The Empty Homes Tax: When Housing Policy Pushes the Legal Envelope

In early March 2026, the San Diego City Council voted 8–1 to place an “Empty Homes Tax” measure on the June 2, 2026 ballot. The proposal would impose an annual tax on vacant second homes that are empty for 183 days or more in a calendar year, starting at $8,000 and rising to $10,000 in subsequent years. The version that advanced to the ballot also includes an additional surcharge for “corporate-owned” vacant homes, with higher amounts in the first and second years.

But if you only read the March coverage, you’d miss a large part of the conversation: this proposal is the endpoint of a longer, politically charged effort that started as a much broader tax and was narrowed only after significant opposition, legal concerns, and enforcement questions surfaced.

What the measure would do, as written today

The City’s Independent Budget Analyst (IBA) describes the proposed ordinance as a new tax on owners of “empty homes,” defined as residential dwelling units left vacant for more than half the year. If approved, the tax would become effective January 1, 2027, and the first tax bills would be mailed in the first quarter of 2028 for homes presumed vacant during 2027.

The IBA also lists a set of exemptions, including (among others) primary residences, bona fide leases, military relocation, certain disaster-related uninhabitability periods, owner death, and owner medical care. Importantly, the IBA notes that the City’s working estimate of impacted homes comes from a proxy dataset tied to the City Treasurer’s Rental Unit Business Tax, and that this approach introduces uncertainty and likely “data clean-up” challenges.

For developers and real estate professionals, the immediate takeaway is not just the nominal tax rate. The takeaway is that implementation depends on definitions, verification methods, exemption administration, and an enforcement mechanism that must stand up to both practical strain and legal scrutiny.

The original proposal was broader, sharper, and aimed directly at short-term rentals

The “Empty Homes Tax” voters will see is not the same policy package originally proposed. In October 2025, Councilmember Sean Elo-Rivera advanced a framework described as the “Vacation Home Operation Tax to Preserve Housing,” which targeted both vacant second homes and whole-home short-term rentals, including properties rented out on platforms like Airbnb. That earlier proposal contemplated much larger reach and significantly higher revenue expectations, with public reporting describing a structure that could apply to thousands more properties and generate far more than the later IBA ranges.

That version sparked organized pushback from short-term rental hosts and industry groups, and it became a flashpoint for accusations about paid turnout and political influence at City Hall. In late January 2026, the City Council’s Rules Committee killed the broader proposal, and the March 2026 ballot measure is the “narrowed” successor that removed short-term rentals entirely.

This history is important because it explains why third-party interests took early positions and why some of those positions shifted once short-term rentals were excluded.

Third-party interests did not disappear, they recalculated

When the earlier proposal targeted short-term rentals, Airbnb and related interests treated it as an existential threat and prepared accordingly. One widely circulated report referencing Union-Tribune coverage noted Airbnb had raised substantial funds in anticipation of fighting the proposal and later indicated it would take a “neutral” stance once the revised measure removed short-term rentals.

That shift is not an endorsement of the new measure. It is a strategic recalibration after a key business category was removed from the tax base. For San Diego property owners, this matters because political resources tend to follow the most directly impacted stakeholders. When one stakeholder group is carved out, opposition can fragment, even when underlying legal and administrative issues remain unresolved.

Revenue projections are wide, and the City’s own analyst flags uncertainty

The IBA estimates a net positive fiscal impact ranging from $12.1 million to $23.8 million in the first year of implementation, with a second-year range of $15.3 million to $30.0 million. Those ranges are not a technicality. They reflect real uncertainty about how many homes will actually be taxable once exemptions are claimed, occupancy patterns change, or owners restructure usage to avoid the tax.

The IBA also benchmarks other jurisdictions and highlights a recurring pattern: early unit counts and revenue estimates are frequently overstated, with higher-than-expected exemption activity and administrative challenges once the law is operational. For a city already facing fiscal strain, this should concern every voter, including those who support housing policy reform, because uncertain revenue paired with new administrative burden is a recipe for downstream pressure on enforcement practices.

Legal vulnerability is not hypothetical, it was raised inside the Council chambers

Councilmember Raul Campillo was the sole “no” vote and cited concern about moving forward without a legal review memo demonstrating the measure can withstand litigation. External critics have echoed legality concerns. The San Diego County Taxpayers Association publicly opposed the proposal, citing concerns about legality and taxpayer protections.

A vacancy tax that depends on contested definitions, proof burdens, and enforcement discretion creates several obvious litigation pathways. The point here is not to predict outcome. The point is that the City chose to advance a measure that its own elected members and outside watchdogs describe as legally exposed.

“All politics are local,” but housing law is increasingly state-driven

California has spent the past several years limiting local discretion in housing approvals and downzoning. SB 330, among other statutes, requires written findings and evidence-based standards before denying or reducing qualifying housing development projects. State agencies also frame SB 330 as a tool to “remove barriers and impediments” and improve certainty through vesting mechanisms such as preliminary applications.

This is where City Hall’s posture becomes difficult to defend as consistent. San Diego’s leadership frequently speaks about housing urgency and the need for housing production. Yet, at the same time, the City has engaged in highly visible local pullbacks and restructurings of housing-related policy tools. In June 2025, the City Council voted to cap the number of ADUs permitted on single-family lots, reversing an earlier incentive program that allowed substantially more units in transit priority areas. In February 2026, the City Council approved reforms that shift historic designation appeal power toward elected officials, explicitly to balance preservation rules against housing production.

When cities tighten one set of incentives while imposing new taxes and compliance burdens elsewhere, the result is not coherent housing policy. It is regulatory volatility, and volatility is the enemy of investment, permitting strategy, and predictable project delivery.

Why Hoffman & Forde opposes this measure

Hoffman & Forde is steadfastly opposed to arbitrary and capricious legislation that burdens property owners without clear legal durability, reliable administration, or a demonstrated connection between the burden imposed and the stated housing outcome. This is especially true when the City’s own fiscal analysis underscores uncertainty about taxable unit counts, enforcement infrastructure, and ultimate impacts on affordability.

The City may argue this is “targeted” because it affects fewer than 1% of properties. That framing misses the land use point. The measure is not a zoning reform. It is a high-dollar annual tax instrument that depends on ongoing classification decisions and recurring compliance processes. Processes that cost taxpayer dollars.

If San Diego wants housing production, there are proven pathways: objective standards, predictable entitlements, lawful streamlining, and consistent use of state housing tools that already constrain local discretion. A vacancy tax might be debated as a policy preference, but it should not be advanced as a substitute for legal clarity and consistent pro-housing governance.

Practical guidance for owners, investors, and developers

If you own a second home in San Diego, or you are evaluating acquisition, disposition, or conversion strategies, you should focus on four practical issues:

1. Classification risk: whether the property could be deemed vacant under the ordinance’s definition and how exemptions would be documented.
2. Entity ownership implications: the ordinance contemplates additional tax treatment for homes not owned by a natural person, which is relevant to LLC and trust structures used for legitimate planning purposes.
3. Lease strategy and documentation: the IBA’s summary treats a bona fide lease as a key exemption category, meaning documentation quality will matter.
4. Market effects and timing: implementation is described as beginning in 2027 with billing in 2028, which affects how owners model carrying costs and evaluate near-term sales or long-term rental conversion.

Hoffman Forde advises clients to evaluate these questions early, not after a ballot passes, because structural decisions are hardest to unwind once enforcement procedures are in place.

Disclaimer

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