homes and $3,000 for condominiums. It would only apply to homes vacant for 120 days a year or more. The money would go into a dedicated fund for creation of low to very-low income units. The group estimates it could generate over $5 million a year for the affordable home fund, although a city analysis gave a range of between $2 million-$4.5 million annually.

On Tuesday, June 28, the Santa Cruz City Council voted 6-0 to advance the tax measure to the November ballot. Dawson believes there is broad support that’s come out of several years of conversations among residents who have watched as more people and families are pushed out of the rental market.

“Renters, property owners, people here for a month, people here for 60 years – everyone started nodding their heads,” she says. “We were looking for part of a solution. We’re very clear this is not a silver bullet, but it became obvious to us there was really broad support.”

IN MONTEREY, WILLIAMSON ALSO SEES THAT A VACANCY TAX AS NOT A SILVER BULLET. “It has to be in a suite of options,” he says. “As local agencies we have to be creative and innovative around our approaches to solve these problems and these are one tool in the toolbelt.”

For the Monterey residents who participated in earlier community meetings, they saw vacancy taxes as a way to finance issues of homelessness, rental issues and creation of new units. “But when it came down to it, there wasn’t enough support on council,” Williamson says. “And getting signatures [in time for November 2022] seemed to be too big a hill to climb.” He plans on building a coalition of constituents and organizations to advance a possible tax measure in 2024.

In Carmel, Baron is taking a different approach, preferring to propose a fee rather than a tax. Fee revenues could go toward purchasing housing for city workers and other employees who work downtown, or other initiatives that would help relieve the lack of housing.

Ultimately he wants the community to decide how best to spend such revenue should a fee be approved in the future.

“Above all, the community needs to support it,” Baron says. “It needs to be something that’s good for the community and we need to be able to list the reasons why it’s good and the programs it will fund, the amount of money it will cost, the money it will take in. We need to do our homework.”

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