Appeals Court Struck Down San Francisco Vacancy Tax
The ruling determined that the city's empty home tax conflicts with state law, leaving local housing policies in flux.
Updated on Oct. 2, 2026 in Apartments
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In September 2026, the California Court of Appeal upheld a ruling declaring San Francisco's vacancy tax illegal. The decision impacts the city's housing policies by finding that Proposition M, which voters passed in 2022, violates the state's Ellis Act.
Why it matters
The court ruled that the tax interfered with the rights of property owners to remove units from the rental market under the state's Ellis Act. This legal outcome creates uncertainty for vacancy taxes currently implemented in neighboring cities like Oakland and Berkeley.
While Oakland's vacancy tax generates $6 million in annual revenue, the court ruling now casts doubt on similar programs. The financial impact of the invalidated San Francisco tax remains subject to ongoing legal shifts.
The players
California Court of Appeal
The state judiciary body that interprets and applies California law to local government ordinances.
Superior Court of San Francisco
The local court that initially heard the challenge against the city's tax policy.
The details
The court determined that San Francisco's tax exerted undue pressure on property owners to keep units in the rental market. This pressure directly conflicts with the state's Ellis Act, which legally guarantees an owner's right to withdraw residential units from the rental market entirely. Following a 2023 legal challenge by property owners and trade groups, the judiciary concluded that local efforts to tax vacancies cannot supersede these state-level property rights.
Timeline
Voters passed Proposition M in 2022.
Property owners challenged the tax in 2023.
The Superior Court ruled against the tax in 2024.
The appeals court upheld the ruling in September 2026.
Money Landscape
This decision marks a significant legal boundary for local housing policies that attempt to curb vacancy rates through taxation. It reinforces the precedence of the Ellis Act over municipal efforts to force rental market participation.
Property owners who were previously subject to the tax may see changes to their local tax obligations. Residents should consult with a qualified tax or legal professional to understand how this ruling impacts their specific property tax status or rental income considerations.
The takeaway
The court ruling highlights the legal tension between municipal revenue tools and state-level property rights. Property owners should monitor updates on the legal status of vacancy taxes to determine if any changes to their local tax filings are necessary.
Further reading
Find more details on local rental market regulations in our Apartments section.
Source note: This article includes information reported by Reason.
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