Vacant Storefronts Are All Over SF. Would Taxing Them Help Fix The Problem?

Source: San Francisco Chronicle, Trisha Thadani and Shwanika Narayan
Photo: Jonah Buffa, Fellow Barber co-owner, sweeps outside his shop. He says the empty building next door adds blight to the area. (Santiago Mejia/The Chronicle)

Vacant storefronts mar nearly every shopping district in San Francisco — from North Beach to Union Street. More than just eyesores in the city’s beloved shopping districts, empty retail spaces are lost opportunities for tax revenue, jobs and foot traffic that help support neighboring businesses.

Now the Board of Supervisors has a plan to help: a tax on landlords who leave their storefronts empty for more than six months. The point? Encourage building owners to quickly rent out spaces, by either settling for a lower rent or finding a pop-up or short-term tenant.

But critics worry how the tax will hobble landlords whose storefronts are vacant for reasons out of their control — like the city’s arduous permitting processes and the high cost of doing business in San Francisco.

The supervisors will vote on the proposed March ballot measure — dubbed “the vacancy tax” — at a special board meeting Thursday. They will likely pass it to voters. It would need two-thirds approval at the ballot to become law.

“This is a long overdue common-sense policy that is not about raising any funds,” said Supervisor Aaron Peskin, author of the measure. “It’s about changing certain bad actor landlords’ behavior, and creating a disincentive for long-term vacancies.”

Peskin and supporters of the tax say it will target landlords who intentionally keep their properties vacant while they hold out for higher rent. But several landlords and small business owners interviewed by The Chronicle criticized the idea, saying it will penalize good landlords along with the bad and won’t help with retail’s underlying woes.

“We’re hustling like crazy so that we can fill our retail vacancies around the city,” said Clinton Textor, a local real estate investor and broker. Textor said he has seven properties that he either owns or leases in the city, two of which are vacant — one on Union Street and the other on Valencia Street.

“You can’t make us more motivated to fill that space than we already are,” he said.

Textor’s empty storefront on Valencia Street is also hurting his neighbor, Jonah Buffa, who owns Fellow Barber next door. Buffa said the boarded-up storefront adds blight to the area and even attracted squatters this summer.

“It was terrible for me,” he said. While Buffa said there needs to be a more targeted measure in outing bad landlords, he said the city also needs to make it easier for small businesses to operate in the city.

“What we don’t want is something that makes it even more difficult for small businesses to survive,” he said.

Empty storefronts are a pernicious problem all over San Francisco. While people commonly blame the rise of online shopping and dwindling foot traffic for the industry’s woes, a Chronicle investigation into the shuttered sites showed landlords and small businesses are also impacted by the high cost of labor, rent and a city permitting process that can take up to a year and a half.

The proposed measure would levy a fee on landlords based on the length of their ground-floor storefront and how long it has been empty. The tax would begin at $250 per linear foot in year one, increase to $500 in year two and then double to $1,000 for each year after that. It would apply only to the city’s 30 or so neighborhood commercial corridors, like those in North Beach and the Haight and on Ocean Avenue.

If it passes, it would go into effect in January 2021.

Landlords could apply for an exemption for various reasons, including if they have been hurt by a disaster or if they apply for permits to make improvements to the property.

The city controller estimates that the tax will generate roughly $300,000 to $5 million annually. But Peskin said the goal of the tax is not to collect revenue — but instead spur landlords to lease their properties faster.

“This is an avoidable tax that we do not want to collect,” he said.

Money from the tax will be donated to a Small Business Assistance Fund, which would be created by the measure.

https://www.sfchronicle.com/local-politics/article/Vacant-storefronts-are-all-over-SF-Would-taxing