Do vacancy taxes work? It depends on what “work” means. Across every city that has tried them, vacancy taxes have reliably reduced the number of empty properties, but no rigorous study has found that they meaningfully lower rents or improve housing affordability. They activate unused housing stock and generate modest revenue. They are not the affordability fix that political rhetoric sometimes promises.
What the Evidence Says About Empty Units
The clearest data comes from Vancouver, which launched its Empty Homes Tax in 2017 and has since raised the rate to 3% of assessed value.1City of Vancouver. Empty Homes Tax The city’s official data shows a 54% decrease in the number of vacant properties between the 2017 and 2022 reference years.2City of Vancouver. Empty Homes Tax Annual Report An independent study by the C.D. Howe Institute estimated that the tax produced roughly 5,355 fewer vacant units than would have existed without it, cutting the overall vacancy rate by about 1.5 percentage points.3C.D. Howe Institute. Ripple Effects – The Impact of an Empty-Homes Tax on the Housing Market
Other cities report smaller or murkier effects. In Washington, D.C., the city tracks roughly 3,469 vacant and blighted properties, with approximately 2,900 paying elevated tax rates. San Francisco’s commercial vacancy tax, which charges by linear foot of storefront frontage after 182 days empty, has seen only a small fraction of properties self-report as vacant.4Treasurer & Tax Collector. Commercial Vacancy Tax (CVT) The direction is consistent: some owners do change their behavior. The magnitude depends heavily on rate design and enforcement.
Why Rents Haven’t Come Down
This is the uncomfortable part for supporters. The same C.D. Howe study that confirmed Vancouver’s vacancy reduction found no statistically significant effect on average rents or new housing construction.3C.D. Howe Institute. Ripple Effects – The Impact of an Empty-Homes Tax on the Housing Market Roughly 5,000 formerly empty units returning to the market sounds substantial, but in a city with Vancouver’s demand pressures the effect barely registered in rental prices.
Two forces explain the result. In high-demand markets, landlords remain confident that vacancies will fill at the going rate, so added supply does not drive prices down. And landlords who might face a vacancy tax in the future can price the risk into what they charge current tenants, muting any affordability gain before it arrives.
The scale problem is the deeper one. Vacancy taxes touch a narrow symptom, properties sitting empty, without addressing the underlying causes of housing cost pressure: restricted zoning, insufficient new construction, and population growth that outpaces supply. A few thousand units returning to the market cannot offset a deficit measured in the tens of thousands. Oakland implemented a flat-fee vacancy tax in 2018 charging $3,000 to $6,000 per property, and rental rates continued to climb in the years that followed.5City of Oakland. Vacant Property Tax Frequently Asked Questions
Enforcement Is the Weak Link
Whether a vacancy tax accomplishes anything at all depends on enforcement, and most programs struggle here. Over one-third of Vancouver’s Empty Homes Tax levies have gone unpaid due to noncompliance. San Francisco’s commercial tax relies on property and business owners to self-report; about 85% of properties complied with reporting requests between 2022 and 2024, but only 2% to 5% of those actually reported a vacancy. In a city with visibly empty storefronts, that self-reported rate raises obvious questions.
Appeals systems create their own leaks. In Washington, D.C., one vacant property owner avoided nearly $400,000 in taxes over 15 years by repeatedly filing appeals. Victoria, Australia, shows the same gap from the other direction: only about 1,779 properties were assessed for the vacant residential land tax in 2024, while the Parliamentary Budget Office estimated the true liable population was closer to 5,000.
Cities relying on owner self-declaration without robust auditing are running an honor system. Vancouver has directed a meaningful share of its vacancy tax revenue into audits, which is the right instinct. Without that capacity, a vacancy tax mostly collects from the honest.
The Legal Vulnerability
Vacancy taxes are also facing growing constitutional challenges in the United States. San Francisco voters passed a residential empty homes tax in 2022. A Superior Court judge struck it down in October 2024 on the grounds that forcing property owners to rent out their units or face a tax penalty violated the Takings Clause of the U.S. Constitution, which protects the owner’s right to exclude others from the property, and California’s Ellis Act, which prohibits the government from compelling residential owners to offer units for rent.6The University of Chicago Law Review. Vacancy Taxes – A Possible Taking The city has appealed, but the residential tax has never collected any revenue.
The reasoning is not narrow. If a vacancy tax effectively penalizes an owner for keeping property empty, a court could treat it as a regulatory taking that requires compensation. Courts generally give taxes wide latitude, but vacancy taxes sit in a gray zone between taxation and regulation, and the San Francisco ruling now shapes how any new program has to be drafted.
The Revenue Paradox
The money side has a built-in contradiction that cities rarely name. Vancouver’s Empty Homes Tax has collected over $100 million CAD since its inception, directed to affordable housing initiatives and enforcement.2City of Vancouver. Empty Homes Tax Annual Report Oakland’s tax brings in a few million dollars per year, funding programs to reduce homelessness and address illegal dumping.
If the tax works as intended and owners fill their empty units, revenue drops toward zero. If revenue stays high, the tax is not changing behavior. Generating money and reducing vacancies are at cross-purposes. Cities that fund affordable housing programs from vacancy tax proceeds may find the stream unreliable as compliance rises or legal challenges succeed.
If You’re the Property Owner Paying One
A vacancy tax structured as a property or real estate tax is generally deductible as part of the state and local tax (SALT) deduction on your federal return. For 2026, the SALT deduction is capped at $40,400 for most filers, so the vacancy tax competes with state income taxes and other property taxes for the same limited space. If your combined state and local taxes already exceed the cap, the vacancy tax delivers no additional federal benefit.
If a city structures its charge as a fine or penalty for violating a local ordinance rather than as a tax, that changes the answer. Fines and penalties paid to a government for violating any law are generally not deductible. The classification depends on how the specific city writes it into its code, so check the local ordinance before assuming the payment reduces your federal tax bill.
The Bottom Line
Vacancy taxes do one thing well: they push some owners to put empty properties back into use. On the affordability question, the evidence is thin to nonexistent. Rents in Vancouver, Oakland, and comparable markets did not fall in response to these programs, because the number of activated units is small next to the underlying supply shortage, and because landlords can pass the risk of the tax into rents charged to everyone else. Enforcement gaps and legal challenges further blunt the effect. A well-designed vacancy tax is a modest tool for activating stock and funding housing programs. It is not a substitute for building more housing.