A TAX HIKE FOR DOING NOTHING? “VACANCY” TAXES SWEEP CALIFORNIA
For decades, it has been deemed a privilege to use your property. Now it’s becoming a privilege to not use your property, or to make mild use of it, including keeping it as a garden.
Since 1926, zoning has been an accepted form of land use regulation across the United States. Since 1947, impact fees on development have been accepted too. In other words, it’s generally a privilege to develop your land. If you are in the coastal zone, the joke is that your children and grandchildren will need permits for their sand castles because those are technically development.
The government holds and grants these privileges through permitting procedures. Under this reality, developers and even homeowners were extorted for many years through excessive fees and dedication demands in exchange for permission to build. Fortunately, a series of landmark cases at the United States Supreme Court corrected this, beginning with Nollan v. California Coastal Commission (1987) 483 U.S. 825, which was litigated by HJTA’s own Tim Bittle.
In California, the Mitigation Fee Act further implemented those changes. Development fees are still legal, but there must be a “nexus” tying the purpose and amount of the fee to the project’s negative public impacts to ensure that no one is paying for more than the actual impact of their home or business. This is a fair policy, and it is why development fees are generally exempted from taxpayer protections in our state constitution, like Propositions 218 and 26. Development fees must already be proportionate.
But trending now are issues of “non-use” of land, or mild uses — such as a private playground or garden — where your local government would prefer something else, such as housing. “Vacant” parcel owners are being taxed even if they create no nuisances and do not violate any zoning ordinances, building codes or health codes.
1) Vacant Lot Registration Fees
One municipal trend is to charge “registration fees” to vacant lot owners. Cities including Long Beach, Pasadena, Azusa, Montebello, Palm Springs, Rosemead, Sacramento and Richmond have implemented vacant lot registration subprograms in their code compliance divisions. Owners of vacant lots must register and pay an annual fee. (Some cities also require registering a foreclosure in progress.) Some of these fees are exorbitant, and they may be disguised taxes. Rosemead appears to be the only city running a subprogram but not charging a fee to register. Perhaps their leaders were mindful of Propositions 218 and 26, and realize that watching all lots has always been the job of code enforcement.
As for the majority of cities charging wide-ranging fees to vacant lot owners, the rationale is that they or their properties are to blame for blight and should pay extra to be monitored. (A question for another day is whether this blame is assigned rightly.) The fees do not cover clean-up, only monitoring. But monitoring is already a function of code enforcement because it is a code violation to allow weeds or trash to build up on your property, among other things. Those who violate existing law are already reported and already pay the price through fines and abatement charges. Through these new registration fees, vacant lot owners are simply being charged extra, even if they keep their lot perfectly clean and maintained.
Some vacant lot owners have told us that their lot is vacant because they are legally prohibited from building on it. Zoning changes rendered their lot too small to constitute a legal building site, or too close to a sensitive habitat, etc. No one wants to buy an unusable lot, so the only thing they can do with it is pay to keep it maintained and pay the taxes. This new fee, they say, adds insult to injury. Others say they hope to build someday, but cannot afford to build yet. The more that taxes and fees increase, the longer their hope is deferred. They understand government’s desire to see potential housing sites developed, but the new fees and taxes are counterproductive to that end. Some say they would feel better about the fee if it were used to provide housing for veterans or the homeless instead of funding a duplication of existing bureaucracy.
If you keep a garden on your lot, some cities will exempt you from the fee if you convert your personal garden into a community garden. Beware, however, that if you invite the public to plant tomatoes on your property, you may need to buy more insurance. And if the public doesn’t weed between their tomatoes, you will need to do it or face a citation.
Where vacant lot fees have been enacted without voter approval, and if the courts approve of them at all, they will be limited under Proposition 26 to the government’s reasonable cost of registration and inspection. That limitation disappears, however, if voters approve a vacant parcel tax. Watch for vacant parcel taxes on your ballot. They are tending to pass because most voters don’t own vacant lots, or don’t realize that “vacancy” — evolving in definition — may include them if they need to keep their property temporarily unoccupied. Please watch and educate your community on the hardship and damage these taxes may cause.
2) Vacant Parcel Taxes
In 2018, Oakland voters passed Measure W, a “Vacant Property Tax” with a twist. Measure W defined “vacancy” as “used less than 50 days per year.” Notice how the definition of vacancy was expanded to apply to all parcels, improved or unimproved. The tax is $6,000 per year or $3,000 for condominiums. How the Oakland City Council will make determinations of “used less than 50 days per year” is uncertain. Namely, what qualifies as a “use”?
Hardships naturally include lots that are not worth paying $6,000 to own, such as unbuildable lots, and homes owned by part-time residents, such as professors teaching abroad, touring musicians, deployed soldiers, missionaries in the field or snowbirds. On hearing about Measure W, we also wondered what would happen to a community garden or a retiree’s garden. Indeed, we received many inquiries about these hardships, including a woman in her 80s who gardens on her adjoining unbuildable lot. She received notice she would be charged $6,000 per year. Is gardening not a “use” of property? Did Oakland voters really want that to happen to her?
There is a sliver of good news in the world of vacant lots and parcel taxes. Parcel taxes are often marketed to voters for school district funding. But in Assembly Bill 2458, it was recognized that dirt lots do not create a need for education. Thus, effective January 1, 2019, the statute authorizing parcel taxes for school districts was amended such that “unimproved property may be taxed at a lower rate than improved property.” But it’s not retroactive and it’s merely optional as to any new tax proposal. Please watch your local government’s consideration of these taxes and speak up for inclusion of this exemption.
3) Vacant Storefront Taxes
The San Francisco Board of Supervisors has just proposed a vacant storefront tax to go into effect next January. But this assumes there are small-business entrepreneurs waiting on the sidelines who can afford to do business — and to cut through the red tape — in San Francisco. Many have commented that this assumption is false. Of course, the commercial property owners would like to have their space fully rented. Like making unused residential lots harder to use, taxing vacant storefronts will only make it harder to do business in large cities.
The board of supervisors and city attorney acknowledge that a two-thirds vote is required under Propositions 13 and 218 to pass this new tax, but as with residential vacant parcel taxes, grassroots campaigning will be important to highlight the negative potential impact.
HJTA is watching this growing trend of taxing property for non-use or mild use. Because the word vacancy has a negative connotation, the two-thirds vote is easier for your local government to attain, so we encourage grassroots campaigning against any unwise measures as soon as you spot them.
Finally, if you own a vacant lot and are subject to a vacant lot fee or tax, especially one that received no voter approval, please send information to our office. Mail it to: Legal Department, HJTA, 921 11th Street, Suite 1201, Sacramento, CA 95814. Or e-mail it to email@example.com. Please put “Vacancy taxes” in the subject line.