Legislative Update: Appeals Court Blocks San Francisco’s Vacancy Tax

November 13, 2026

We've been keeping you up to date on the San Francisco Vacancy Tax, and here's the latest.

The California Court of Appeal has unanimously upheld a lower court ruling blocking the city from enforcing the vacancy tax, finding that it conflicts with a state law protecting property owners’ right to leave the residential rental market.

Approved by voters in 2022, Proposition M applies to certain units in buildings with more than two residences that sit vacant for more than 182 days a year. The tax starts at $2,500 to $5,000 per unit, depending on size, and can climb to $20,000 per unit by the third year.

Property-owner groups challenged the measure, arguing that it effectively pressures owners to rent out homes they would otherwise keep off the rental market. The appeals court agreed, finding that the tax conflicts with the Ellis Act, which protects an owner’s right not only to exit the rental business, but to stay out of it. The court concluded that the city cannot put a “prohibitive price” on that choice.

For San Francisco property owners, the decision removes a potentially significant financial penalty tied to keeping certain residential units vacant. It also reinforces an important limit on how far local governments can go in using taxes to influence owners’ decisions about their properties. The ruling could have implications for other California cities considering similar measures.

The tax remains blocked for now. San Francisco may still ask the California Supreme Court to review the decision, but has not said whether it will.