Portland Revisits Vacancy Tax as Data Raises Questions About Impact on Apartments and Mixed-Use Buildings

By Aaron Kirk Douglas Director of Market Intelligence, HFO Investment Real Estate

Portland City Council is once again exploring a vacancy tax or fee, commissioning a study to evaluate how such a policy might apply to residential units and commercial spaces that remain vacant for six months or more. The renewed push comes as downtown Portland continues to struggle with empty storefronts and as questions persist about residential vacancy across the city.

The concept is not new. It is also not as simple as it sounds—especially when applied to market-rate apartments and mixed-use buildings, where vacancy is often misunderstood.

A vacancy tax is intended to push landlords to lease empty units or spaces more quickly by imposing a financial penalty. The theory assumes that property owners are holding units off the market, waiting for higher rents. However, in Portland’s current multifamily market, the opposite is happening.

As I stated recently to Portland Business Journal reporter Sara Edwards (March 30, 2026), “Market rate providers are already providing concessions in order to fill units, which is bringing rents down that have already been flat for the last couple of years. I just don’t understand what the point is.”

That reality is critical. Vacancy in market-rate apartment buildings is typically the result of normal leasing cycles, tenant turnover, and broader economic conditions—not a deliberate strategy to hold out for higher rents. Newer buildings, in particular, often experience lease-up periods that can temporarily elevate vacancy. At the same time, rent growth in Portland has flattened, and operators are already responding with incentives to attract tenants.

The same dynamic applies, in a different way, to mixed-use buildings. Empty retail storefronts, particularly downtown, drive much of the current political momentum behind a vacancy tax. But retail vacancy is driven less by landlord behavior and more by structural shifts in demand, including reduced foot traffic, remote work patterns, and ongoing business closures. As noted by local operators, landlords are already reducing rents and restructuring deals to secure tenants, in some cases offering space at rates that would not have been considered viable before the pandemic.

A tax does not solve a demand problem.

National research reinforces this point. A 2025 report from the Institute on Taxation and Economic Policy (ITEP) found that vacancy taxes “have not had dramatic effects on housing markets where they have been tried” and generally do not lead to lower rents, even when they reduce the number of vacant units.[1] The same report concludes that these policies tend to function more as modest revenue tools than as meaningful housing solutions.

Additional academic research has reached similar conclusions. A 2026 study examining Washington, D.C.’s long-standing vacancy tax found no evidence that the policy reduced housing prices and suggested its impact on the broader housing market was negligible and that Washington, D.C.’s tax may have increased house prices rather than decreased or limited them.”[2]

Cities with Vacancy Taxes

Even in cities that have implemented and extensively studied vacancy taxes, the results are at best mixed. In some cases, the number of reported vacant units declines. However, that does not translate into improved affordability or increased housing production.

This distinction matters for Portland. Market-rate apartments and mixed-use buildings are income-producing assets that operate within competitive market conditions. Owners are already motivated to lease units as quickly as possible because vacancy directly reduces revenue. Unlike the scenarios often cited in policy discussions, there is little economic incentive to keep stabilized rental units vacant.

At the same time, the City Council lacks clear data on the type and scale of vacancy within its multifamily and other residential housing stock. The current study commissioned by the city is designed to explore how a vacancy fee might be structured, not to establish whether vacancy in market-rate housing is occurring at a level that even warrants some kind of tax or intervention. Without that baseline, any policy risks being poorly targeted.

Unintended Consequences

The potential unintended consequences are also becoming clearer. A vacancy tax applied to market-rate apartments or mixed-use buildings would introduce additional operating costs at a time when development is already slowing due to higher interest rates and rising construction costs. That added uncertainty will likely only further discourage new investment, delay projects, and reduce reinvestment in existing properties.

As with most housing policies, those costs do not disappear. They are absorbed into the system and ultimately passed through to renters and tenants.

National research highlights another structural issue. Vacancy taxes are inherently limited in their impact because they target a narrow slice of the housing market. As the ITEP report notes, generating revenue from vacancy and reducing vacancy are often at cross-purposes—if the policy works as intended and units are leased, the tax base declines.[1]

In other words, even in the best-case scenario, the policy cannot meaningfully scale.

The broader takeaway is straightforward. Vacancy taxes may have a role as a supplemental tool in specific circumstances, particularly when addressing abandoned or distressed properties. But when applied to market-rate apartments and mixed-use buildings, the evidence shows they are unlikely to reduce rents, increase supply, or solve housing affordability challenges.

Portland’s housing issues are rooted in supply constraints, development barriers and economic fundamentals—not widespread intentional vacancy in stabilized rental housing.

Until policy is aligned with those realities, the risk remains the same as it was a year ago: implementing a measure that may raise some revenue but does little to address the underlying problem.

A stronger long-term strategy is to focus on economic growth and workforce development. As technology changes the nature of work, we need to invest in retraining for both AI-adjacent roles and high-demand vocational careers that will support an aging population. That’s how you improve affordability in a lasting way.

Then vs. now – what’s changed since July 10, 2025

Here is a quick then vs. now update based on my original vacancy tax article from July 10, 2025. [see article for details on these taxes]

Canada: Vancouver

Then (2025)

• Reduced reported vacant units (~50%+ decline) by charging 3% tax.

• Generated significant revenue

• No meaningful impact on affordability

Now (2026)

• Still widely cited as the model

• Evidence that: It shifts some units into rental use, however it does not lower rents in a meaningful way

• Policy experts continue to describe it as: “useful on the margins,” not a solution to supply

San Francisco

Then (2025)

• Residential vacancy tax tied up in court

• Uncertain whether it would ever be implemented

Now (2026)

• Still blocked after court ruling

• No revenue collected

• No impact on housing

• This most aggressive multifamily-targeted policy still hasn’t survived legally—and hasn’t produced results.

Honolulu

Then (2025)

• Politically stalled

• Facing pushback and design challenges

Now (2026)

• Still not implemented

• Ongoing debate around enforcement exemptions. Economic impact

Oakland

Then (2025)

• Implemented

• Raised money

• No clear housing impact

Now (2026)

• Still generating modest revenue (~$5–6M annually)

• Continued discussion about expanding it

• This is a revenue tool—not a housing solution.

NEW CITIES / NEW DEVELOPMENTS (Since July 2025)

San Diego (2026 ballot movement)

• Vacancy tax headed toward ballot consideration

• Modeled after: Oakland & Vancouver

Key issue:

• Debate already centered on: Legal risk: whether it actually changes behavior

Translation: Even new adopters are already questioning effectiveness before implementation.

Los Angeles (Re-emerging discussion)

• Previously studied vacancy tax

• Shelved due to: Low projected revenue after exemptions

• Now being reconsidered in policy discussions

Takeaway: Big cities keep revisiting the idea—but struggle to make it work.

Washington, D.C. (Important but often overlooked)

• Long-standing vacancy-style tax (5–10%) [See footnote 2]

• One of the oldest in the U.S.

Reality:

• Still exists

• Still does not meaningfully affect rents or supply [2]

Takeaway: Even long-term implementation doesn’t move the market.

International (Policy spreading, results unchanged)

• Spain, Ireland, France expanding vacancy-style taxes

• Same pattern: Some units return to market No structural change in affordability

Takeaway: Global trend—but same limitations everywhere

The Big “Then vs Now” Conclusion

Across cities:

• Some revenue

• Some marginal vacancy reduction

• No meaningful rent relief

• No increase in housing supply

Since we first looked at this last year, the evidence has only become clearer. Vacancy taxes can raise some money and shift a few units—but they don’t lower rents, and they don’t solve the supply problem.

Footnotes & Sources

[1] Institute on Taxation and Economic Policy, Local Vacancy Taxes: A Tool but Not a Panacea (Nov. 17, 2025). Read the report.

[2] Zachary Esses Johnson, The Impact of Vacancy Taxes on Housing Prices: A Synthetic Control Study (Jan. 2026). Read the study.