Portland’s Vacancy Tax Idea: City Councilors Ramp Up For Potential Policy 07/10/25
by Aaron Kirk Douglas, Director of Market Intelligence, HFO Investment Real Estate
Harkening back to the bygone days of Chloe Eudaly, Portland City Councilor Jamie Dunphy (District 1) recently appeared on the Citycast Portland Podcast to discuss his idea of implementing a vacancy fee or tax on empty residential and commercial properties in the city. Following his podcast discussion, Candace Avalos (District 1) sent an email on 6/12/25 to constituents, promoting Councilor Kanal’s (District 2) vacancy fee study. This concept is gaining support among certain city councilors as a potential solution to the housing crisis, but is it truly the comprehensive answer to our challenges? Here we take a closer look at Dunphy’s proposal and the reality of implementing similar policies in other cities.
The Concept of a Vacancy Tax
A vacancy tax, as discussed by Dunphy, would target properties left vacant for extended periods, particularly in residential units such as luxury apartments. These units are often found in high-end areas such as South Waterfront, where owners leave properties empty either due to high rents or as tax write-offs. The aim is to reduce vacancies and ensure these spaces are utilized productively, particularly in neighborhoods facing high demand for housing. Dunphy also discussed how vacant commercial spaces, such as retail properties in places like St. John’s, could be targeted in the same way to prevent landlords from leaving spaces empty due to the costs of lowering rents.
However, here’s the catch: Portland hasn’t initiated any study or research on the actual impact of a vacancy tax. Dunphy’s comments are based more on a gut feeling that it’s working in other cities than on any solid data or analysis. It’s almost as if he’s assuming that because a policy has been suggested or partially implemented elsewhere, it must be the solution for Portland. However, the truth is that the results of such policies in other cities are far from definitive. In fact, the outcomes paint a more complicated picture.
Examining Other Cities: A Reality Check
Let’s examine the actual performance of vacancy taxes in cities Dunphy mentions, such as Vancouver, BC, and San Francisco, among others, to see how they have fared.
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Vancouver’s Empty Homes Tax (EHT): Launched in 2017, the EHT aimed to reduce vacant properties by imposing a 1% tax, which was later increased to 3% by 2021. While Vancouver has seen a 54% reduction in vacant properties from 2017 to 2023, the actual impact on affordability is questionable. According to the C.D. Howe Institute, while the tax has generated over $142 million for affordable housing, average rents have remained relatively stable. In other words, it hasn’t exactly solved the affordability crisis. Critics argue that it’s not a supply-side solution and has limited impact on the actual housing market.
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San Francisco’s Proposition M: Approved in 2022, this tax targeted residential properties vacant for more than 182 days annually. The goal was to raise $20 million annually for housing initiatives. However, legal challenges have stalled its implementation, and as of March 2025, it remains in limbo due to a court ruling deeming it unconstitutional. This demonstrates a fundamental challenge. What works in theory can often fail in practice, and Portland should be cautious of this risk.
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Honolulu’s Struggles: Honolulu attempted to pass a similar tax on empty homes, but enforcement issues and political resistance have hindered progress. In December 2024, the Honolulu City Council deferred a final vote on Bill 46, further delaying action. Again, we see that legal and political hurdles can be significant barriers to the effective implementation of these measures.
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Oakland’s Vacancy Tax: In contrast, Oakland implemented a vacancy tax in 2022, raising $7 million in its first year. The funds were used to support homelessness initiatives and housing grants; however, Oakland has also faced challenges, including rising construction costs and a strained housing market, which raises questions about whether such a tax can truly alleviate the housing crisis in the long term.
So, while vacancy taxes may indeed raise funds, the actual success in reducing vacancy rates or lowering rents is highly debatable. In many cases, they’re not the silver bullet they’re often touted as. It’s not just about raising money—it’s about addressing the root causes of housing shortages, and this proposal might be missing the mark.
A Lack of Data and Planning in Portland
Another major concern with Dunphy’s proposal is the lack of concrete data on vacant properties in Portland. According to the podcast, there is a lack of clarity regarding the number of truly vacant properties in Portland, as many are excluded from official counts, including Airbnb units, bank-owned properties, and homes that have been removed from the rental market. Without this data, crafting a policy that accurately addresses the issue of vacancy seems premature at best. How can we be sure the solution will work if we don’t know the full extent of the problem?
Dunphy’s suggestion to “take inventory” of vacant spaces across the city and collaborate with other cities that have implemented vacancy taxes sounds beneficial. Still, Portland hasn’t yet done the groundwork. Currently, the idea appears to be yet another under-researched one based solely on anecdotal evidence from cities that have experienced difficulties with vacancy taxes.
What Should Portland Do?
Instead of jumping into another policy that might end up in court or fail to address the root cause of our housing issues, Portland needs a comprehensive strategy that looks beyond simply filling vacant spaces.
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Focus on Supply-Side Solutions: Let’s discuss building more homes and addressing zoning and permitting issues that hinder housing production. The newly opened Housing Production Office (HPO), opened in July 2025, is a promising start. Its aim to construct 36,000 new homes annually is ambitious, but it’s also a step in the right direction.
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Streamline Permitting Processes: As seen in Oregon, multifamily developers face a complex maze of permits and regulations that slow down the construction process. The HPO’s role in streamlining these processes should be prioritized to speed up housing development.
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Invest in Affordable Housing: Rather than relying on vacancy taxes to fund affordable housing projects, Portland should consider more direct funding mechanisms, including tax incentives for developers to build affordable housing.
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Data and Transparency: Let’s collect more accurate data on vacancy rates and rental markets to develop policies that are grounded in reality, not assumptions.
Conclusion: Proceed with Caution
Councilor Dunphy’s idea of a vacancy tax (which is supported by several other council members) may sound appealing on the surface. Still, before jumping on this bandwagon, we should carefully examine the real-world implications of such policies. The cities Dunphy cites as examples have experienced mixed results at best. Without thorough research, data, and a clear strategy, Portland risks implementing a measure that may raise money without addressing the fundamental issues of housing supply and affordability. Let’s ensure that any new policies we adopt are backed by real evidence and will truly serve the people of Portland, rather than just creating another regulatory burden.
Sources:
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Vancouver’s Empty Homes Tax (City of Vancouver, CA website)
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See: Oakland’s Vacancy Tax (2022) and City of Oakland here.
Organizations that have come out against vacancy taxes:
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California Apartment Association (CAA) – The CAA has been vocal about the negative effects of vacancy taxes on property owners, particularly small landlords, and has highlighted the complexities of enforcing these taxes.
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National Multifamily Housing Council (NMHC) – NMHC has criticized policies like vacancy taxes for potentially discouraging investment in the housing sector and exacerbating affordability issues.
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Urban Institute – Researchers at the Urban Institute have analyzed the effectiveness of vacancy taxes, finding mixed results that suggest these measures may not be sufficient to address the root causes of housing shortages.
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American Planning Association (APA) – The APA has cautioned against over-reliance on vacancy taxes, advocating for a more comprehensive approach to housing policy that includes zoning reforms and increased housing supply.
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Portland Metro Chamber – This organization has raised concerns about the impact of vacancy taxes on Portland’s business environment.
Councilor Jamie Dunphy’s false and misleading statements in his interview included the following:
Statement 1: “A multifamily owner or a commercial space owner can use vacancies as tax write-offs, incentivizing them to keep properties empty rather than leasing them.”
Analysis: This statement is mostly false, but there is a small kernel of truth.
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Generally, property owners (including multifamily and commercial space owners) cannot directly write off vacancies themselves. However, they can deduct other associated expenses related to owning the property, such as mortgage interest, property taxes, insurance, repairs, and maintenance. These are legitimate business expenses that can be deducted, regardless of whether the property is occupied or vacant.
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Vacancy losses themselves aren’t a direct tax write-off. If the property owner isn’t generating rental income due to vacancies, they may have a smaller income to report; however, they still must demonstrate that they are actively trying to lease the property.
Some landlords might prefer to leave properties vacant if the cost of reducing rents or dealing with tenant turnover is seen as more expensive or less desirable. Still, tax benefits aren’t typically the primary driver in these decisions.
Statement 2: “There are many vacant storefronts and commercial properties across Portland, especially in areas like St. John’s, where landlords prefer to keep spaces vacant due to the tax benefits and the high costs associated with reducing rents.”
Analysis: This statement is partially true.
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Vacant commercial properties and storefronts are found in areas like St. John’s in Portland, as well as other parts of the city. Vacancy rates in commercial properties have fluctuated, especially following the economic disruptions caused by the COVID-19 pandemic.
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However, the idea that landlords “prefer to keep spaces vacant due to tax benefits” is somewhat misleading. While tax benefits from vacancies aren’t a major factor (as explained in Statement 1), landlords may keep spaces vacant for other reasons. These reasons could include the cost of reducing rents to fill vacancies, high operational costs, or a lack of demand in certain areas. Sometimes, landlords wait for the market to recover, hoping that property values or rental rates will increase.
Conclusion:
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Statement 1 about tax write-offs for vacancies is inaccurate in suggesting a strong incentive for landlords to keep properties vacant.
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Statement 2 acknowledges real vacancy issues, but the link to tax benefits is overstated. Landlords likely prefer to wait for a better rental market rather than taking a hit on rental prices, but tax incentives are not usually the primary motivator.
For further information, refer to resources such as IRS Publication 334 for general tax guidelines.
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