Empty Home Tax Frequently Asked Questions (FAQs)

The City of Santa Cruz is suffering from a housing affordability crisis that is pricing out many of its residents who have contributed to the city of Santa Cruz’s diversity, infrastructure, and economy. Homes that sit empty in Santa Cruz are lost opportunities to house people that Santa Cruz needs, including younger people and people from diverse cultures, backgrounds and orientations. By disincentivizing empty homes in Santa Cruz through taxing homes left unoccupied, we can increase the affordable housing units available by funding those types of projects.

 An empty home is defined as not being “in use” for a minimum of 120 days per calendar year. That means a dwelling unit could be empty for 245 days a year and would not be subject to the tax. A group of community members from several local groups focused on affordable housing collected available data to inform the details of the ballot by using 2020 census records, tax assessor records and locally focused academic studies on housing.

There are currently 17,277 parcels (some of which contain multiple units) in Santa Cruz. The latest 2020 Census Numbers show a vacancy rate of 9.5% meaning 2,283 out of 24,014 dwelling units in Santa Cruz are empty. If just 500 property owners were to pay the tax, the city would raise about $3 million dollars annually.

Here are the proposed tax rates for the Empty Home Tax by Property Type which would ONLY apply to units empty for 246 days in a calendar year or more:

Property Type

Annual Tax Rate

Residential

$6,000.00 per parcel

Condominium or townhouse unit under separate ownership

$3,000.00 per vacant residential unit

 Residential unit on parcel with seven (7) units or more

$3000 per vacant residential unit

The funds raised will be sequestered in a dedicated fund used to create permanently deed-restricted low, very low, and extremely low income housing units for sale or rental. The Empty Home Tax Initiative directs the Santa Cruz City Council to disperse the money collected to affordable housing projects for the lowest income levels.

Homeowners will declare through a secure online portal or via mail whether their property is empty or occupied by April 15th following the previous calendar year. The ordinance will fund the administration and enforcement of the tax and the city of Santa Cruz will audit a sampling of tax-eligible properties yearly to ensure compliance. Penalties will be assessed for false declarations or late payments. The declaration process for the average property will take about the same amount of time as paying your annual car registration fee online

Probably not. The overwhelming majority of people who live and work in Santa Cruz reside in the property they own. The only parcels and units that are subject to the tax are those that are not occupied for 120 days and do not qualify for the exemptions made within the ordinance. The Empty Home Tax WILL NOT tax places where people live (e.g. principal residences and Accessory Dwelling Units (ADUs).

A parcel is a piece of real property (i.e. land) under a defined ownership, or it can be a lot in a subdivision (e.g. condo under separate ownership). This means a piece of land with a defined boundary that is owned by someone or a corporation. You can have multiple dwelling units on a parcel. For example on parcel A there could be a main house and a granny unit (aka ADU), on parcel B there is an 8 unit apartment building, on parcel C there is a duplex, on parcel D a single family home, etc. Santa Cruz has 17,277 parcels with 24,014 units on them. The 2020 census data reports 9.5% or 2,238 units are empty.

No. ADUs are situated on parcels where there are one or two other units, such as a house or stand alone garage, for example. For parcels where there are up to 6 units on a single parcel, no tax will be levied if at least one of those units are occupied for more than 120 days.

An owner will be able to claim a tax exemption in the case of hospitalization, residence in a long-term care facility, active legal proceedings or construction.

The revenue generated from the Empty Home Tax Initiative will be managed by the City Council. However, the money will be restricted for specific purposes as listed in the initiative, such as for the creation of low-income housing. The City Council will be assisted by the Empty Home Tax Oversight Committee, which is made up of volunteer residents that will make budgetary recommendations, review financial reports, and monitor enforcement. An independent third-party auditor will perform regular audits funded by the initiative to ensure accountability, in accordance with California law.

No. The Empty Home Tax Initiative is only paid by owners whose properties are vacant for more than 8 months in a calendar year. Occupied rental units will not be affected. In addition, parcels with 6 units or fewer on them (including ADUs) only need to have one unit on the property occupied for at least 120 days in a calendar year to be ineligible for taxation.

Cities that have implemented an Empty Home Tax include Oakland, California and Vancouver, British Columbia, Washington, D.C. and others around the globe. Santa Cruz has an opportunity to be among the first in California to utilize this proven tool to bring significant relief to the housing crisis locally. See Resources for more information.

The community members working on the ordinance determined that 120 days was a fair amount of time to give small landlords, in particular, enough time to find occupants for their property. Properties can be empty for up to eight months each year and will not be subject to the tax.

Using publicly available data there was a natural break in the number of units per parcel between 6 and 7 units. We let the math guide us in making the split.  Ninety-eight percent of the parcels in Santa Cruz have 1-6 units on them. This break ensures the vast majority of property owners will just have to occupy one unit and not be subject to the tax.

 

Source: Santa Cruz County Addresses data layer

https://data1-cruzgis.opendata.arcgis.com/datasets/7e98689ccae44ac7a4bf9c963a349f07_1/explore?location=36.990596%2C-122.062800%2C13.08

The purpose of the Empty Home Tax is to act as an incentive for those who choose to leave their existing units empty to either live in the unit, rent it, or contribute to the development of affordable housing by paying the tax. In conversations with a number of neighborhood groups, we learned that taxing undeveloped parcels would put a heavy burden on some long-time residents who do not have the funds and/or the desire to develop properties in neighborhoods. Also many of these spaces are used as de-facto green space by residents

While landownership is a major asset to developing affordable housing, there are still significant barriers, including financing and zoning among other constraints. Therefore, the initiative did not want to add any additional financial barriers to the City’s ability to generate the kind of affordable housing we need.

We strongly believe the Empty Home Tax ordinance, by placing a financial incentive for property owners to occupy their units, will reduce short term rentals not increase them. The city of Santa Cruz has a Short Term Rental Ordinance that only permits 250 owner-occupied rentals within the city of Santa Cruz. However, the City currently does not actively or vigorously enforce this existing statue and we encourage them to do so.

Units are exempt from the tax during construction that makes them impossible or impractical to occupy.

The ordinance provides for a Citizen Tax Oversight Committee that will meet at least once a year. The Committee will keep tabs on the functioning of the Tax program and make recommendations to the City Council to improve zoning and land use designations to better support the creation of permanently affordable housing for low, very low and extremely low income individuals. The Committee will include at least 3 renters, 2 low-income individuals, 2 members with financial expertise, 1 UCSC student, and one unionized City worker.

 

In addition, an independent third-party auditor will perform regular audits to ensure accountability and proper disbursement of all revenue in accordance with the uses set forth in the initiative.

The City will be reimbursed from the proceeds of the Empty Home Tax, for the expense of setting up the program and annual administration of the initiative. Once established, the funds will be used by the City to pay for the program, up to a cap of 15% of the revenue. In addition, the funds will be available to fund the Tax Oversight Committee.

Yes on Empty Home Tax Santa Cruz**FPPC# 1438739**info@emptyhometax.org**831-200–3878