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Frequently asked questions
 

Why do we need a vacancy tax?

As the housing crisis reaches new heights, we are losing families and longtime residents and gaining empty homes. The percentage of vacant homes in South Lake Tahoe has risen to 44% (up from 33% in 2000) and the increases in vacancies are outpacing the new housing being built. Median home prices in South Lake Tahoe have more than doubled since 2013. Approximately half of Tahoe’s workers now live outside the region, and of those who do live here, nearly two-thirds don’t earn enough to afford the living expenses of a typical family. Lack of affordable housing has led to a shrinking population, a shortage of workers, and 36% drop in school enrollment since 2000. A vacancy tax incentivizes vacant homeowners to rent to locals; if just 20% of vacant homeowners rent to locals, it would add more than 1,400 new housing units to the local market while simultaneously generating more than $34 million per year for workforce housing development, road repair, and essential services. The City’s other tax proposals are projected to generate an average of $2-3 million per year. A vacancy tax is the only policy solution that addresses the scale of the problem, immediately adding housing units to the market and generating tens of millions of dollars per year for the city’s residents and roads.

How would a vacancy tax benefit South Lake Tahoe?

44% of all housing units in South Lake Tahoe - more than 7,000 houses - currently sit empty most of the year. A vacancy tax incentivizes vacant homeowners to rent to locals, adding more than 1,400 new housing units to the local market while simultaneously generating more than $34 million per year for workforce housing development, road repair, and essential services. A vacancy tax benefits both second homeowners and full-time residents by ensuring South Lake Tahoe remains a vibrant community. The housing crisis is eroding the experience for visitors and residents alike, and no one wants to own a home in a hollow town devoid of employees or local culture. *Projections assume 80% of vacant homeowners pay the annual fee and 20% of vacant houses convert to local housing.

Why don't we build more housing instead of adding a tax?

The City of South Lake Tahoe needs new funding sources to build more housing. The City is currently maxing out all available federal and state grant funding to build the 248-unit Sugar Pine Village, which is not nearly enough to close the gap on the 3,290 housing units needed by the local workforce in 2026. We need additional revenue streams to solve the housing crisis. A vacancy tax would bring in an estimated $34 million per year for housing development, road repair and essential services. The addition of millions of dollars per year will allow the City to build more affordable housing and develop local housing retention programs, as well as purchase and fully renovate old motels into additional housing units.

How would a vacancy tax work?

Modeled after Berkeley’s successful vacancy tax, owners of vacant houses that are unoccupied for more than 6 months per year would pay $3,000 for the first year and $6,000 every year thereafter. If 20% of the 7,150 vacant homeowners shift to renting their property 6 months or more, that adds 1,430 housing units, while generating more than $34 million each year for affordable housing, road repair, and essential services. Property owners will complete a short Declaration of Occupancy online or by mail indicating how the property was used that year. Enforcement will be handled through spot audits and penalties for fraudulent declarations. We recommend the City use a small portion of the millions generated annually by the program to add two staff positions to manage implementation and enforcement for a smooth roll-out and transition. Renting to a local resident for 6 months of the year would exempt a second homeowner from the tax. Additional exemptions would exist for properties under active renovation, buildings in probate, and homes of elderly residents currently in a care home or long-term medical treatment.

Is it fair to tax second homeowners? Some second homes are family homes that go back generations. 

Second homeowners are absolutely a valued part of our community. And as part of our community, they need to be part of the solution. The housing crisis is eroding the experience for full-time residents, second homeowners, and visitors alike. No one wants to own a home in a town with no local culture or employees to staff local businesses. Furthermore, owners of second homes that were purchased long ago are paying only a small fraction of the property taxes that a local resident would pay if they purchased the same home today. California’s Proposition 13 ties property taxes to the initial sale value, so residents who have recently bought homes are being taxed many times more than second homeowners who have owned family property for decades. A vacancy tax would allow our community to share that burden more fairly.

Second homeowners pay property taxes with no "drain" on local resources. Isn't that a good thing?

Despite this common narrative, the truth is quite the opposite. Housing *is* a local resource, and a very precious and limited one, given Tahoe’s environmental and physical constraints on development. While a small percentage of Lake Tahoe Unified School District's funding comes from individual property taxes, the vast majority of school funding comes from funding tied to student attendance numbers. As local families have moved away amid skyrocketing housing prices, we have lost 36% of our school enrollment in the last 20 years – and per-student funding tied to it. Local businesses also suffer when homes sit vacant. Traffic becomes over-concentrated on weekends and holidays, while shops, restaurants, and grocery stores see visitation and revenue drop midweek and in the off-season. Additionally, vacant homeowners don’t pay sales taxes on weekly groceries, gas, or other household items, one of the City’s leading sources of revenue. Despite the long-held narrative to the contrary, empty second homes are not a drain-free source of tax revenue. They come at a high cost to our local economy and our community.

Is a vacancy tax legal?

Yes. Other US cities have already led the way. Washington D.C. has had a vacancy tax for thirteen years, and Newport, RI adjusts property tax rates based on full-time residency. Here in California, the cities of Oakland, San Francisco, and Berkeley all have vacancy taxes. The City of San Francisco is currently defending its 2022 vacancy tax, which is expected to be upheld. The suit alleges that vacancy taxes are a form of “takings” under the Fifth Amendment, despite longstanding precedent that “excise taxes,” such as a vacancy tax, are not “takings.” If there was merit to vacancy tax challenges, Washington DC’s vacancy tax would have been overturned years ago.

What about the costs of a lawsuit?

The City’s in-house counsel handles lawsuits on a regular basis, including the lawsuit and appeal for Measure T. These types of routine legal expenses are part of the city’s normal working budget. The City of South Lake Tahoe can and should hold the revenue generated in an interest-generating account for two years as a standard precaution against financial risk. The vacancy tax will immediately shift incentives for homeowners to rent vacant properties to locals, while millions of dollars accrue to fund major capital investments in housing and infrastructure after the two-year holding period.

Where did you find all of this data?

The facts on this website come from the following sources: https://www.trpa.gov/tackling-tahoes-housing-crisis/ https://data.census.gov/table?t=Housing:Housing+Units&g=160XX00US0673108&tid=ACSCP5Y2021.CP04 https://www.tahoedailytribune.com/news/real-estate-housing-market-analysis-for-march-2022-vs-2023/ https://berkeleyca.gov/sites/default/files/documents/Ballot%20Measure%20Info%20-%20Nov%202022%20v2.pdf https://www.cityofslt.us/DocumentCenter/View/17094/Complete_HousingElement_CLEAN_reducedsize?bidId= https://dof.ca.gov/forecasting/demographics/estimates/estimates-e4-2000-2010/ https://legistarweb-production.s3.amazonaws.com/uploads/attachment/pdf/1777447/03_GeneralPlan_APR_for_2022.pdf https://www.cde.ca.gov/ds/

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