OPPOSE SENATE BILL 789 - STATEWIDE VACANCY TAX ON COMMERCIAL REAL ESTATE

SB 789 (Menjivar; D-Van Nuys) proposes a statewide vacancy tax on commercial real estate, imposing a $5 per square foot tax on properties deemed "vacant." While intended to address commercial vacancies, the bill would have serious unintended consequences for property owners, businesses, and local governments.

Vacancy is largely driven by market forces—not neglect—especially as sectors like retail, office, and industrial continue to recover from the pandemic. This tax would penalize property owners during economic uncertainty and risk further destabilizing struggling markets. SB 789 would also undermine local property tax revenues, reducing property values and triggering reassessments under Prop 8—resulting in permanent funding losses for schools, cities, and essential services.

Finally, the bill imposes costly administrative burdens, requiring state and local agencies to track and enforce a complex policy that has proven ineffective in cities like San Francisco and Oakland.

UPDATE: After significant pushback from stakeholders, including many of our members, SB 789 (Menjivar; D-Van Nuys) has been substantially amended to remove the proposed $5-per-square-foot vacancy tax. While this change marks important progress, we remain opposed to the bill.

As amended, SB 789 now requires owners of non-residential property to annually report vacancy details—including the number of vacant days, reasons for vacancy, and any ongoing renovations—to the California Department of Tax and Fee Administration. Property owners who fail to report would face state-imposed penalties.

Our industry will continue to argue that this unnecessary and expensive data collection mandate will cost the state millions and deliver little value. We will keep working with our coalition partners to oppose this burdensome proposal and advocate for more effective, practical solutions.