To Fund Affordable Food, San Francisco Looks to Tax Vacant Grocery Stores, Pharmacies

Some retail pharmacy chains and grocery stores that have closed in recent years still hold their leases, making it difficult for new businesses to fill the empty storefronts.

The measures, which could appear on the November ballot as two separate initiatives, would essentially create a vacancy tax on those empty storefronts to disincentivize large retailers from leaving behind what Supervisor Bilal Mahmood calls “zombie stores.”

“They hold the lease but won’t let anyone take it over, and they’re intentionally keeping it vacant to block competition,” said Mahmood, who represents the Tenderloin neighborhood, which has a dearth of grocery store options, and introduced the package of ordinances. “People have to drive across the city just to fill their prescriptions and seniors and families can’t walk to their neighborhood grocery store to get fresh produce.”

The vacancy tax would apply only to stores already operating in San Francisco, in an effort to keep existing stores open and not discourage new ones.

In addition to taxing large retail chains that leave their storefronts empty, the plan’s “abandoned pharmacy and grocery stimulus” would also create incentives through tax credits and streamlined permitting for grocery stores and pharmacies to move into empty properties.

Taxes collected on the vacant storefronts could go toward a new affordable grocery fund, which would also accept private donations if both measures pass. The fund would be intended for a variety of different affordability programs focused on healthy food.

One idea, inspired by a different program under New York Mayor Zohran Mamdani, is to use the funds to help the city buy vacant buildings and lease them to affordable grocers at below-market rents.

Another would be to revamp an earlier model that San Francisco utilized to help liquor stores convert into fresh grocery stores, called Healthy Retail SF, spearheaded by former supervisors Eric Mar, Jane Kim and Malia Cohen.

The program ran from 2017 to 2021, and exceeded its goals by recruiting and maintaining 12 stores that agreed to make the switch and carry healthier products, according to a 2021 analysis report.

That program was successful for Tenderloin business owners like Satwinder Multani. He previously ran a liquor store in the neighborhood, but now oversees Dalda’s Community Market, a fully stocked grocery store just around the corner from his previous location.

It took a few years to complete the transition, but he said it’s been worth the hassle. The business is doing well, and he can tell his store is filling a real need in the neighborhood for fresh produce.

“Our sales went up ever since we moved here. It took us a while, but now I think we are doing much better than when we had the smaller version. I see more families shopping here, and if people see something we are missing, they let us know.”

Anthony Partlow lives just up the block from Dalda’s. Once a month, he’ll travel by e-bike about 45 minutes to pick up certain meats and nonperishables from large grocery chains. But he goes to Dalda’s almost every day for fresh foods like lettuce and other basic items.

“It’s actually quite difficult to find fresh groceries in the area, and it’s expensive. This place is the only one I really trust as far as fresh produce goes,” he said, standing outside of Dalda’s. “It’s really hard to eat fresh if the stores aren’t providing fresh produce.”

Both he and the store owner said they’d welcome more grocery stores and pharmacies into the neighborhood. But the fund that spurred the kind of corner store transitions like Dalda’s has run dry.

“There’s a lot of successful models that we’ve seen, including some success over time, but either they’re underfunded or not supported by the city,” Mahmood said. “It’s time for the city to help accelerate what we’ve seen work well and resurrect the programs that worked well in the past, but we’re not supporting anymore.”

Mahmood hopes the measures will help more families access reasonably priced groceries by shrinking local food deserts, neighborhoods that lack access to affordable, nutritious food.

The Tenderloin is not the only part of the city experiencing disparities around healthy food options or lacking accessible places to fill a prescription. Empty pharmacy and grocery stores are scattered across neighborhoods like the Mission, Bayview, Fillmore and other areas.

In Sunnydale, a nonprofit organization and philanthropists are working to open a privately funded grocery store operated by Bi-Rite, an upscale grocer in San Francisco, that will sell fresh produce and other pantry goods at wholesale prices.

Mahmood said his vision is for the city to boost those kinds of efforts while promoting more affordable grocery options.

“Imagine if the city was funding a component of that to help it move along at an even more cost-effective rate,” he said.

The proposal has drawn early support from food justice groups in the city, such as Food and Agriculture Action Coalition Toward Sovereignty, and Farming Hope, as well as food and service unions like United Food and Commercial Workers and SEIU Local 87.

“San Francisco needs to seriously address food as part of its affordability crisis,” Andie Sobrepeña, co-executive director of Farming Hope, a culinary job training and food justice nonprofit, said in a statement. “The Affordable Grocery Act is a step forward to provide a solution to transform access to food in San Francisco.”

Co-sponsoring Supervisors Myrna Melgar, Stephen Sherrill, Chyanne Chen and Danny Sauter are also backing the plan, which the board will vote on in July. If passed, the ballot measures for the tax and fund would go before voters in November.