OAKLAND — Easing the sticker shock for landowners subject to Oakland’s new parcel tax on vacant properties, the city is cutting the $6,000 annual fee in half next year for most people.
The tax — which was approved by more than 70 percent of Oakland voters last year — was created to discourage corporate speculators and spur development by charging property owners $6,000 a year for holding onto vacant lots and $3,000 a year for not renting out units in apartment buildings.
But since the city began giving out notices to people who may be subject to the tax, vacant land owners have flooded public meetings, confused about whether they are on the hook for it or not and urging Oakland officials to cut a break for people who own vacant property but don’t have the means to build on it.
City Council members, on Tuesday, approved an extensive set of exemptions to the tax, and also opted to reduce the rate to $3,000 a year for owners of vacant properties in parts of the city where zoning laws allow a maximum of four apartments. Of Oakland’s 4,366 vacant parcels, 2,941, or 67.4 percent, fit that description.
Jeanine Fetterly, who has owned a vacant parcel in the Montclair district since 1976, said the reduced rate is a “step in the right direction” but still doesn’t significantly ease the burden the tax puts on owners like her who can’t afford to build. Fetterly had held onto her property in the hopes that her children would be able to build a home there. Her children have grown up, and don’t have the time or money to build a new house.
After the ballot measure passed, Fetterly looked to sell her property to avoid paying the $6,000 tax, but the market was flooded with people dumping their vacant parcels, and the value of the property significantly dropped.
“For half of that, I’m not so panicked about holding onto it,” Fetterly said.
City council member Rebecca Kaplan said the reduced rate is only set for the first year, and council members will decide after that whether to keep it at $3,000. The tax will be collected for the next 20 years.
Council member Loren Taylor, at the meeting, said even with the exemptions and the tax cut for certain property owners, the fee still effectively dissuades companies from keeping their properties empty.
“When it comes to the old McDonald’s on Foothill Boulevard that has sat there vacant for 23 years, I don’t think they should get half the fee. There are some who clearly shouldn’t be getting a break,” Taylor said.
About 53 percent of the city’s vacant parcels are owned by people who don’t live in Oakland, according to a report from the city’s finance department. About 80 percent of the vacant parcel owners from Oakland live in a different part of town than their lots.
Finance officials do not yet know what kind of financial hit the city’s budget will take from the exemptions and the tax break, since it’s unknown how many properties will end up being exempted. Over the summer, the City Council budgeted $7 million generated from the tax to be used in the 2020-21 fiscal year to pay for a homeless commission, a pilot program to create self-governed homeless encampments, grants for housing accessibility improvements, a mobile homeless outreach team, surveillance cameras to catch illegal dumping and crews to pick up dumped trash.
The ballot measure defined vacant parcels as ones that are “in use” less than 50 days a year, but apart from parcels that people live on or had businesses on, property owners were confused as to how the city would define “in-use.”
In the ordinance passed Tuesday, city officials exempted vacant parcels that are within 500 feet of the owner’s home — such as undeveloped parcels used as defensible space or backyards. The ordinance also exempted parcels used as driveways.
The ballot measure also exempted property owners who are considered “very low-income” by the U.S. Department of Housing and Urban Development — defined as making at most 50 percent of the area median income — as well as owners who are 65 or older and are considered “low-income” — defined as making less than 80 percent of the area median income.
In 2019, the “very low-income” limit is set as $43,400 for an individual and $61,950 for a family of four; the “low-income” limit is $69,000 for an individual and $98,550 for a family of four.
The ballot measure also included an exemption for owners who had a financial or non-financial hardship that prevented them from paying the tax. The ordinance clarified that owners who filed for bankruptcy, are unable to work for a month or who lost their jobs are exempt.
The ordinance also clarified that people whose vacant parcels were tied up in a lawsuit or other court action for at least six months were exempt, as well as owners who served in the military and were deployed overseas for 60 days our of the year, or who inherited the property within a year. If the owner of a property dies, the next owner will not have to pay the tax that year.
Properties that are on an “extreme slope” or if developing on them would block somebody else’s view are exempt, as well as properties that are unable to be developed because of a natural disaster or their geography.
