Berkeley City Council is considering imposing a tax on vacant storefronts to incentivize property owners to rent out their space.
In a January report to City Council this year, the city’s Office of Economic Development, or OED, described the impact of vacancies as “contributing to neighborhood blight, worsening the shopping environment and reducing foot traffic.” From 2011 to spring 2017, OED observed 427 distinct retail spaces that were vacant at some point.
“I’m extremely concerned about the vacancies I’m seeing throughout the city,” said Councilmember Lori Droste. “We want to make sure small business can thrive in our city.”
Proposition 218, which was passed in 1996, limits local governments’ abilities to raise taxes without voter consent. In order to set a vacancy tax large enough to impact property owners, City Council would first need to refer the tax as a ballot measure to Berkeley voters.
Droste acknowledged that the effect of the tax would be dependent on the amount and on whether voters would approve such a measure. The OED report noted that other cities have established a similar fee on owners of vacant properties but that these fees have not been large enough to incentivize action.
Some Berkeley business leaders, however, disagree with the approach that City Council is taking in addressing vacancies. Stuart Baker, executive director of Telegraph Business Improvement District, said that while he likes the concept behind the vacancy tax, he believes that it can have unintended consequences.
“The problem that a vacancy tax can have is it could unintentionally force a property owner to fill a store or space with whatever store would move in,” Baker said. “If someone is asked to … pay a tax if they leave it vacant, they may just stuff anyone in there. The question to ask the community is, is that really the best way to improve a district or neighborhood?”
John Caner, CEO of Downtown Berkeley Association, added that he was concerned that a small number of long-term vacant properties were serving as the impetus for the tax. He said other tools such as grants or loan programs for exterior improvements to the storefronts may prove more useful to landlords in helping them rent out their space.
“To have a vacancy tax to address a handful of properties when the effect has a broad impact on all landlords is probably not the right approach,” Caner said. “With the changing pace of retail … a lot of landlords are struggling to fill spaces. … Sometimes, it takes awhile to get the right tenant.”
City Council will discuss potential ballot measures such as the vacancy tax at its special meeting Tuesday.