.A Breakdown of Santa Cruz’s ‘Empty Home Tax’ Initiative

Would the measure generate enough money to make it worthwhile?

Santa Cruz city voters will decide whether homeowners should be charged a tax on second vacant homes on the November ballot. But differing data about how costly such a tax would be, and how much money will be generated, is a sticking point between supporters and opponents—and at the heart of the discussion about the tax at last week’s City Council meeting.   

Known in Santa Cruz as the Empty Home Tax initiative, the measure is one of a growing number of taxes popping up around the state—and world—that is looking to charge a fee for those second empty vacation rentals that some say are taking up critical space in a scarce rental market. Cities like San Francisco, Los Angeles—and more locally, Capitola—have all considered a similar tax for this year and next years’ ballot, with a few California cities bringing this issue to voters in November. 

The premise of the tax is a simple one: use taxes from homeowners’ empty vacation rentals to fund affordable housing, and hopefully as a consequence encourage more homeowners to find renters for their additional rentals. 

At least, it’s simple in theory. 

In practice, there are more logistical considerations these measures have to take into account, and it can be hard to nail down exact data to determine the costliness of such a tax, and how much money can be generated. That’s partly due to the novelty of such taxes—Oakland became the first city in California to approve a similar tax in 2018, modeled in part off Vancouver, Canada’s vacancy tax. Data on second homes and vacancies can also be hard to pinpoint, and calculated in different ways, contributing to the ambiguity.    

So how much would it cost to implement this tax, how much affordable housing could it generate, and what would its implementation look like?

Battle of the Data 

On June 28, city staff presented a report that estimated the start-up cost of the tax will be $607,000, and predicted it will generate $2-4 million in revenue. After start-up, staff estimates the costs to be closer to $420,000 annually. 

Those hefty initial expenses include a budget of $65,000 to build a web portal for landlords to certify whether their secondary properties were occupied fewer than 120 days that year. If so, they could be subject to a tax between $3,000 to $6,000, depending on the number of units in the property. 

$126,000 is budgeted to support the measure’s Oversight Committee. The Oversight Committee—made up of volunteers, and scheduled to meet a minimum of once a year—keeps tabs on the functioning of the tax program. 

Staff also included $100,000 in potential legal fees. 

Empty Home Tax Campaign Manager Cyndi Dawson, Councilmember Sandy Brown and other members of the public objected to these high start-up fees at last week’s council meeting. 

There’s already a web portal that the City uses to receive reports and payments for the Transient Occupancy Tax and Short Term Rental Fees—in short, the infrastructure is there for the self-reporting system, Dawson tells GT. She believes the costs for the portal should be more like $5,000‐$15,000.

Then there is the expense for supporting the Oversight Committee. 

“There was 1,000 hours per year of staff time allocated for one meeting a year,” says Dawson. “$126,000 for one meeting just was, like, a glaring [overestimate].”

As for the legal fees, Brown and Dawson questioned at the meeting why they were included in the first place. 

“I’ve been here and voted yes and voted no on many ordinances,” Brown said. “We’ve never been told it costs $100,000 for potential legal risk.”  

City staff emphasized these start-up costs were created with input from consultants who have implemented ordinances before, and that should there be litigation, it would cost the city significantly more than the $100,000. Staff also cited the tax’s novelty, making costs and revenue difficult to calculate. 

As for how the city calculated the $2-4 million the tax might generate, staff looked at “data from the County of Santa Cruz’s absentee property lists, homeowner exemptions claimed and long-term and short-term rental data.”

The Empty Home Tax campaign uses Census Data to estimate the tax’s revenue. Data shows a vacancy rate of 9.5%, or 2,283 homes, in the city of Santa Cruz for 2020. The estimate includes second homes, homes under construction and ones used seasonally. Over accounting for landlords who qualify for exemptions, if only 500 property owners were to pay the tax, the city would raise about $3 million dollars annually, says Dawson. And even at that low estimate, the ordinance—which funds city costs associated with the tax up to 15%—would fund the city staff’s estimated administration expenses.  

Peter Cook, a long-time Santa Cruz real estate agent and member of Santa Cruz Together, which is running an opposition campaign to the measure, says even those numbers are wildly overestimated. 

Three of his clients have already come to him saying they will find a way to not pay the tax—but not necessarily by renting to students or other Santa Cruz locals. 

“People will probably exaggerate and say that they live there the minimum number of days,” says Cook. “I think some people will sell their properties. And I think some people will probably rent them out oftentimes to family members, and oftentimes with big air quotes around ‘renting it out.’”

Ultimately, the council voted unanimously to bring back an updated report that compared costs to other cities with similar taxes, and re-evaluated staff expenses associated with the committee meetings. 

“I’m sorry to hear that you didn’t get more information from some of the other jurisdictions that have adopted [similar measures] about their costs,” Brown said at the meeting. “I think that it would have been really helpful for you and for all of us to see an analysis that was based on, well, what’s real.” 

Oakland’s Tax

In 2018, Oakland voters passed the city’s own version of a vacancy tax.   

There are some key differences in Oakland’s tax compared to the Empty Home Tax, one being that Oakland’s vacancy tax applies to residential and nonresidential properties, and includes undeveloped land and commercial properties. 

Since 2020, when the city began collecting money on the measure, the tax is projected to bring in just over $15 million. Most of that money has gone towards Oakland’s Public Works and Human Services departments, to establish a commission on homelessness, a mobile outreach team for homeless residents, homeless cleanup services and housing grants to local shelters. 

Meanwhile, the city’s finance and administrative departments are expected to use $2.5 million of the tax’s projected revenue.    

The initial start-up costs were closer to $100,000 and according to Rosanna Munoz, Oakland’s acting assistant revenue and tax administrator, those costs were pretty accurate. 

Oakland is gearing up to build thousands of new units over the next several years, and this money might make a meaningful dent in construction costs for new units—especially low-income units, says Munoz. 

“We continue to be faced with a large and growing homelessness crisis,” said Oakland City Council Member Rebecca Kaplan when Oakland received its most recent fiscal report on the vacancy tax. “And making sure we are doing the most we can with all that we have to remedy it is critical.”


  1. I find it interesting that the solution to our housing problems is to raise taxes. It funny how states, cities and municipalities will spend millions in the form of tax breaks and outlays as incentives to bring business to an area, but what they won’t do is provide an incentives to build housing without taxing everyone else to do it.
    The state passes a law to allow everyone to build a second unit, but do the cities and counties provide incentives to make it happen. NO. Instead to even start a second unit is 10’s of thousands in permit fees just to start the process, without any assurance that you can build. Then of course the reassessment of the entire property so the county can get more money.

  2. The vacancy numbers of 9.5% stated by the Empty Home Tax are greatly exaggerated. There is no way one in 10 homes in the city is vacant. Local more reliable data indicates maybe 1.2-2% vacancy at most. The EHT does not tax vacation homes or parcels of land. It won’t improve the housing situation one bit, but will likely cost the city taxpayers money every year. Ridiculous!

  3. As a renter and fifth generation CA Central Coast resident who would like to continue to live and work in the area, I definitely like the idea of a tax that’s high enough to make having a second home unfashionable. But I worry it wouldn’t, in which case, Santa Cruz still doesn’t have a lot of land for new buildings except for ADUs in people’s backyards. Let’s definitely make THAT easy and fashionable! I also wonder how such a tax would apply to people who don’t live in their homes but buy them for AirBnBs, companies like Pacaso, which some neighboring counties are fighting, trying to swoop in and create a market for new second home owners with homes essentially bought as timeshares, as well as people like the lovely lady who’s trying to move a violent sexual predator into her huge Bonny Doon second home (next door to a bunch of teenage girls) because CA is willing to pay the exorbitant $6.5K monthly rent she’s asking. Would there be loopholes which these types of people and companies could use to still screw over local renters?

  4. The Empty Home Tax is about raising millions of dollars for affordable housing. It doesn’t tax where people live including ADUs. Massive infill projects are happening and the majority of the units (>80% in most cases) are market rate which is out of reach for most of our community. Up to 17 story buildings have been zoned south of Laurel in the Downtown Plan Expansion. The Empty Home Tax isn’t a silver bullet and won’t solve the housing affordability crisis but will help make a dent. It gives property owners like myself a chance to step up and spend 5 minutes a year to answer yes or no to using my property for 120 days a year. Check out this video https://youtu.be/XRo7VTGZjGo that shows what the process will be like for home owners to declare. I was part of the group that worked with an expert tax lawyer to write the initiative and we modeled the declaration process after Vancouver to make sure home owners were not burdened and we could still raise millions from those that keep their property empty for more than 8 months. That includes the hundreds of unpermitted short term rental in the City of Santa Cruz. For those of us that live in our homes we won’t pay and can help raise money from those that aren’t living in their homes as their primary residence. Affordable housing needs vastly exceed supply. We can use this money to convert or build new units to keep our friends, neighbors, family and community here in Santa Cruz instead of being pushed out. You can check our more details at https://emptyhometax.org/why-an-empty-home-tax-for-santa-cruz/

  5. Housing inequality, just like wage inequality are by products of the deterioration of our middle class due to defunding and consecutive tax breaks for the wealthy/corporations since the 1980’s. Thus effectively transferring wealth to the few. We the people have to fight to maintain what is left of our collective social safety net. I have read the entire text of measure N and have found that it is very well researched and well written. What is most disturbing from the opponents is the language they use to oppose it… “Too extreme”, “Too invasive”, “Too punitive”. Too punitive only if one lies about their 2nd, 3rd, or 4th home/condo/unit… IF left unoccupied for more than 120 days. Personally, these extreme terms they use are a better fit for the repeal of Roe v Wade. Now that’s extreme, invasive and punitive. Context is too important to be left out of the conversation. Ottowa, Toronto, the Peel region of Ontario, like Capitola, LA, and San Diego are all considering and debating empty home fees/taxes. Oahu, Paris have debated and considered empty home fees/taxes, Jackson Hole Wyoming as well. Ireland has an Empty Home Initiative on a national level, Singapore is looking at empty home fees/taxes, and Spain has recently introduced a national vacancy tax as part of its new “right to housing law”. As long as there are incentives to hide wealth in real estate we will continue to have vacant buildings. Whether one lives in them or not. I applaud those who are attempting to address a part of this monumental inequality.


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Aiyana Moya
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