California Court Struck Down San Francisco Vacancy Tax

The appellate ruling determined the empty home tax conflicted with the state’s Ellis Act protections.

Updated on Oct. 2, 2026 in Apartments

Bold flat-color editorial illustration featuring geometric apartment building shapes in red, cream, and black, representing housing policy regulation. — The California Court of Appeal ruled in September 2026 that San Francisco's vacancy tax, Proposition M, violates state-level property rights protections. AI Illustration. Upload story photo >

Live Poll

Do you support local taxes on vacant homes to address housing shortages in your area?

In September 2026, the California Court of Appeal upheld a lower court decision invalidating San Francisco's vacancy tax. The court ruled that the measure, known as Proposition M, conflicted with the state's Ellis Act.

Why it matters

The ruling centered on the Ellis Act, which guarantees property owners the right to remove units from the rental market. By penalizing owners for keeping units empty, the city tax effectively pressured them to stay in the business, a practice the court deemed illegal.

Proposition M was passed by San Francisco voters in 2022 to tax vacant units. Oakland’s own vacancy tax currently generates $6 million in annual revenue.

The players

California Court of Appeal

This judicial body is responsible for reviewing decisions made by lower trial courts within the state.

Superior Court of San Francisco

This trial court serves as the primary judicial venue for civil and criminal matters within San Francisco.

The details

Property owners and trade associations filed a challenge against the tax in 2023, arguing it violated statutory rights. The Superior Court of San Francisco initially ruled against the city in 2024 before the appellate court finalized the decision.

Voters passed Proposition M in 2022.
Property owners challenged the tax in 2023.
The Superior Court ruled against the tax in 2024.
The appeals court upheld the ruling in September 2026.

Culture Shift

This ruling represents a significant check on local efforts to address housing shortages through aggressive tax policy. It highlights the growing tension between municipal attempts to force market participation and state-level property rights protections.

The invalidation of the vacancy tax removes the threat of financial penalties for property owners who choose to keep units off the rental market. This change may alter how landlords manage their property portfolios in the coming months.

The takeaway

Property owners should remain aware that state laws often supersede local mandates regarding unit availability. Understanding the scope of the Ellis Act remains essential for those operating within the California housing market.