Curbed SF election guide: SF’s Proposition D vacancy tax, explained

Like clockwork, it’s almost Election Day in San Francisco; in fact, early voting has already started for the upcoming California primary election on March 3, 2020.

In additional to the hotly contested Democratic presidential primary, the March vote places a handful of crucial housing and infrastructure propositions on the ballot. We have everything you need to know about every vote you’re being asked to cast, starting with Proposition D.

What’s the proposal?

In an effort to incentivize finding new tenants for blighted commercial properties, Proposition D, the city’s proposed vacancy tax, would charge owners of chronically empty SF storefronts $250 per linear foot for the first year of remaining vacant, $500 in year two, and $1,000 every year after the unit remains empty.

Fees collected would go into the city’s new small business fund, and wouldn’t kick in until 2021. This measure requires two-thirds of the vote in order to pass.

Who’s behind it?

Supervisor Aaron Peskin first proposed the fee plan, and an 8-0 vote by the rest of the Board of Supervisors qualified it for the ballot. (The full board backs the proposal, but the late December vote had three abstentions, including Peskin, who was out of town at the time.)

What’s the backstory?

While the ongoing retail apocalypse has hit San Francisco hard, the problem of long derelict storefronts bedeviling SF neighborhoods goes back years.

According to the SF Office of Economic and Workforce Development, a healthy range for vacancy rates for retail units in a neighborhood is between five and ten percent. SF’s citywide average comes in around 12 percent—higher than ideal, but still not necessarily that bad. However, in some commercial corridors the figure reaches as high as 27.6 percent. In neighborhoods like the Richmond District, that adds up to some 150 empty stores in highly visible areas.

While most landlords presumably want paying tenants in their units, some spaces stay empty for years. Small businesses in particular complain they have trouble keeping up with soaring rent prices.

Arguments for Proposition D

Proposition D’s sponsors argue that small businesses will have more power to negotiate rent prices if landlords have an incentive not to let retail spaces go empty, and that the new small business fund—a first for SF—will assist those struggling in the current retail crisis.

While landlords complain at the possibility of a new tax, Peskin et al. characterize the vacancy fees as “entirely avoidable” and say that it simply puts the onus on building owners to attract tenants. The potential to cut down on unsightly and depressing empty storefronts creates keen appeal for Proposition D.

Arguments against Proposition D

Counterarguments suggest that the current crisis in retail is already hurting commercial landlords and that Proposition D threatens to kick them while they’re down. The anti-crowd also says that it impresses unrealistic standards on how long it takes to find and negotiate with new businesses in SF and run the existing gamut of red tape. Further, pinching building owners won’t helps small businesses.

Since the new tax would exempt nonprofits, opponents similarly allege a double standard, and accuse City Hall of crusading against private business as a political show.

Supported by

• SF Board of Supervisors
• Mayor London Breed
• Sierra Club
• YIMBY Action
• Merchant associations in neighborhoods like the Haight, Castro, Ingleside, and North Beach

Opposed by

• SF Republican Party
• Ed Lee Asian Pacific Democratic Club