Are Vacancy Taxes a 'Blunt Instrument'?

Cities like San Francisco, Oakland, and New York City are considering following Washington, D.C. to implement vacancy taxes. J. Brian Charles writes, "cities are turning to vacant property taxes to nudge property owners of both retail and residential spaces to lease, develop or sell their properties before a short-term vacancy turns into what some cities see as blight."

"In 2016, Washington, D.C., collected $9.4 million in vacancy taxes. Still the effectiveness of the tax remains unclear, according to a 2017 report from Pew Charitable Trusts. When asked, the city could not say how many properties were leased, improved or sold as a result of the tax, according to the Pew report.

A concern is that in hot markets, landlords who may be holding out for high-end renters will end up settling for a national chain. "Levying a tax might drive a landlord to fill a vacancy, but the new tenant may not be the type that made neighborhoods like Greenwich Village, the Mission District in San Francisco or Columbia Heights in Washington, D.C., attractive in the first place." And there's also the worry that physical retail may inevitably decline, replaced by online vendors.