The courts ruling on the San Francisco EHT. What is the impact here?
Housing Now! Coalition Empty Homes Tax Whitepaper
San Francisco Proposition M Court Ruling – Applicability to Honolulu Bill 46
Certain Councilmembers and opponents of Bill 46 (2024) have cited a recent California lower court decision against San Francisco’s Empty Homes Tax (Proposition M). We wanted to provide you with our views on that lower court decision and why it should not discourage Honolulu’s efforts to pass Bill 46 to address our severe housing crisis.
The lower court’s recent decision (and the related appeal) can be found at the Register of Actions page for the case (Case No. CGC-23-604600).
Executive Summary
The California lower court’s decision should not delay or discourage Honolulu from passing Bill 46 for the following reasons:
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The City of San Francisco has appealed the lower court decision. The underlying legal issues about Proposition M will ultimately be decided in the appellate courts.
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A ruling by California state courts has no binding effect in Hawaii or other jurisdictions.
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Most of the claims made in the San Francisco case depend on California laws and tax features unique to Proposition M that are very different from the terms of Bill 46 and Hawaii laws.
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The single claim in the San Francisco case that could be raised regarding Bill 46 would be under the Takings Clause in the U.S. Constitution. But that claim will most likely be dismissed on appeal, because local governments have broad authority in imposing taxes on real property within their jurisdiction. The validity of empty homes taxes under the Takings Clause has been discussed in prominent national legal publications, as further discussed below.
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Background
The case was brought by a group of apartment associations and individuals challenging San Francisco’s Proposition M, which imposed a tax on certain empty homes there. The lower court’s November 2024 decision granted the Plaintiffs’ motion for summary judgment against Proposition M based on the following claims:
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Violation of the Takings Clause
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Preemption by the California Ellis Act
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Violation of Due Process and Equal Protection clauses
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Violation of the California Constitution’s privacy clause
Detailed discussion
1. Takings Clause claims
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Plaintiffs’ argument - The City can’t use a tax to coerce property owners to rent out their properties, so this tax constitutes an unjust taking of private property without compensation.
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Legal analysis - Legal scholars in top legal publications do not support Plaintiffs’ claims.(FN1) The University of Chicago Law Review rejects Plaintiffs’ arguments in: Vacancy Taxes: A Possible Taking? Noting the “high constitutional tolerance of taxes,” they conclude “it is unlikely that a fine imposed to encourage productive use in lieu of vacancy is a taking,” noting that “such fines levied on the nonproductive use of property are a background principal of property law that, regardless of economic or investment impact, preclude a conclusion that the vacancy tax is a taking.” 91 Univ of Chicago Law Review 1725, at 1725 and 1764-65 (2024). Examining numerous forms of empty homes taxes in the United States, the University of Pittsburgh School of Law examined constitutional challenges to these taxes in the Pittsburgh Tax Review - Vancouver Empty Home Tax: An Analysis of Taxation as a Solution to a Housing Crunch. They similarly found the U.S. Supreme Court has “an historical preference not to interfere with state taxes” and concluded “There are no United States Constitutional impediments to an empty home tax.” 18 Pittsburgh Tax Review 212 (2020).
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Our view: likely to be dismissed in appellate court - The Plaintiffs acknowledge that, as a general proposition, taxes are not prohibited under the Takings Clause. Courts have generally granted cities and states broad authority to levy taxes to serve the public welfare, including regulatory taxes to shape housing policy or to internalize costs of certain types of activities (e.g., alcohol or smoking) that cause the public harm. While taxes are often challenged by individuals seeking to avoid them, courts generally uphold local governments’ powers to levy taxes so long as the taxes are rationally connected to public welfare goals and do not violate other laws. We believe an empty homes tax would most likely withstand U.S. Constitution legal challenges, as supported by the legal publications and reasoning above.
2. The California Ellis Act Preemption claims
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Plaintiffs’ argument - Proposition M is preempted (prohibited) due to California’s Ellis Act, which states that no government entity in California may “compel the owner of any residential real property to offer, or continue to offer, accommodations in the property for rent or lease.”
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Our view: not applicable to Honolulu - Hawai‘i has no state law similar to California’s Ellis Act, so this claim is inapplicable to Bill 46.
3. The Due Process, Equal Protection claims
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Plaintiffs’ argument - California’s Proposition M does not exempt dwellings rented to (or occupied by) the owner’s family members, so Plaintiffs argued the City may not use a tax to disadvantage property owners who choose to house their own family members.
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Our view: not applicable to Honolulu - Bill 46 provides an exception for dwellings occupied for 6 months by any individuals (including family members) who use the dwelling as their primary residence, so this claim is inapplicable to Bill 46.
4. The California Constitution privacy clause
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Plaintiffs’ argument - Proposition M violates the California Constitution’s privacy clause(FN2) by compelling property owners to rent their property against their will.
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Our view: not applicable to Honolulu - The Hawai‘i Constitution (which differs from California’s Constitution), states (emphasis added): “The right of the people to privacy is recognized and shall not be infringed without the showing of a compelling state interest...” (Section 6 of the Preamble). Bill 46 does not violate Hawaii’s law because it does not compel rental of property but simply imposes different tax rates based on property use, as Honolulu has done for over 100 years (e.g., Residential with home exemption vs. Residential A, Commercial property vs. Residential, etc.). In any event, our housing crisis constitutes a compelling state interest and Bill 46 is narrowly tailored to help address this crisis.
Final thoughts
Our views are not, of course, professional legal advice. We encourage the Honolulu City Council to work with the City’s Corporation Counsel in executive session to further understand these issues and if appropriate, make any further amendments to Bill 46 to help assure its success. We should not delay moving forward with effective ideas for addressing our housing crisis, based on unfounded claims of unconstitutionality, when Proposition M is based on very different laws from Bill 46. As residents, we hope that the City Administration is willing to work to do everything it can to empower the City Council to provide a wide range of diverse solutions to address our severe housing crisis.
Organization details
Prepared by: Housing Now! Coalition (https://www.hihousing.org/)
Date: June 2025
Contact: Ross Isokane (isokane@gmail.com) or Ellen Godbey Carson (egcarson@icloud.com) or info@hihousing.org
Footnotes:
FN1 Note that the University of Chicago Law Review is the flagship law journal published by that institution and is one of the most influential law journals in the country, often cited in U.S. Supreme Court and other court opinions. And The Pittsburgh Tax Review has repeatedly been ranked among the top tax journals in the United States.
FN2 That privacy clause is in the California Constitution’s Article I, Section 1, stating “All people are by nature free and independent and have inalienable rights. Among these are enjoying and defending life and liberty, acquiring, possessing, and protecting property, and pursuing and obtaining safety, happiness, and privacy.”