News and Events

Help stop stricter statewide rent control

Contact your lawmaker today. Take action today to stop AB 1157 by Assemblyman Ash Kalra, D-San Jose, which would impose stricter rent control on nearly all rental housing providers in California. The bill will be heard in the Assembly Housing and Community Development Committee on Thursday, April 24, 2025. We need your help to defeat this harmful legislation.

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California proposal to tax landlords for vacant storefronts draws criticism

Bill could hurt, not help, industry growth, some property pros warn

By Brannon Boswell, Rachel Scheier
CoStar News
April 16, 2025 | 5:29 AM A California proposal to tax properties that are vacant for more than six months is rattling some commercial real estate professionals, with critics warning it could deepen vacancies and deter investment in struggling retail and office corridors. Senate Bill 789, introduced by State Sen. Caroline Menjivar, who represents Burbank and the San Fernando Valley, would impose a $5-per-square-foot annual tax on commercial properties that remain vacant for 182 or more days in a calendar year. If passed, it would be one of the most expansive vacancy tax measures in the United States and the first to apply throughout any state. The measure is set for an Assembly hearing April 23 and needs approval from two-thirds of both state legislative chambers. The bill aims to discourage prolonged commercial vacancies, which it says undermine economic vitality, reduce tax revenue and contribute to neighborhood decline. Its stated goals are to incentivize “property activation,” support “equitable community development” and generate funding to address California’s housing and homelessness crises. Developers and leasing brokers say the bill could inadvertently penalize landlords who are already investing in their communities — and may delay rather than accelerate lease-up activity. “This is insanity,” said Ed Sachse, president of Los Angeles-based KWP Real Estate, a manager of commercial properties across Southern California. “You’re penalizing landlords who are doing everything right but still need 12 to 24 months to bring a space back online.” In response to requests for comment from CoStar News, Menjivar's staff said the senator was "working on addressing concerns and will be amending the bill in the next week to refine the language." The bill would make California the first state to impose this type of broad-based commercial vacancy. Critics say it borrows logic from residential policy — where turnover costs are lower — and applies it to commercial real estate, where bringing in a new tenant can run into the hundreds of thousands of dollars. “The cost to lease a commercial space isn’t in the same universe as turning over an apartment,” said Chris Wilson, JLL's U.S. and Southwest retail lead. “With legal fees, commissions and tenant improvements, just getting one 5,000-square-foot space leased could cost $200,000 or more.”

Unintended consequences

If the measure passes the high bar of two-thirds approval, some in the industry say the state could be sending the wrong message to capital markets already skittish about investing in California’s high-cost, high-regulation real estate environment. “Everyone has the same goal,” Sachse said. “Owners want to lease their space. Their lenders want them to lease it. But this tax is counterproductive to everything they’re trying to do.” As currently written, the measure targets long-term vacancies in shopping centers, office buildings and other commercial properties. Proceeds would be deposited into California’s “Dream for All” fund, designated for first-time homebuyer assistance. Property owners would be required to submit tax payments electronically each March for the previous calendar year. The bill includes exemptions for properties that are undergoing active renovation or held up by environmental or legal delays. But some industry professionals argue the tax overlooks the time, cost and complexity involved in filling vacancies — especially in California’s most highly regulated cities. “This would only drive more properties into receivership and reduce capital available to reposition them,” Hudson Pacific Properties CEO Victor Coleman wrote in a LinkedIn post. “Imposing a significant tax on top of mortgage payments, property taxes, insurance and operating expenses will only further elongate extended periods of vacancy.” Sachse described the leasing cycle in detail: Owners hire brokers, market the space, identify a qualified tenant, negotiate a lease and secure city permits — steps that often take a year or more, particularly in a soft leasing market. He warned the proposed tax could strip resources needed for tenant improvement allowances or redevelopment projects. Rushing leasing decisions under the pressure of a vacancy tax could lead to tenant mismatches and premature failures, Wilson said. “A tax that pressures speed over fit could create even more vacancies,” he said. The bill also fails to account for legitimate causes of vacancy, from demographic shifts to zoning constraints, according to David Greensfelder, managing principal at Greensfelder Commercial Real Estate. “All vacancies are not created equal,” Greensfelder told CoStar News.

Targeting blight

Vacancy taxes exist across the country, but most are local ordinances targeting specific types of blight. Industry experts say California’s proposed tax stands out for its scale, cost and statewide reach. Though lawmakers may adjust that scope in the coming weeks, questions remain about whether such taxes work to reduce vacancies. San Francisco became one of the first big cities in the country to levy such a tax in early 2020, prior to the pandemic, when voters wondered why the city was riddled with empty storefronts despite its booming economy. Backers of the tax argued that landlords were keeping properties vacant as they held out for higher rents. Today, San Francisco is dotted with "for lease" signs, though it's difficult to use that to determine the effectiveness of the vacancy tax, which didn't take effect until 2022 because of the pandemic. Moreover, the tax excludes the city's main downtown commercial districts, and compliance has been low, in part because the system has confused property owners and leaseholders, officials say. Fewer than 200 storefront owners paid the tax the first year it was enacted, according to city data, even after enforcement efforts by tax officials. The San Francisco tax requires landlords or tenants of properties left vacant for longer than six months to pay $250 per foot of street frontage on the first year, then $500 for the second and $1,000 for the third and beyond. An economic impact report on the tax written by the San Francisco controller's office chief economist, Ted Egan, in 2019, before it was enacted, acknowledged that a "narrowly tailored tax" could discourage "speculative or negligent behavior by property owners," but it stressed that "properties can also remain vacant for long periods because of economic conditions beyond the control of the owner." In other words, larger economic factors such as the rise of e-commerce could be the real main culprits behind the widespread retail vacancies plaguing American cities. "There's a perception that landlords are greedy," said longtime San Francisco retail broker Kazuko Morgan of Cushman & Wakefield. "But landlords want to rent out their spaces." She added that given the current challenges facing traditional retailers, officials should be doing all they can to make life easier for retailers, including lifting restrictions and easing permitting requirements.

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LA City Imposes New Registration Requirements (and Fees) for Landlords

The LA City Council passed an amendment to the Just Cause for Eviction Ordinance (JCO), which went into effect January 27, 2025. It applies to most landlords who own and lease residential property within the city, if they are not already regulated by the city’s Rent Stabilization Ordinance

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The Change Reaction Wildfire Relief Fund Partners with Scott Properties

Scott Properties Group is pleased to partner with The Change Reaction in an effort to provide financial assistance to those affected by the wildfires. We strongly believe the resiliency of hard working Angelenos is propelled when all community members come together for a greater cause. We extend our gratitude and ask that you please join us in making a donation to the Wildfire Direct Giving Fund.

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L.A. County approves emergency rental protections for displaced residents and pets

The Los Angeles County Board of Supervisors has approved a resolution providing temporary rental protections and short-term rental policy changes to assist residents and their pets displaced by the January 2025 windstorm and critical fire events.

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LA City Council Punts On Postfire Eviction Pause, Rent Freeze

The Los Angeles City Council voted Wednesday to continue discussions of a proposed eviction pause and rent freeze in the wake of the Eaton and Palisades fires in a council committee rather than vote to enact it or not. Councilmembers cited concerns and questions about the process and speed with which the proposal came together, the enforceability of such a move, and the potential impacts on the rental market.

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News Alert: West Hollywood Suspends 1-Year Lease Requirement

On January 21, 2025, the West Hollywood City Council unanimously passed an urgency ordinance entitled, "Emergency Urgency Ordinance in Response to Fires" that goes into effect immediately. The ordinance suspends the existing the 1-year minimum lease requirement for all rental housing (including multifamily as well as hotels) to wildfire victims for 18 months, namely July 21, 2026. However, the minimum lease term must be for at least 30 days.

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Gov. Newsom issues executive order barring L.A. County landlords from evicting tenants housing wildfire victims

LOS ANGELES (KTLA) – Gov. Gavin Newsom issued an executive order Friday prohibiting landlords in Los Angeles County from evicting tenants who open their doors to wildfire victims. “At a time when so many have been suddenly displaced, we need more housing and shelter than ever. Opening your place of residence to help shelter those in need is not only encouraged and generous, but deserves to be protected,” Newsom said in a statement.

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AB 2493: Tenancy: application screening fee

Existing law authorizes a landlord or their agent, when they receive a request to rent a residential property, to charge an application screening fee to cover the cost of obtaining information about the applicant. Existing law also prohibits a landlord or their agent from charging an applicant an application screening fee when they know or should have known that no rental unit is available at that time or will be available within a reasonable period of time, unless the applicant agrees in writing. Existing law also requires a landlord or their agent, if an applicant that has paid an application screening fee makes a request, to provide a copy of the consumer credit report to the applicant who is the subject of that report.

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We Love LA. These Are Ways You Can Help Your Local Communities

As you know, the LA-area fires have devastated many communities in LA County. Our team would like to thank the fire fighters and first responders in every jurisdiction, and countless of community members that are showing solidarity by giving to charities, fostering animals, volunteering, donating items to local shelters, making meals, and much much more. All of these efforts show great courage and resilience.

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