Appeals Court Struck Down Vacancy Tax
The ruling determined that the 2022 voter-approved measure conflicts with state protections for property owners.
Updated on Oct. 2, 2026 in Apartments
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Property owners who opposed San Francisco's Proposition M saw their challenge succeed as a state appeals court recently declared the empty home tax illegal. The court found that the city measure conflicted with the state Ellis Act, which governs the right of owners to withdraw units from the rental market.
Why it matters
The decision invalidates a tax meant to bring vacant units onto the rental market and creates significant legal uncertainty for similar housing policies across the Bay Area. Residents now face questions regarding the future of local efforts to address unit availability through tax policy.
The California Court of Appeal upheld a lower court ruling, invalidating the local tax against a backdrop where Oakland's similar vacancy tax generates $6 million in annual revenue. The ultimate impact on neighboring city programs remains unknown.
The players
California Court of Appeal
The state judicial body that issued the final ruling declaring the San Francisco vacancy tax illegal.
Proposition M
The 2022 voter-approved measure that implemented a vacancy tax on certain residential units.
The details
In 2023, property owners and trade associations challenged Proposition M, arguing it violated state law. The court concluded the city's mandate pressured owners to rent out units in direct opposition to the Ellis Act, which guarantees the right to remove property from the rental market. This ruling finalizes the earlier 2024 Superior Court decision against the city.
Timeline
Voters passed Proposition M in 2022.
Property owners initiated a legal challenge in 2023.
The Superior Court issued a ruling against the tax in 2024.
An appeals court upheld the ruling in September 2026.
Across the Bay
The ruling relies on the Ellis Act, a long-standing state law that has historically protected the right of owners to withdraw units from the rental market. This decision updates the precedent for how local jurisdictions, including Oakland and Berkeley, may structure their own housing policies.
The court's decision removes the vacancy tax obligation for property owners in the city. Owners and renters should monitor how this shift influences rental unit availability across their neighborhoods.
The takeaway
San Franciscans should recognize that local housing taxes face strict state-level oversight when they intersect with property rights. Follow future legislative discussions or potential city appeals to see how the Board of Supervisors addresses the resulting funding and vacancy policy gaps.
Further reading
For more background on the local housing market and regulation, explore San Francisco Apartments.
Source note: This article includes information reported by Reason.
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