SF Judge Rules 'Empty Homes Tax’ Unconstitutional

by Andrew Walden

Unconstitutional.

That’s the word from Judge Charles Haines of the the San Francisco Superior Court in an October 31, 2024 decision striking down San Francisco’s ‘Empty Homes Tax.’ 

Adopted by 54.5% of San Francisco voters as Proposition M in the November 8, 2022 General Election, the San Francisco Empty Homes Tax was set to be collected beginning in April, 2025 for the 2024 Tax Year.

But it immediately faced litigation from plaintiffs including the San Francisco Apartment Association, the San Francisco Association of Realtors, Small Property Owners of San Francisco Institute, and four individual property owners. 

Here are key passages from plaintiffs’ successful Motion for Summary Judgement:

…the (US) Supreme Court has held that the government cannot “compel a landowner over objection to rent his property” without violating the Takings Clause. Yee, 503 U.S. at 528; see also FCC v. Fla. Power Corp., 480 U.S. 245, 251-53 (1987) (noting constitutional problem if utility company was compelled “to enter into, renew, or refrain from terminating” agreements to lease its property).

And the courts have not hesitated to enforce this constraint, whether violated directly or indirectly.

Thus, in Cwynar v. City & Cnty. of S.F., 90 Cal. App. 4th at 637, the First Appellate District held that property-owners stated a takings claim where San Francisco forced them to continue renting units that they no longer wish to rent, rather than reclaiming them for their own use or use by a close family member. Id. at 658.

Likewise, in Levin v. City & Cnty. of S.F., 71 F. Supp. 3d at 1072, the Northern District of California struck down as a taking a San Francisco ordinance requiring landlords to pay evicted tenants 24 times the difference between their old rent and their new rent as a condition of removing units from the market. The Court held that though a local government may require a landlord to make a reasonable relocation payment to displaced tenants, to help mitigate the direct impact of eviction on those tenants, the Takings Clause does not allow a city to require landlords to make expenditures to benefit society at large as a condition of no longer renting the property. Id. at 1086.

And perhaps most directly on point, the New York Court of Appeals (that State’s highest court) squarely struck down as a physical and regulatory takings (in a case cited with approval by Cwynar) New York City’s “anti-warehousing” law, which required landlords to “rent up” vacant apartments or pay “substantial monetary penalties for noncompliance”— “$500 per unit penalty … for each unit unrented to a bona fide tenant.” Seawall Associates v. City of New York, 74 N.Y.2d 92, 104 (N.Y.), cert. denied, 493 U.S. 976 (1989).

Proposition M is substantively indistinguishable from the anti-warehousing penalties struck down in Seawall, except that its penalties are much greater, and it should suffer the same fate because “[a] state may not impose a charge for the enjoyment of a right granted by the Federal Constitution.” Watchtower Bible & Tract Soc’y v. City of L.A., 30 Cal. 2d 426, 431 (1947); see also Harman v. Forssenius, 380 U.S. 528, 540 (1965). But that is precisely what Proposition M does….

A message on the San Francisco Treasurer and Tax Collector’s website states:

“On October 31, 2024 the San Francisco Superior Court issued a ruling against the City and County regarding the Empty Homes Tax (case number CGC-23-604600).  We are currently evaluating the court’s decision and how it impacts our upcoming collections for the tax and we expect to have more information in the coming weeks.  We will continue to update our website with new developments.”

Haines' ruling was formalized by a November 26, 2024 written ruling signed by Senior Judge Ronald E Quidachay.

Read  Motion for Summary Judgment

LINK: Case Docket File

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