Affordable housing advocates float idea of new “Ghost Tax” on Denver landlords

Advocates for more affordable housing units in Denver are floating the idea of what’s known as a “Ghost Tax” or VHT- vacant home tax- on Denver landlords as a new way to raise money to create more affordable housing in Denver. These kinds of taxes or fees are imposed on landlords whose properties are vacant and not rented for an extended period of time- typically about six months. 

They are used as a tool in a handful of American cities and Canada to encourage property owners to rent or sell their homes and thereby increase the stock of affordable housing.

“Well, it’s certainly not very well thought through,” said Drew Hamrick, general counsel and vice president of government affairs for the  Apartment Association of Metro Denver. “This is a level of intrusiveness in government that Denverites don’t want to tolerate and don’t want to live under.”

The vacant home fee idea was contained in a five-page letter sent in August to Mayor Mike Johnston and the Denver City Council from the Colorado Coalition for the Homeless, Enterprise Community Partners and Archway Communities, organizations dedicated to creating and maintaining affordable housing. The letter, obtained by CBS News Colorado, outlines numerous potential strategies to create more affordable housing in Denver. Measure 2R, pushed by Mayor Johnston, would have imposed a .05% sales tax in Denver to raise hundreds of millions of dollars for affordable housing, but the measure narrowly lost at the hands of voters last November. 

In the letter obtained by CBS, the authors wrote, “Assessing a fee on rental units in the Denver market that are left vacant, with their rents unchanged for a minimum period of time, could bring in significant revenue for Denver. This approach”,  said the letter, “is preferable than potentially taxing unoccupied second homes in Denver as there is less likely to be an abundance of such homes.”

Cathy Alderman, Chief Communications and Public Policy Officer for the Colorado Coalition for the Homeless, and one of the authors of the letter, said, “It’s our responsibility to be thoughtful about how to bring in the desperately needed revenue to make housing affordable for Denverites.”

In explaining the vacant home fee proposal, Alderman said, “We want to encourage landlords to lower their rents on units that are sitting vacant while people are living outside. Is there a way to incentivize that lowering of rent so the working-class folks and the people experiencing homelessness in Denver have a chance to get into a rental unit? I think vacancy fees might be a way to think about that,” said Alderman. “This is one potential option of many that we think is worth exploring.”

She said that with an estimated 27,000 empty rental units in the Denver metro area, she believes corporate landlords are refusing to reduce their rents to appropriate levels of affordability.

“I don’t think it’s unreasonable to ask the housing community, when they have empty units for long periods of time, to consider making those units available to lower-income households,” said Alderman.

A handful of U.S cities have approved or considered vacancy taxes.

Oakland, California, has a vacancy tax, which has owners of homes used less than 50 days a year facing a $6,000 flat tax.

Washington, D.C. also has a version of a vacancy tax.

In San Francisco, voters approved an empty homes tax, but higher courts have ruled it unconstitutional.

Honolulu has been considering an empty homes tax since 2018. 

In South Lake Tahoe, a ballot measure last November that would have imposed a $6,000 a year vacancy tax was soundly defeated, with nearly 74% of voters turning down the idea.

The Apartment Association’s Hamrick termed such a tax or fee in Denver a “very bad idea. A high vacancy rate is good for the consumer.” 

“Taxing that or imposing any type of financial penalty moves the market in the wrong direction. All costs, including taxes, ultimately percolate down to the renter,” said Hamrick. “If you raise the fees or taxes on sesame seeds, all of a sudden Whoppers start to cost more.”

In Australia, vacancy fees can be imposed on foreign property owners whose properties sit vacant for more than six months of the year. In Toronto, a 3% vacant home tax is imposed on property owners whose homes are vacant for six months or more of each year. Vancouver began an empty home tax (EHT) in 2017 that levies a tax of 3% of the property’s assessed value if it is vacant for more than six months of the year.

Alderman emphasized the proposal being floated now is aimed at corporate landlords with high vacancy rates, not at “mom and pop” landlords or owners of accessory dwelling units.

Jordan Fuja, a spokesperson for Mayor Michael Johnston, said, “We are always looking for creative housing solutions and welcome new ideas from our community partners. Affordable housing is the most pressing issue facing Denverites today…”

Read the letter sent to Mayor Mike Johnston’s Office:

Dear Mayor Johnston, Members of Denver City Council, and Director Rife of Department of Housing Stability (HOST) –

We appreciate the continued partnership of your offices on working collaboratively to solve the housing and homelessness crisis in Denver.  Many of us were disappointed to witness the voters’ rejection of Measure 2R last November and we supported looking at the General Obligation (GO) Bond process as the next opportunity for Denver to make historic and desperately needed investments in affordable housing.  While we are thrilled to see one-time investments of $45m in housing and $11.4m in upgrades to supportive housing and shelter, we know we need to begin preparing for the opportunity to make sustainable and long-term investments in affordable and supportive housing in the future. 

We have heard that there is interest both within the Mayor’s Office, HOST, and among Council Offices in contemplating another ballot measure for the 2026 election cycle.  We would like to extend our interest and willingness in being part of that process. And, reflecting on the defeat of Measure 2R, we want to offer up a few suggestions and ideas for how a potential ballot measure might be most successful in Denver. 

First, we heard loud and clear from voters and councilmembers that they wished there had been more time for meaningful stakeholder and community feedback in the development of a plan for how funds raised by ballot measure would be spent.  In response to that, we offer the following framework for engagement:

• Convene affordable housing stakeholders early and often. We all appreciated the informational convening led by the Mayor’s Office and HOST in early April, where interest in a potential 2026 ballot measure was raised. We and many of our partners are hopeful that reconvening that group will happen soon and often, particularly as many of the organizations represented there are well-poised to inform and then help carry a successful initiative.

• Involve HOST’s Housing Stability Strategic Advisors (HSSA). Even as our organizations support councilmembers’ previously expressed interest in updating HSSA’s membership and role, we continue to see this body as a helpful resource to HOST and responsible for informing major housing decisions and plans. HSSA should be involved in the process of crafting a ballot initiative and part of any plan allocating new resources for affordable housing and housing stability. 

• Involve stakeholders adjacent to affordable housing. Affordable housing-focused organizations and HSSA members can support the City’s identification and engagement of individuals and organizations whose work intersects with housing accessibility and affordability. This includes renters and tenant advocates, residents and owners of mobile homes, legal aid and housing service providers, community health centers, neighborhood groups, education professionals, and foundations. 

• Engage Denver voters and communities. We strongly recommend that the administration and council offices proactively and directly understand the affordable housing needs and desires of Denver residents through surveys, newsletters, town halls, within existing city-initiated communications and efforts (e.g. DDPHE’s Community Health Improvement Plan), and in collaboration with community-based organizations ensure participation from historically underrepresented residents. The information gathered should be consistent, aggregable, and shared transparently as part of the decision-making process.

Second, many voters also indicated that they felt sales tax in Denver was becoming too high.  Particularly amid ongoing, significant financial uncertainty due to sweeping federal changes and cuts to public and safety-net programs, the Trump administration’s on-again, off-again tariff policies, ongoing upward pressure on inflation, and massive budget shortfalls at the state and local levels, we are concerned that a sales tax may not be the most sustainable or reliable source of funding.  While we would not rule it out as a funding source, we are committed to working with all of you to identify other potential revenue sources (or some combination thereof) that might be more palatable to voters and sustainable in the long-term. Alternate revenue sources could include (this list is not intended to be exhaustive, and we would welcome the opportunity to brainstorm further):

• Vacancy fees. Assessing a fee on rental units in the Denver market that are left vacant, with their rents unchanged for a minimum period of time, could bring in significant revenue for Denver.  Current reports indicate that there are more than 27k vacant units of rental housing in the city.  This approach is preferable than potentially taxing unoccupied second homes in Denver as there is less likely to be an abundance of such homes.  But both may merit exploration and have precedents across Colorado and the country. 

• Corporate head taxes. Particularly in light of the tax exemptions from which many corporations will now benefit under H.R. 1—and the nearly $1 billion-hole corporate tax changes alone have punched in the state budget—collecting funds from large corporate employers for every employee residing within Denver could be both a financially realistic source of new affordable housing revenues and a politically palatable tax for Denver voters.  

• Other bonding mechanisms. This year’s state legislative session yielded several new state funding mechanisms for housing, including allowing the state to buy up to $50 million in bonds issued by the Colorado Housing and Finance Authority (CHFA) at below-market rates. CHFA will in turn invest these bond proceeds into affordable homeownership. We encourage Denver to consider similarly creative bond opportunities—though would want to see revenue allowable for a range of investments in affordable housing and housing stability.  

• City-managed funds. State law also newly directs at least 20% of the state’s approximately $1.6 billion Public School Fund into community-serving investments, including housing. Critically, the law allows the treasurer to invest these state funds with below-market rates of return, enabling real affordability for residents who should ultimately benefit. We are interested in understanding whether Denver manages any similar funds where creative investment of uncommitted dollars could yield new revenue.

Third, voters, stakeholders, and councilmembers expressed concern over the lack of specificity in how and for whose benefit 2R revenue would be invested.  We therefore think it would be highly beneficial to craft a publicly accessible framework for how any new funds could be used; we believe that we made good strides toward such a framework in the Measure 2R process.  Our organizations are specifically committed to ensuring that any funds raised are directed at meeting our community’s greatest housing needs.  While the housing crisis is felt broadly by many Denverites, data consistently shows that that households living at 60% area median income (AMI) and below struggle the most to find housing and stay stably housed. This includes people trying to exit the cycle of homelessness.  Without significant investments of public funds, the private housing market simply cannot solve for this segment of the housing crisis. 

Therefore, we offer some of the following points as a framework for how any funds raised specifically to address the housing shortage in Denver could be used:

• We hope the compromise reached in Measure 2R specifying that for rental housing, funds would serve households living at 80% AMI and below would be maintained. We would continue to support exceptions for mixed-income developments or innovative housing pilot programs to go up to 100% AMI, so long as they also provide levels of immediate and long-term affordability for those living at 60% AMI and below and are aligned with community needs. 

• We believe that including language around the funds being used for “demonstrated community needs” does help direct the funds to those households most in need while allowing for some flexibility for specific projects. We understand City agencies are in the process of planning for and then implementing a comprehensive housing needs assessment, including a displacement risk assessment, and expect these timely efforts to further quantify and “demonstrate” Denver’s current housing gaps and needs. We are also sensitive to the fact that projects for specialized populations like seniors, veterans, families, etc. might require some additional flexibility.

• We also maintain that any future ordinance language, like Measure 2R, must ensure that any housing funded with resulting dollars will protect and provide long-term affordability within the community.

• We continue to support the general allowable uses provided in Measure 2R—affordable housing development, preservation, acquisitions, and conversions of properties primed to be affordable residential housing, and housing stability efforts—with a few adjustments that we would be happy to detail in further conversation.

Lastly, we would like to offer suggestions for ongoing oversight, transparency, and management of potential future revenue: 

• We continue to support and recommend that any future funds be administered by HOST through current programs that are working well, and we support HOST having the ability to appropriately staff up to meet the demands and goals of this fund. While it may be necessary to bring in other departments and/or experts to assist with new and creative financing tools or programs, we think that ensuring alignment of housing funding with current HOST goals and programs will be best achieved through HOST administration of new funds.
• In the event that sales tax is used as the funding mechanism, we recommend against bonding out these funds at least for the first few years.  Gap financing is urgently needed to get some projects underway and to preserve existing affordability the City cannot afford to lose. Affordable housing developers and providers need funds today for supportive services and housing vouchers.  Immediately bonding new revenues will significantly delay positive impacts and restrict the City’s ability to meaningfully address the housing affordability crisis.

We look forward to discussing this with you further and offer our organizations as ones that are willing to research ideas, explore issues and approaches, and assist with coordinating stakeholders.  Please let us know when a convenient time to meet in the coming weeks might be.

Sincerely,

/ss

Britta Fisher (President and CEO) and Cathy Alderman (Chief Communications and Public Policy Officer), Colorado Coalition for the Homeless

(bfisher@coloradocoalition.org and cathy.alderman@coloradocoalition.org)

Jennie Rodgers (Vice President) and Kinsey Hasstedt (Director, State and Local Policy), Enterprise Community Partners

(jrodgers@enterprisecommunity.org and khasstedt@enterprisecommunity.org)

Laura Brudzynski (Chief Executive Officer) and Katie McKenna (Housing Development Manager), Archway Communities

(laurab@arhwaycommunities.org and katiemckenna@arhwaycommunities.org)