Op-Ed | Vacancy Rates Don’t Prove We Have Enough Housing—They Prove We Don’t

In the ever-polarized debate over California’s housing crisis, one argument keeps resurfacing: that because some cities have higher-than-average vacancy rates, we must not have a housing shortage. This idea—pushed recently by critics citing a San Francisco Federal Reserve study—is both dangerously misleading and rooted in a fundamental misunderstanding of how our housing system works.

San Francisco’s 8.7% vacancy rate and Santa Monica’s 9.5% are indeed above the so-called “economically healthy” rate of around 5%. But this doesn’t mean we’re overbuilding. It doesn’t mean the supply problem has been solved. It means something far more troubling: our housing system is no longer governed by shelter needs—it’s governed by financial speculation.

Vacant homes in cities like San Francisco aren’t empty because they’re unneeded. They’re empty because they’ve been purchased as investment assets, used as short-term rentals, or held vacant in anticipation of higher future profits. These units exist in the market—but not in the real housing economy that working people actually live in.

Speculative Vacancy Is Not a Sign of Surplus—It’s a Symptom of Financialization

To argue that a 9% vacancy rate means we have a housing surplus is like arguing that food waste in grocery stores means we don’t have a hunger problem. It confuses distribution with availability. And it ignores the structural incentives that lead developers, hedge funds, and landlords to under-utilize housing in the name of maximizing return on investment.

Economists have a term for this: “speculative vacancy.” It’s when housing is built, bought, or held not to meet human need, but to serve as a vehicle for wealth storage and extraction. In high-demand cities, this can include:

• Luxury condos that sit empty as investment shells.
  
• Rent-controlled units kept off-market until prices rise.
  
• Short-term rentals displacing long-term tenants.
  

None of these scenarios reflect housing abundance. They reflect a housing asset bubble—and they thrive precisely because of scarcity.

Vacancy Is a Lagging Indicator—Supply Matters Long-Term

The commenter who claimed “supply is not the issue” cited the San Francisco Fed study without noting that its authors did not conclude that supply was irrelevant. In fact, most economists—including at the Fed—agree that increasing the supply of housing, especially in high-opportunity areas, helps moderate prices over time.

Vacancy rates can fluctuate in the short term based on many factors: new construction coming online, seasonal markets, or pandemic-era shifts in housing demand. But the long-term correlation between tight supply and high rents remains clear. Cities that build more—at all income levels—consistently show slower rent growth and less displacement than those that don’t.

It’s also important to recognize that “healthy” vacancy rates vary depending on market context. In ultra-constrained cities like San Francisco, a 9% rate doesn’t reflect a glut of housing—it reflects a distorted market where too many people are priced out, and too much housing is hoarded.

Subsidized Housing Alone Isn’t Enough—We Need Supply at All Levels

To be clear, subsidized affordable housing is essential. But it’s not a substitute for overall housing abundance. California’s affordability crisis didn’t start because we built too much—it started because we didn’t build enough of the right kinds of housing in the right places.

As California YIMBY and other experts have argued, we need both public investment and private production—especially in starter homes, missing-middle housing, and infill development near jobs, transit, and schools.

The idea that new housing “sits empty” while people sleep on the streets makes for compelling rhetoric. But it’s not new construction causing homelessness—it’s exclusionary zoning, land speculation, and decades of underbuilding. A recent analysis from UCLA’s Lewis Center found that every additional market-rate home built in California helps reduce displacement pressure in surrounding areas—especially when built in high-cost cities.

The Real Divide: Shelter vs. Speculation

What California faces is not simply a shortage of units, but a misalignment between housing policy and human need. Our laws, financial systems, and tax codes incentivize the hoarding of housing, the flipping of homes, and the commodification of shelter.

So when we talk about vacancy, the question isn’t just how many homes are empty—it’s why.

Are they vacant because we’ve met everyone’s needs? Or are they vacant because our housing stock is being treated as a hedge fund portfolio, rather than a basic human necessity?

A Path Forward

To address this crisis, we need to do more than build—we need to reclaim housing as a public good. That means:

• Enforcing vacancy taxes to disincentivize speculation.
  
• Expanding tenant protections and permanent affordability programs.
  
• Upzoning exclusionary communities to allow for more equitable growth.
  
• Subsidizing deeply affordable and supportive housing for those with the greatest need.
  
• And yes—building more housing at every level of the market, especially in high-opportunity cities.
  

Vacancy statistics don’t tell us the full story. But when read in context, they do tell us this: California’s housing crisis is not the result of too much supply—it’s the result of a system where homes are treated as investments, not shelter.

Until we fix that, high vacancy rates will coexist with unaffordability. And no amount of wishful thinking will make that contradiction go away.

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