SB 789, introduced by Caroline Menjivar, originally proposed a statewide vacancy tax on commercial real estate. The bill would:

• Impose a $5 per square foot annual tax on commercial properties that are considered "vacant."
• Apply to properties that have been vacant for 182 days or more during a calendar year (not necessarily consecutive days).
• Exclude the residential portions of mixed-use properties.
• Direct revenue toward California's Dream for All homeownership program.

Example:

• If you owned a 20,000-square-foot office building that met the definition of vacant:
• 20,000 sq. ft. × $5 = $100,000 per year in vacancy tax.

For a 100,000-square-foot shopping center, the tax could be $500,000 per year if it qualified as vacant.

Current status

The bill has changed significantly during the legislative process. Rather than immediately imposing the tax, later amendments shifted the proposal toward requiring owners of certain vacant commercial properties to file information returns with the state so lawmakers can gather data before deciding whether to implement a vacancy tax in the future. In other words, as amended, the bill is no longer the straightforward $5-per-square-foot tax that was originally introduced.

Why commercial real estate owners are concerned Organizations representing commercial property owners argue that a vacancy tax could:

• Penalize owners during economic downturns.
• Increase the cost of holding office, retail, and industrial properties.
• Discourage redevelopment projects that require buildings to remain vacant during permitting or construction.
• Add financial pressure to sectors already experiencing elevated vacancy rates.