Reported / Citable
Background
San Francisco voters enacted Proposition M, imposing a tax when certain residential units remained vacant for specified periods. Property owners challenged the measure, arguing that taxing prolonged vacancy effectively punished owners who exercised their state-law right to withdraw housing from the rental market.
The superior court entered judgment for the owners on multiple grounds. San Francisco appealed, defending the tax as a permissible local revenue measure rather than a regulation compelling anyone to rent.
The Court’s Holding
The Court of Appeal affirmed because the Ellis Act preempts Proposition M. The Act embodies a statewide policy that public entities may not compel residential owners to remain landlords. A substantial recurring tax triggered by keeping a unit vacant burdens the very choice state law protects.
San Francisco’s home-rule authority did not save the measure. The Ellis Act addresses a statewide concern and is narrowly tailored, while leaving local governments significant authority over land use, leases, and tenant protections. Because preemption resolved the dispute, the court did not reach the owners’ additional constitutional arguments.
Key Takeaways
- Local governments may not use financial penalties to accomplish indirectly what the Ellis Act forbids them to require directly.
- Calling a measure a tax does not insulate it from state-law preemption.
- The Ellis Act protects an owner’s decision to leave the residential rental business while preserving other local regulatory powers.
- Courts ordinarily avoid constitutional questions when a statutory ground fully resolves the case.
Why It Matters
The ruling affects San Francisco property owners, housing policymakers, and counsel evaluating vacancy measures elsewhere in California. Municipalities must design housing incentives around the Ellis Act’s protected exit right; owners facing vacancy-based charges have a significant new preemption precedent.