With 72,327 election day ballots having since been added to the early mail-in count in San Francisco, for a total of 144,667 ballots having been tallied, representing 28.7 percent of the 503,899 potential votes which could be cast, Proposition D is PASSING and the YES margin for Proposition E has increased to 55 percent:

Proposition D (Vacancy Tax for Ground Floor Retail/Commercial Spaces): 68% YES / 31% NO
Proposition E (Additional Limits on Office Development): 55% YES / 45% NO

Keep in mind that Proposition D requires 66⅔% Yes votes to pass and there are a significant number of mail-in ballots (over 40,000), including every mail-in ballot dropped off at a polling place on election day, which have yet to be processed.

Based on the first tabulation of 72,340 mail-in ballots, Proposition D was failing (63% YES) while the YES margin for Proposition E was 52 percent.  In other words, if the yet to be counted mail-in ballots follow the trend of the first batch, the outcome for Proposition D would flip (to a fail).

UPDATE: In fact, including provisional ballots, there are an estimated 103,600 ballots left to count as of this morning, March 4, including:

  1. 57,000 vote-by-mail ballots returned to polling places on Election Day.
  2. 3,700 vote-by-mail ballots returned to ballot drop-off stations on Election Day.
  3. 2,700 vote-by-mail ballots cast at voting centers on Election Day.
  4. 24,000 provisional and conditional voter registration ballots cast at polling places.
  5. 1,700 conditional voter registration ballots cast at voting centers.
  6. 14,500 vote-by-mail ballots expected today (March 4) from the United State Postal Service

UPDATE: With an additional 35,538 ballots having been counted, for a total of 180,205, the support for Proposition D is holding firm at 68 percent YES while the support for Proposition E has slipped from 55.4 to 54.6 percent with an estimated 70,000 ballots left to be processed.  Both propositions should pass assuming the trend for vote-by-mail ballots returned on election day, versus mailed, holds.

UPDATE: With another 60,477 ballots having been tallied, for a total of 240,682, the support for Proposition D has ticked up to a little over 69 percent YES while the support for Proposition E has inched down to 54.5 percent. And while there are now 54,000 ballots left to be processed, the passage of both propositions is now effectively guaranteed.

Comments from Plugged-In Readers

  1. Posted by perplexed and dumbfounded

    Why are office properties being punished for the fault of the city for not building enough affordable housing?

    • Posted by hundoman

      Because this is San Francisco where nothing makes sense?

      The stupidity of the Voters of San Francisco never but fails to amaze me.

      Not only did we vote to issues $1.4 billion dollars in new bonds for various spending measures which will cost the people over $2.8 billion dollars when finance charges are included but we seriously just hurt our ability to build so called affordable housing as well we put a put a tax on landlords that have vacant store fronts.

      San Francisco voters in their wisdom have decided with Prop E to tie the development of new office space with the ability of San Francisco to build so called affordable housing.

      So no affordable housing no new office space.

      The problem is that office space development pays for so called affordable housing development with over $1.5 billion of affordable housing offset costs to be lost over the next 20 years with these development restrictions.

      San Francisco already has the most expensive office space costs in the nation as a result of past voter building mandates as well as the most expensive office space construction costs and I guess this will only make office space rents even more expensive and force business out of San Francisco who can pay our already highest in the nation office space rents.

      • Posted by Amewsed

        Not to minimize the bad results which you have stated, there are potentially other worse ballot issues in the pipeline later this year: split roll commercial/residential property taxes meant to eliminate Prop 13 protections for commercial building owners. This will mean market rate property taxes will be passed on to office and business tenants who in turn passes increases to consumers. If other non-SF based company can sell the same product for less, how long do you think the SF based company stays in business?
        Even beyond that, how long until Prop 13 protections for residential properties also suffer the same fate? With rent control, eviction controls firmly in place?
        Handwriting is on the wall.

        • Posted by sparky-b

          Prop 13 is a state wide vote. So companies will need to leave California to avoid it. Plus since it’s a state wide vote the voting body is a much higher percentage of property owner compared to SF.

        • Posted by two beers

          “This will mean market rate property taxes will be passed on to office and business tenants who in turn passes increases to consumers.”

          Eh, no. LLs charge what the market will bear. If they price their properties higher than the market will bear, their properties will sit vacant. Exactly as we’re seeing right now, with the, er, epidemic of vacant commercial property across the city. Don’t worry, even with higher taxes, LLs willing to charge a reasonable rate will still be making a lot of money.

          No one is suggesting overriding Prop 13 on residential properties.

          • Posted by Chris

            Except landlords are like any business people, they are in the business to make money. If a retail store sells shirts for more than the market will bear, it either lowers the price, or it goes out of business. There is some strange and incorrect notion that somehow landlords have special resources every other business does not have and also unlike every other business they do not like losing money by having a property sit vacant for years. Very few landlords intentionally price a rental property above market because, errrr (to use your interjection), they LOSE money doing this. And, for the few who actually have the resources to lose money for years and do not care about lose money, an additional tax is not going to motivate them to lower their asking rent, they will simply chalk up the extra task as an additional carrying price on the property, take a federal and state income tax deduction on the cost of the “vacancy tax,” and keep the property vacant until they get the rent they want, or sell it.

            So, Proposition D will do nothing to eliminate the “epidemic,” but I guess it will make people feel good that they voted. Too bad, they did not vote for something that will actually resolve the issue.

          • Posted by SocketSite

            Keep in mind there’s a big difference between opportunity and out of pocket costs (and an average landlord’s tolerance for when the later, versus former, is increased).

          • Posted by Jake

            Except that’s just for starters, after they waste all that money they’ll go after residential properties.

          • Posted by Chris

            Keep in mind, Socketsite, that the average landlord is not contributing to the vacancies that you see. The average landlords (i.e. small landlords) are actively trying to rent out their commercial spaces, lowering asking rents, even offering periods of free rent. The vacancies that one sees in commercial corridors either come from permitting and approval issues or from deep-pocket landlords who have the resources and tolerance to go without renting a space for years. Any landlord who can go without renting a space for years is not going to be impacted by what amounts to a fairly modest tax increase in the scheme of things.

            Again, will guarantee that Proposition D will do absolutely zilch to resolve the commercial vacancy issue, and while I am happy to be proven wrong, I know I will not be. I will look forward to the next half-brained scheme that is cooked up once Proposition D fails to have any impact. I have lived in San Francisco for many years longer than most people posting here, and I have seen several of these “bold ideas” get proposed, implemented, and fail over the years.

          • Posted by SocketSite

            We might not share the same definition of “average” or what constitutes deep-pocketed.

            While there are certainly distinct instances of permitting and approval woes, those hasn’t been the driving forces behind the vacancy rates on commercial corridors like Union Street or in the Castro where the average asking rent has actually been on the rise versus discounted.

            Thanks to Proposition 13, the ability service the carrying costs for many older, long-held commercial spaces doesn’t require particularly deep pockets and a “modest tax increase” could actually be substantial in terms of out of pocket costs, at least relatively.

            That’s not to say Proposition D will have the impact as billed, or even any impact at all, only that there’s a big, and rather important, difference between actually losing money and foregoing what one perceives to be “below market,” yet still profitable, rents while holding out for a whale or better terms.

          • Posted by two beers

            Another reason why LLs don’t lower rents to find market clearing price is the cascading downward pressure that lowering rent causes. Tenants will call to renegotiate, and their friends at the club will tell them they folded too quickly. Lowering rent lowers property value, triggering higher interest on loans. Better to leave property empty and show a loss, than let a market work as it’s supposed to.

      • Posted by Julie Keith

        I couldn’t agree more! So frustrating living among so many morons!!!

      • Posted by thisishowicomment

        And yet even with the highest rents in the nation, people are still trying to grow their businesses here at a rate that puts a crushing amount of demand on our limited housing supply.

        • Posted by Chris

          Except, the supply is kept artificially low, which is exactly why the rents are some of the highest in the nation. There are not an unlimited amount of people who want to live in the city, nor are there are unlimited number of businesses who want to be here. In fact, you see the headlines about the thousands of people leaving the city each year, and also there have been many high profile businesses that have left the city, too. If you restrict the housing to an unreasonable amount (and encourage people who have units that might otherwise be rented to choose not to rent them) and also restrict the office supply, then you drive up the rents for both housing and office space. Proposition E will merely ensure that wealthy downtown landlords stay very, very wealthy and face no competition. In fact, many downtown landlords actually SUPPORTED Proposition E since it guarantees their rents will stay sky high.

          • Posted by SFRealist

            And then you hear complaints about how nonprofits and arts organizations can no longer afford to pay rent in the city.

    • Posted by SFRealist

      If Prop E passes it would be great news for existing commercial landlords.

  2. Posted by David

    Looks like prop D may yet pass.

  3. Posted by Jake T

    Bayview and Sunnyside are relatively affordable neighborhoods and have short commutes to South San Francisco, the new growing employment center of San Francisco. Let the gentrification begin.

  4. Posted by SocketSite

    UPDATE: With 72,327 election day ballots having since been added to the early count, for a total of 144,667 ballots tallied, representing 28.7 percent of the 503,899 potential votes which could be cast, Proposition D is now PASSING and the YES margin for Proposition E has increased to 55 percent.

    Keep in mind that a significant number of mail-in ballots (over 40,000), including every mail-in ballot dropped off at a polling place on election day, have yet to be processed and Proposition D was failing based on the early mail-in count.

    • Posted by hundoman

      God can only help to save us now from the voters of SF.

      You really have to feel for the hurt the people of San Francisco have put on this place.

      • Posted by two beers

        “God can only help to save us now from the voters of SF.”

        Qu’ils mangent de la brioche!

  5. Posted by density

    So if Prop E passes, does that mean that all the currently phased Central SOMA office projects (e.g. Kilroy Flower Mart, 598 Brannan St) could now all be built at once rather than phased? Will the involved developers actually want to do that or prefer to keep the phasing to not have to raise/borrow as much $ at once and be more nimble as market conditions shift?

    I’m just trying to understand the implications of this measure (most likely) passing on these projects and if this measure will ironically increase the office pipeline in the short term (but obviously not the long term).

    Also, I’d be interested to hear people’s thoughts on whether Prop E passing will shift more office demand to downtown Oakland or the Peninsula/South Bay?

    • Posted by Chris

      Proposition E does have an “acceleration clause” for up to 1.7 million square feet of office space for certain projects within the Central SOMA Plan Area, provided they were submitted to the development pipeline before September 11, 2019, and they either provide dedicated parcel space of at least 10,000 square feet onsite for permanent affordable housing, fund or replace public safety facilities of at least 10,000 square feet, or provide dedicated community arts or PDR space of at least 10,000 square feet that rents at no more than 60% of market-rate for at least 30 years.

      This “accelerated amount” is deducted from all future Prop M cap allocation, and in no event can it cause more than 6 million square feet of office space to be constructed within the Central SOMA plan area until at least 15,000 new units of affordable housing are constructed within the area.

      • Posted by Jake T

        For context, that’s about 11 years of citywide affordable housing production at current rates of ~1,666 units/yr.

        • Posted by Chris

          No. 1.7 million square feet of approved development would not at all fund 11 years of affordable housing production at 1,666 units per year. Not at all. The current developer affordable housing fee per square foot is $52.20, which is what would potentially apply to all these projects since they were all submitted before September 10, 2019. That amounts to approximately $89 million. The average cost to build one affordable housing unit in San Francisco is $750,000, which means $89 million would build 119 units. Even if you are talking about leveraging the $89 million with tax money and grants or having the projects set aside some parcel space to build affordable units, you are still not going to get 18,326 units from it. Jake T, your math does not add up.

        • Posted by Chris

          Or, maybe, you might have been referring to the Prop. E requirement that 15,000 units must be built in Central Soma before additional office space could be approved–in that case, yes, it would take about 10 years at the current rate of affordable housing production to reach that threshold requirement. And of course, it would mean the city would have to channel ALL the new affordable housing production just into Central SOMA, which I think is the real motivation of Proposition E since it benefits the proposition sponsor John Elberling and his business of building affordable housing units in the area.

          • Posted by Brahma (incensed renter)

            Or, maybe, the rate of construction for affordable housing will increase now that all of the dollars slushing around in search of commercial projects will now not be able to fund new commercial projects and instead (at least some portion) will be directed toward residential. Which, of course, is the point.

          • Posted by Jake T

            Ding ding ding. Pay in lieu fees to the gatekeeper drawing a $300k/yr salary if you’d like to take advantage of the new Central SOMA plan on your lot.

          • Posted by Jake T

            The dollars trying to build commercial projects will be happy to build residential in Austin or any one of the many cities where development is still profitable. Even CalPERS is not dumb enough to buy a residential pro forma in this city.

          • Posted by Brahma (incensed renter)

            The dollars sloshing around will be able to build residential in Austin as well as San Francisco and a bunch of other cities to boot, seeing as how The Fed is getting underway with the process of making borrowing dollars as inexpensive as it’s been in a decade and there is already a worldwide surplus of investment money. And if the people currently occupied with selling pro forma projects to public pension funds decide they can’t make residential projects work there will be plenty of others ready and willing to replace them in the marketplace. Looks to me like the proponents of Prop. E happened to time things just right.

  6. Posted by SocketSite

    UPDATE: In fact, including provisional ballots, there are an estimated 103,600 ballots left to be tallied as of this morning, including:

    1. 57,000 vote-by-mail ballots returned to polling places on Election Day.
    2. 3,700 vote-by-mail ballots returned to ballot drop-off stations on Election Day.
    3. 2,700 vote-by-mail ballots cast at voting centers on Election Day.
    4. 24,000 provisional and conditional voter registration ballots cast at polling places.
    5. 1,700 conditional voter registration ballots cast at voting centers.
    6. 14,500 vote-by-mail ballots expected today (March 4) from the United State Postal Service

    And if the yet to be counted mail-in ballots follow the trend of the first batch, the outcome for Proposition D would flip (to a fail).

  7. Posted by mary_jane_jacobs

    Pretty excited about Proposition D, but I think we should expand it.

    We have a lot of problems in our society, and we need people to study those problems. So we should be taxing everyone who has a sociology degree, but isn’t working as a sociologist. I mean, we’re not ‘forcing’ them to make that choice, it’s just that there’s a cost they are causing us all to bear for not doing what they are supposed to do.

    Similarly, we have a public health crisis. I know there is a lot of privately owned exercise equipment out there (exercise bikes, weights, etc.) that people don’t actually use. We should have a tax on everyone who can’t prove they are using the exercise equipment that they own. I mean all of us are going to wind up paying for their sloth right? They can just sell it to someone else if they don’t like the taxes.

    Don’t get me started on automobiles people own but don’t drive. We need to get those people out on the road!!!

    • Posted by jeremyharrison

      Love it.

    • Posted by two beers

      If there were a tax on faulty logic, false comparisons, and specious arguments, your bill would be steep.

      • Posted by mary_jane_jacobs

        Please explain why my comparisons are inaccurate.

        • Posted by two beers

          Comparing an asset class to an educational degree?? Comparing an active profession to passive rent collection? Comparing vacant storefronts that make neighborhoods more dangerous to someone deciding not work in a field they majored in? Viewing higher education solely as occupational training? Comparing people underutilizing their personal exercise equipment with landlords whose business model (theoretically) means renting out their property at the highest rate they can get (but not at a rate higher than they can get, which by definition means they have no intention of renting out their property)?

          My choosing not to drive my car not only doesn’t hurt the rest of society, it actually helps it. Landlords who price their properties above what the market wil bear turn their business locations into dangerous slums. These landlords create public nuicance. These landlords are bad citizens. These landlords contribute nothing to society. These landlords are social leeches. (I’m not accusing all landlords of this, only the ones who refuse to lower rents to market clearing prices).

          That’s just for starters…

          • Posted by mary_jane_jacobs

            I agree with you that no government, through tax policy or other requirement one should be able to require you to drive your car. It’s your asset, you paid for it, and it’s up to you to decide when and how you drive it. And yet, we have rules. You can’t leave your car on the street indefinitely, right? You need to have a parking permit, or move it every 72 hours. If you are keeping a non-operating car indoors, you are taking up space that could be housing for someone else. Your non-use of your car does have a social impact. Should society be able to tax away that behavior.

            The idea that real estate is a “passive activity” is convenient for progressive politics and tax policy. No homeless guy has ever crapped on my 401k account, or graffiti’ed my Schwab statement, incurring the threat of city fines. No financial advisor has ever tried to flush a toy down the toilet, plugged his plumbing and then expected me to re-carpet his office when the basin overflows into his downstairs neighbors apartment.

            People don’t have to rent out their retail spaces at prices they choose to avoid. If a doctor is out of work, we don’t say, “You need to go be a barista or start driving for Uber.” People get to choose the price at which they are willing to trade their personal resources, time or assets.

            Anyone can keep his/her savings in a bank account, as opposed to buying government bonds, or stocks or any other asset. You get to choose what you do with your assets.

            The hyperbole of my sociologist and exercise equipment examples serve to highlight the issue of how far we can reasonably expect to control the economic decisions of others. I think it’s the height of absurdity that the Planning Department can “require an active street front” (i.e. demand some sort of retail trade or non-office activity) in the permitting of a new building while the city simultaneously taxes vacant storefronts. This will simply lead to even more expensive housing and a lower grade offering of services to people.

            My hyperbole is of course exceeded by yours: “turn their business locations into dangerous slums. These landlords create public nuicance [sic]. These landlords are bad citizens. These landlords contribute nothing to society. These landlords are social leeches.” This is incel talk applied to the economy.

            That one is a single lonely person is not the fault of the attractive people in the city who don’t want to date him/her/them(!) Nobody has to be your significant other. It’s a choice.

            Nobody has to rent their storefront out to a hookah bar/massage parlor. It’s a choice.

  8. Posted by jimmythekid

    some people say politicians will tax the air you breathe. This is absurd! No one will ever tax the air you breathe however we do have to mitigate the carbon dioxide that is exhaled with each breath so we have no choice but to initiate an exhale tax..

  9. Posted by civ-e

    it’s pretty pathetic that these “issues” are even up for debate, and even more pathetic that they are decided on by ballot.

  10. Posted by SocketSite

    UPDATE: With an additional 35,538 ballots having been counted, for a total of 180,205, the support for Proposition D is holding firm at 68 percent YES while the support for Proposition E has slipped from 55.4 to 54.6 percent with an estimated 70,000 ballots left to be processed.

    Both propositions should now pass assuming the trend for vote-by-mail ballots returned on election day, versus mailed, holds.

  11. Posted by Robert

    Proposition D will just lead to the pop up of Dollar stores everywhere (or rather $1.25 stores because of these tariff taxes).

  12. Posted by mary_jane_jacobs

    I think the minimum viable Prop D avoidance scheme will be something like a folding card table and 5 used books on display, $20 each.

    “C’mon in, we’re open Thursdays from 9:30am to 9:45am! Check us out!”

    • Posted by Philip

      Hadn’t thought of that! Great way to deal with this idiocy.

      SF solution: declare war on small business, force developers to build “multi use” space nobody wants, then tax property for not leasing the space they were forced to build to businesses that have left or are about to fail.

  13. Posted by Ohlone Californio

    People who opine online as if scores of land rich, old school SF landlords do not sit and hold properties vacant for years and years while awaiting the whale tenant who will do all the necessary upgrades AND pay top, top dollar?

    Those people don’t know anything about San Francisco commercial real estate.

    Tax such landlords. They deserve taxing. They’re greedy, and they ruin neighborhoods.

  14. Posted by Katdip

    As a policy-oriented voter but not a real estate expert, what I find so annoying is the complete lack of credible information on WHY stores are vacant. All the articles I’ve read on Hoodline, Chronicle, etc feature opinions – greedy landlords holding out, online retail, permitting delays, etc. But these are actually verifiable facts, but I couldn’t find any good independent analyses on how they collectively contribute to the problem. So that makes it impossible to evaluate if this tax will actually make a difference – my gut is that it won’t, as it’s too low to affect wealthy loss-seeking landlords, and does nothing to fix the other issues.

    • Posted by two beers

      Storefronts remain vacant because it’s against LLs’ long-term interest to lower rents in the short-term.

      Real estate is not an open and transparent (ie, what Smith meant by “free”) market.

    • Posted by Jake T

      When Vallie Brown was pursuing permitting reform, the Planning Department put a variety of studies that emphasized that the near term policy lever in the city’s control to reduce vacancies was primarily the yearlong permitting process.

  15. Posted by SocketSite

    UPDATE: With another 60,477 ballots having been tallied, for a total of 240,682, the support for Proposition D has ticked up to a little over 69 percent (YES) while the support for Proposition E has slipped to 54.5 percent (YES). And while there are another 54,000 ballots left to be processed, the passage of both propositions is now effectively guaranteed.

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