Designing A Vacancy Tax for Sonoma – Part Two

By Karla Noyes 

If the City of Sonoma instituted a vacancy tax, it could do three things: motivate owners of long‑term vacant homes to put them back into use; generate revenue for essential city services; and – most importantly – restore the year‑round civic participation that keeps neighborhoods strong by bringing people back into those homes.

Sonoma has 707 vacant homes, including 269 second homes, and currently has no mechanism to discourage long‑term residential vacancy.  There are also opportunities: real estate sales may increase as owners unload unused properties, and residential rental management firms may see an uptick in business. If voters chose to pursue a vacancy tax, the City Council would place the measure on the ballot for approval by Sonoma’s primary‑residence voters, since owners whose primary residences are elsewhere vote in other jurisdictions.

To design a vacancy tax, cities must make several policy choices. These choices fall into five categories: defining vacancy; determining which properties are included; establishing exemptions; setting tax rates; and deciding how the tax will be administered and enforced. Cities around the world with vacancy taxes use clearly defined criteria for each of these decisions. For example, the length of vacancy that qualifies for the tax varies widely. Vancouver uses six months of non‑occupancy per year; San Francisco uses 182 days; Berkeley uses 182; and Oakland uses 50 days.

Cities must decide what types of properties are included. San Francisco’s residential vacancy tax, which is currently tied up in court, applies to buildings with three or more units, which includes apartments and condos, while single family structures are exempt. San Francisco also has a vacancy tax on commercial properties in certain locations. Berkeley’s vacancy tax applies to all residential units; Oakland’s applies to all residential and commercial parcels.

Exemptions from the tax must be carefully defined. Common exemptions include properties that are undergoing major renovations; very low-income owners; low income seniors; disabled owners; properties owned by 501 (c)(3) organizations; properties that are unsafe; properties in probate; properties where the owner is under medical hardship; properties actively listed for sale or rent; and new construction.

Tax rates must be determined. Vancouver’s vacancy rate is 3 percent of assessed value; San Francisco’s is $2,500 up to $20,000 per unit, depending on size and year; Berkeley’s tax rate is $3,090 to $6,180 per unit per year; Oakland’s is $3,000 to $6,000 per parcel.

What rate to charge corporate owners? The San Diego Empty Home Tax, which was not approved on a ballot measure (losing 46.8 percent to 53.1 percent), proposed to charge vacant homeowners $8,000 the first year, $10,000 in subsequent years and, for corporate entities, an additional $4,000 the first year and $5,000 per year in subsequent years.

The type of administration also needs to be determined. Vancouver and Oakland require all homeowners to declare occupancy every year, online. Most cities use online self-reporting, or neighbors can report a vacant property. Cities cross check with water or electrical usage, and postal “vacant” flags. Programs are administered through their finance departments or property tax systems. Oakland also utilizes the SCI Consulting Group.

There are several other questions to address. How is the tax to be enforced and what will be the penalty for non-filing? Will there be fines for false declaration? What department of the city will do audits, check for utility usage and random verifications? Generally, this tax process is handled by finance departments, but it may require an additional one or two dedicated employees.

Vacancy taxes aren’t experimental – they are established, proven tools used by cities around the world to address housing shortages and long‑term residential vacancy. Sonoma can draw from these successful models, tailor them to local conditions, and design a policy that strengthens neighborhoods while generating reliable revenue for community priorities.

In doing so, there are precautions and potential mistakes the City should be aware of. They include:

• Annual reporting should be required for trust and transparency.
• Incentives for occupancy could be incorporated, such as fast-track permitting or offering rehabilitation grants. But for a permitting exemption you must provide realistic permitting timeframes.
• It is recommended to use a universal vacancy tax,  by which all vacant residential properties are taxed, instead of singling out condos or other types of properties.
• It is important to get a realistic estimate of revenue; revenue may be higher in the early years and fall off as properties are rented.
• There are few studies that evaluate changes in vacancy over time, except for Vancouver’s Empty Homes Tax 2024 Annual Report, that states that between 2017 and 2023 vacancies fell 68.8 percent, with most residences returned to the rental market. It should be noted that Vancouver has a 3 percent tax on assessed value, for a $1,000,000 property the annual vacancy tax is $30,000, and  that additional cost is clearly a motivating factor.
• Do not mandate a use for the vacant property, give the owners the option to rent, sell or keep the property vacant and pay the tax.
• Keep in mind that a tax that goes to the General Fund only needs 50-plus percent voter approval. Taxes that go for specific purposes need 66 percent approval.

With clear definitions, fair exemptions, and transparent administration, a vacancy tax raises revenue from luxury consumption, brings some homes back into the long‑term rental market, and most importantly, restores year‑round civic life that strengthens Sonoma’s social fabric.

Karla Noyes, M.B.A., is a Sonoma Valley real estate agent.