Vacancy Tax: A Proposal for Boston

The VOL Anti-Gentrification Action Committee has started a working group around the idea of establishing a Vacancy Tax in Boston to push back against the displacement associated with gentrification and increase the guaranteed access to affordable space in our city.

What is the Problem?

There are many vacant units in the city of Boston, either on the market for rent or sale at rates most local people can not afford, are held as investments by non-residents or neglected and unusable. Many of these units, while not serving the citizens of Boston, contribute to the process of gentrification and displacement by raising the cost of all real estate which is already some of the least affordable in the country.

What is the Solution?

Create a law, ordinance, tax and or other policy that targets wealthy large scale property owners whose properties are unaffordable or unusable to the average Bostonian with significant a financial penalty for two reasons.

1. To incentivize property owners to lower the rent or asking price or otherwise make the property able to be used in order to avoid the penalty. This will allow access to people who have been previously been denied.
2. To generate revenues for city-owned investments that are built to guarantee affordable access to housing and commercial space.

The Initial Concept

A proposal for a local (Boston) policy aimed at reversing the rampant displacement of long term residents associated with gentrification and development and securing affordable housing and commercial rental opportunities for Boston residents, especially marginalized and disproportionately impacted groups such as low-income families, women (and women headed households), people of color and those who have been impacted by interaction with the criminal justice system. 

How It Works: The City of Boston imposes local tax, fee or other punitive financial measures on a defined class of property owners who hold large amounts of real estate; the majority which is priced above affordable and whose properties sit vacant due to lack of interest or ability to pay on behalf of potential renters. 

Who It Targets: Large scale developers (particularly of luxury housing or high end commercial spaces), Property owners who meet certain minimum thresholds for the number of properties owned. Property Owners who hold property in Boston as investments that residents cannot  live in or access. It does not target: families who own a multifamily for rental income or rent out a room or Air BnB (that complies with city guidelines), property owners who provide all affordable or section 8 housing

Desired Outcomes: property owners with unfilled units will reduce their prices to a level of affordability because it is more economically viable than paying the vacancy tax. This will increase the stock of affordable housing AND adjust property values to reflect something the people of Boston can afford. Disincentivize the development of units that are not affordable and through the tax generate revenue for investments in affordable housing and commercial spaces. 

How The Revenues From The Vacancy Tax Would Be Used: a common fund owned and operated by the city with community governance to invest in, purchase and hold property with the express purpose of renting it out at affordable or subsidized rates to marginalized bostonians: 

Enforcement: failure to comply with the vacancy tax should result in the application of penalties including revocation of occupancy licenses, a barring to apply for permits to develop anywhere in the city and additional financial penalties

The Next Step: Community Conversation

On Monday October 19th 2020 at 6:00 PM we are having a Community Conversation on Zoom about this and we are looking for your input and ideas.

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Our Process & Who We Have Reached Out To So Far

After initially drafting and circulating the idea we began to consider how it could take form in law and policy. This is when we began to reach out to Elected officials and organizations we thought might have interest and ability in helping develop and push this idea. So far we have been in contact with:

Office of Boston City Councilor Michelle Wu – We reached out and received some initial interest and helpful research which can be found in the research section below.

Office of Boston City Councilor Julia Mejia – We reached out and received enthusiastic support. They are co-hosting our initial community conversation. Their research and work can be found here and is also included in the research section below.

Office of Boston City Councilor Andrea Campbell – We reached out and received interest and hope they remain a part of the conversation.

City Life Vida Urbana – We reached out and received interest and they are following up with an internal meeting.

Cambridge City Councilor Quinton Zondervan – We reached out and received enthusiastic support. We look forward to seeing how we can push this policy across city lines.

JPNDC – We reached out and are eager to hear back.

We have also had numerous personal conversations and indirect contacts with other folks, from community members to elected officials, trying to gauge and rally support for the idea.

We are inviting all local elected’s, concerned individuals and community organizations to join us in the initial and follow up conversations.

Research

What’s going on with all the vacant units in Boston?

• As of June 2020, around 9.9% of units across the United States were vacant, meaning that they had no person living there
• In the Boston-Cambridge-Newton Metropolitan Statistical Area, which is a region the census uses to collect data, the percentage of vacant units trended downwards between 2010-2020, meaning that overtime the average vacancy rate decreased
  • However, this data is not the entire story:
    • Between 2010-2015, the City of Boston was looped into a statistical area with Cambridge and Quincy. In 2015, the Census looped Boston into the MSA of Boston-Cambridge-Newton, which is more reflective on average of the rental market. 
    • As such, between 2015-2020, the percentage of vacant units trended upwards, meaning the average vacancy rate increased.

• In a hearing held in 2019, the City of Boston indicated that it does not keep a precise count of the number of vacant units within the city. However, the above census data reveals that whatever number that may be, it is likely rising.
• In 2020, the average rent in Boston increased by 3% over the previous year to an average of $3,432/month. Only about 20% of the total units in Boston are income-restricted, meaning that they are designated for individuals at or below a certain amount of income. While this is one of the highest in the country, it does not necessarily reflect the need of Boston renters. 
  • High rents in Boston, and developments that produce purely luxury housing, displace Boston residents, primarily Black and Brown residents, contributing to Boston being the third most gentrified city in the United States

What is the City doing to reduce the number of vacant units/retain Boston residents?

• In 2018, Councilor Edwards made her maiden speech on the issue of displacement and has since worked hard to make legal changes to how the city defines “affirmatively further fair housing.”
• In 2018, Boston City Councilor Kim Janey held a hearing to discuss displacement, during which several proposals came forward, including a luxury tax and an anti-speculation tax
  • Luxury Tax: A sales tax or surcharge levied only on certain products or services that are deemed non-essential or accessible only to the super-wealthy
  • Anti-Speculation Tax:  A tax to discourage speculative investors, or “house flippers,” from buying and rapidly reselling properties.
• In 2019, Councilors Campbell and O’Malley proposed a vacancy tax. Their work has kickstarted this conversation and contributed to the calls for greater housing justice.
  • Councilor O’Malley’s proposal specifically focuses on vacant lots within the city. 

Media

• October 2019 – Boston Herald: Boston councilors call for vacancy tax

State Level

The Low Income Housing Tax Credit Program (LIHTC) is a federally authorized program for non-profit and for-profit developers to promote the construction and rehabilitation of affordable rental housing. The Low Income Housing Tax Credit Program (LIHTC) is a federally authorized program for non-profit and for-profit developers to promote the construction and rehabilitation of affordable rental housing.

What is a vacancy tax?

• While the idea of a vacancy tax comes in many forms, the core concept of it is a fee which landlords who own a certain number of unoccupied units would have to pay.
  • This would incentivize them to make these apartments more affordable, which would help lower-income prospective tenants find apartments in their price range while ensuring that the landlords avoid paying a fee

Do other cities have vacancy taxes?

• Providence: The non-utilization tax rate is set at 10 percent of the assessed value of the real estate and will be imposed on buildings that consistently unoccupied. The tax will not be imposed on property that is owned by an abutting neighbor, a new owner, or nonprofit housing organization that has submitted a development plan
• Washington D.C.: Created a property tax rate for vacant commercial and residential properties, both “blighted” and “unblighted,” with different tax rates for each
• Oakland: Flat tax per parcel depending on the property type. This measure was put to a ballot vote
• Vancouver: Residents complete a property status declaration to determine of the property is subject to the tax (of 1% of assessed home value)

Media

• Vacancy Taxes: The Next Frontier In Housing Policy?
• Cities Now Use Taxes to Fight Blight. Is It Working?
• News from Barcelona

How could a vacancy tax work in Boston?

Large scale developers (particularly of luxury housing or high end commercial spaces), property owners who meet certain minimum thresholds for the number of properties owned, and property owners who hold property in Boston as investments that residents cannot live in or access would pay an annual fee that is determined based on a percentage of their unit’s value.

As the City of Boston does not currently keep record of the number of vacant units, the City would likely have to employ the method used by Vancouver, requiring landlords to self-report to the city (or face another fine)