The California Court of Appeal has ruled against San Francisco's Proposition M, which aimed to impose a tax on owners of residential units kept vacant for over 182 days. This decision affects property owners and could have broader implications for housing policy in the city.
Proposition M was passed by voters in November 2022 with the intention of addressing the city's housing crisis by discouraging property owners from keeping residential units vacant. The measure was designed to generate funds for affordable housing and rental subsidies while increasing the availability of housing units for occupancy.
The plaintiffs in this case, including property owners and local associations, challenged the proposition in court, arguing it was unconstitutional and violated state law. They claimed that the measure unfairly penalized property owners who chose not to rent their units, particularly affecting small landlords and families.
The case reached the California Court of Appeal after a trial court ruled in favor of the plaintiffs, prohibiting the city from enforcing the tax. The court's decision was based on several key legal arguments, including claims that the proposition constituted an unconstitutional taking of property and was preempted by the Ellis Act, a state law that protects landlords' rights to exit the rental market.
In its ruling, the court affirmed the trial court's decision, stating, "Proposition M violates the Takings Clause of the Fifth Amendment and is preempted by the Ellis Act." The court emphasized that the measure imposed a significant financial burden on property owners who chose not to rent their units, effectively compelling them to enter the rental market against their will.
The ruling also highlighted the potential conflict between local laws and state regulations, noting that while San Francisco has home rule powers, these do not exempt local laws from state preemption when there is a direct conflict. The court found that Proposition M's requirements imposed a prohibitive price on property owners' rights under the Ellis Act, which protects their ability to keep their properties off the rental market.
The impact of this ruling is significant for property owners in San Francisco. It reinforces the protections afforded by the Ellis Act and limits the city's ability to impose taxes that could infringe upon property rights. This decision may also set a precedent for similar cases in the future, as it clarifies the boundaries of local taxation authority in relation to state law.
Moving forward, the city may consider revising Proposition M or exploring alternative measures to address housing vacancies without infringing on property owners' rights. The ruling could also lead to discussions about the balance between local housing policies and state protections for landlords.
The city has the option to appeal the court's decision, but details about any potential appeal were not available in the court filing. Meanwhile, the ruling serves as a reminder of the complexities involved in addressing housing issues in urban areas, particularly in a city like San Francisco, where housing demand far exceeds supply.