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On September 11, 2026, the California Court of Appeal in San Francisco issued its decision in Debbane v. City & County of San Francisco, No. A172067, __ Cal. App. 5th __, holding that San Francisco’s residential “vacancy” tax is illegal and unenforceable. In a unanimous, published opinion the Court affirmed the judgment entered by a San Francisco Superior Court judge in 2024, which enjoined collection of the tax. Nielsen Merksamer represented the plaintiffs who successfully challenged the measure.

Enacted by the City’s voters in November 2022, the so-called “Empty Homes Tax” sought to coerce San Francisco property owners into renting out residential units that they own—subject to all the stringent restrictions and requirements that San Francisco imposes on rental units—rather than keeping them vacant. Specifically, it sought to impose a substantial tax on any unit that was vacant, unoccupied, or unused for at least half the year, with limited exceptions, and with the amount escalating each year the unit was vacant.

Shortly after the measure was approved, Nielsen Merksamer filed a suit challenging the tax on behalf of the San Francisco Apartment Association, the San Francisco Association of Realtors, the Small Property Owners of San Francisco, and four individual property owners who faced the prospect of being forced to either pay tens of thousands of dollars for the “privilege” of keeping units vacant on the properties where they lived or selling their homes.

The trial court held that the measure was illegal on a number of constitutional and statutory grounds and enjoined collection of the tax. The City appealed, and the Court of Appeal affirmed the lower court’s ruling that the tax is preempted by California’s “Ellis Act,” Cal. Govt. Code §§ 7060-7060.7, which was enacted by the Legislature in 1985 to guarantee that property owners have an absolute right not to rent their properties and to override case law to the contrary. (Having decided the appeal based on the Ellis Act, the Court did not reach the trial court’s constitutional rulings.)

The tax, therefore, remains enjoined, and the City Tax Collector has confirmed that he is not enforcing the measure’s provisions.

Partner Chris Skinnell argued the case in both the trial court and the Court of Appeal.