California voters consider controversial vacation homes tax in iconic Lake Tahoe area

SOUTH LAKE TAHOE, Calif. (AP) — Owners of vacation homes in Northern California's South Lake Tahoe could face a significant tax increase if voters in the mountain resort town approve a measure on Tuesday’s ballot that pits affordable housing against private property rights.

South Lake Tahoe, which sits on the shores of the iconic alpine lake, has about 7,000 vacant homes — 44% of the city’s estimated housing units — according to the 2022 American Community Survey. Measure N would levy a flat $3,000 tax on homes that are vacant 182 days within a calendar year.

The tax would increase to $6,000 for every subsequent year the home remains empty for half the year.

The town is the latest across the United States with a growing debate about the impact of vacation properties. Critics say vacant second homes have worsened the nation’s housing crisis by contributing to a shortage of affordable rental properties, especially in pricey resort places like South Lake Tahoe.

Supporters of the measure say they want to encourage homeowners to rent to workers or pay into a fund for housing, roads and transportation projects. They say the city is shedding families as businesses struggle to hire staff in a region with little land available for housing development.

Kelly Bessem works at least 50 hours a week at multiple jobs as a hydrology and land management field scientist and a snowboard instructor. She's currently sleeping in her car to buy a house in Markleeville, which is a 40-minute drive to South Lake Tahoe.

“I’ve done all the things I’m supposed to, but it’s still to the point where I just squeeze by,” Bessem said.

Nancy Dunn, a homeowner who has lived part-time in South Lake Tahoe since 2018, opposes the measure as unfair and un-American.

“This is my home, and I want to be able to come back to it when I want to, and come and go as I feel,” Dunn said as she stocked her house with firewood earlier this month. “The American way is to have the right to own property, and to do with it as you please.”

The California Association of Realtors and the National Association of Realtors have contributed a combined $1 million to defeat the measure in a town with only 12,000 registered voters.

While still rare in the U.S., more places are considering an empty homes or vacant homes tax to address workforce housing shortages by tapping underused homes to expand the long-term rental market.

In Hawaii, the Honolulu City Council is trying to pass an empty homes tax, its third attempt since 2018, while the Colorado Association of Ski Towns is seeking legislation allowing cities and counties to ask voters to approve vacant homes taxes.

Margaret Bowes, the Colorado group's executive director, said resort towns have few options in where they can build. The lack of housing “has reached a crisis level" affecting basic services and commerce "from ski resort companies to local, small businesses,” she said.

Perhaps the best known example is Vancouver, Canada, which in 2017 imposed a 1% tax on an empty home’s assessed taxable value. The tax is now 3% and the city says it has generated $142 million for affordable housing projects.

In California, San Francisco and Berkeley approved taxes on vacant properties in 2022.

Vacancy taxes can work to a limited degree in larger cities, but an empty homes tax could make a huge difference in smaller towns like South Lake Tahoe, said Shane Phillips, who manages the Randall Lewis Housing Initiative at the University of California, Los Angeles.

He did not know enough about the proposed tax to weigh in, but generally supports vacancy taxes on vacation homes in regions where housing is short. Taxes can be used to discourage harmful behavior, he said, such as taxes on cigarettes.

“And I think there's a similar argument to be made here, that people consuming multiple homes and not living in them in communities like South Lake Tahoe ... it's actually doing harm to other people," Phillips said.

Measure N has roiled the tiny community, which with about 21,000 year-round residents is the most populous city ringing Lake Tahoe and a popular weekend destination. It is 188 miles (300 kilometers) northeast of San Francisco.

The city has a median household income of $68,000, lower than the $95,000 median in California. The median sales price of a home was $750,000 in September — up from $427,000 five years ago, according to Redfin.

Modeled on Berkeley's empty homes tax, the city projects that the proposed tax will raise up to $8 million in its first year and up to $20 million a year afterwards.

Amelia Richmond, co-founder of Locals for Affordable Housing, the group that collected the signatures to get the issue on the ballot, said it is an opportunity to ensure South Lake Tahoe does not go the way of other mountain towns with even higher vacancy rates.

Property owners would self-report each year, although documentation may be required. There are exceptions to the occupancy requirement, such as homes undergoing renovation.

To avoid the tax, owners of vacation homes could sell their property, lease to a tenant year-round, or rent to seasonal travelers or workers. They can't list their homes as short-term rentals after the city voted to curtail rentals of fewer than 30 days, citing noise and the housing shortage.

Opponents say many of them scrimped and saved for modest second homes and they shouldn’t be punished for the region’s lack of affordable housing. They're also upset because as part-time residents, they cannot vote on the measure.

Tom Fields, 85, splits his time between a three-bedroom house that he describes as nothing special other than its location on Lake Tahoe and a place in central Oregon.

“This is crazy and I don’t even know if it’s constitutional,” he said. "When you purchase the land and they start taking away rights, that’s when people get upset.”

Har reported from San Francisco.

A "No on Measure N" sign sits in front of a home in South Lake Tahoe, Calif. on Thursday, Oct. 17, 2024, where voters will decide whether to approve Measure N, which will mandate a tax to homeowners who leave their homes vacant for more than half the year. (AP Photo/Haven Daley)

A "No on Measure N" sign sits in front of a home in South Lake Tahoe, Calif. on Thursday, Oct. 17, 2024, where voters will decide whether to approve Measure N, which will mandate a tax to homeowners who leave their homes vacant for more than half the year. (AP Photo/Haven Daley)

Amelia Richmond, Co-Founder, Locals for Affordable Housing, talks to a voter outside a grocery store in South Lake Tahoe, Calif. on Thursday, Oct. 17, 2024, where voters will decide whether to approve Measure N, which will mandate a tax to homeowners who leave their homes vacant for more than half the year.v(AP Photo/Haven Daley)

Amelia Richmond, Co-Founder, Locals for Affordable Housing, talks to a voter outside a grocery store in South Lake Tahoe, Calif. on Thursday, Oct. 17, 2024, where voters will decide whether to approve Measure N, which will mandate a tax to homeowners who leave their homes vacant for more than half the year.v(AP Photo/Haven Daley)

Homes are seen on a mountain overlooking South Lake Tahoe, Calif, on Friday, Oct. 18, 2024, where voters will decide whether to approve Measure N, which will mandate a tax to homeowners who leave their homes vacant for more than half the year. (AP Photo/Haven Daley)

A sign welcomes motorists to South Lake Tahoe, Calif. on Friday, Oct. 18, 2024, where voters will decide whether to approve Measure N, which will mandate a tax to homeowners who leave their homes vacant for more than half the year. (AP Photo/Haven Daley)

Homeowner Kelly O'Hare stands on her balcony overlooking South Lake Tahoe, Calif. on Friday, Oct. 18, 2024, where voters will decide whether to approve Measure N, which will mandate a tax to homeowners who leave their homes vacant for more than half the year. (AP Photo/Haven Daley)

Wall Street pointed toward losses early Thursday and potentially the first losing month since April in what has been a red-hot year for U.S. markets.

Futures for the S&P 500 fell 0.7% before the bell, while futures for the Dow Jones Industrial Average slid 0.5%.

Microsoft fell 3.6% overnight after the tech giant reported better profit than expected, but disappointed investors who were looking for bigger AI-related growth.

Meta, the parent company of Facebook, also posted stronger-than-expected quarterly results, but warned that it expected a “significant acceleration” in infrastructure spending next year as it continues to pour money into developing AI. Meta shares lost 2.6% overnight.

Ebay tumbled 7.2% after it issued a conservative forecast despite meeting Wall Street's sales and profit expectations.

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Uber slid 5.3% after the ride-hailing app after reported that gross bookings growth slowed, overshadowing its strong third-quarter results.

In Europe at midday, France's CAC 40 slipped 1%, Germany's DAX fell 0.6% and Britain's FTSE 100 declined 0.8%.

Japan's benchmark Nikkei 225 dipped 0.5% to finish at 39,081.25. Australia's S&P/ASX 200 slipped 0.3% to 8,160.00. Hong Kong's Hang Seng lost 0.1% to 20,359.95, while the Shanghai Composite added 0.4% to 3,279.82.

South Korea's Kospi dropped 1.5% to 2,556.15 after North Korea test launched a new intercontinental ballistic missile designed to be able to hit the U.S. mainland in a move that was likely meant to grab America's attention ahead of Election Day.

Markets also were watching the Bank of Japan, which kept its benchmark rate unchanged at 0.25%. Japan is also facing political uncertainty after its governing party, tainted by campaign financing scandals, lost its majority in the lower house of parliament in elections last weekend.

Upcoming earnings releases in Asia, as well as the rest of the world, also added to the wait-and-see mood.

Benchmark U.S. crude rose 43 cents to $69.04 a barrel. Brent crude, the international standard, added 48 cents to $72.64 a barrel.

The U.S. dollar slipped to 152.70 Japanese yen from 153.31 yen. The euro cost $1.0868, up from $1.0858.

FILE - A person walks in front of the Tokyo Stock Exchange building in Tokyo, on Oct. 2, 2024. (AP Photo/Eugene Hoshiko, File)

FILE - A person stands near an electronic stock board showing Japan's Nikkei index at a securities firm in Tokyo, on Sept. 18, 2024. (AP Photo/Eugene Hoshiko, File)