San Francisco Grocery Tax Stalls as Incentive Plan Advances
San Francisco’s proposed grocery tax on certain vacant former supermarkets and pharmacies has lost part of its ballot package, while the tax measure itself remains pending. Supervisor Bilal Mahmood is shifting attention toward fee waivers, healthy-retail support, and zoning incentives. The outcome could shape grocery access in neighborhoods affected by major store closures.
Key Takeaways
- San Francisco’s proposed Affordable Grocery Fund was listed as killed on July 20, 2026.
- The separate vacancy-tax proposal remained pending, with a Board of Supervisors hearing scheduled for July 21.
- The tax would apply to certain properties formerly used by chain grocery stores or pharmacies, not to purchases at checkout.
- The proposed rates would begin at $3 per square foot and increase for properties left vacant in consecutive years.
- Mahmood’s revised approach focuses on permit-fee relief, healthy-food retail programs, and developments that include grocery space.
San Francisco’s grocery tax proposal has entered a narrower and more uncertain phase after one part of the Affordable Groceries Act failed to move forward.
The original package included two separate measures. One would have established a city fund supporting access to affordable and nutritious food. The other would impose an excise tax on certain properties formerly occupied by chain supermarkets or pharmacies and then left vacant or converted to another use.
City legislative records show that the Affordable Grocery Fund measure was killed on July 20. The grocery tax proposal remained officially pending, with a Committee of the Whole hearing scheduled for July 21.
That distinction matters because the proposal has not resulted in a tax on groceries purchased by consumers. The measure targets qualifying owners or lessees of former grocery and pharmacy properties rather than shoppers or active neighborhood markets.
The Grocery Tax Faces a Narrower Ballot Path
The proposed grocery tax was designed for properties whose last qualifying use was as a formula retail grocery store or pharmacy for at least 365 consecutive days. The former store or pharmacy must have operated at the location on or after January 1, 2017.
Under the filed measure, a property would be treated as vacant when it remained unoccupied, uninhabited, or unused for more than 182 days during a tax year.
The proposed charge would begin at $3 per square foot of lot area during the first year of vacancy. It would rise to $5 per square foot in the second consecutive year and $10 per square foot in each later year.
A separate one-time charge of $5 per square foot could apply when a covered property was used for something other than a grocery store or pharmacy for more than half of the year.
The measure included several forms of temporary relief. Receiving a qualifying construction or rehabilitation permit could stop days from counting toward vacancy for three years. Properties severely damaged by a natural disaster could receive a two-year exclusion.
A new owner or tenant who certified plans to reopen a grocery store or pharmacy could also receive an exemption covering the acquisition year and the following two tax years. Certain nonprofit organizations would not be subject to the charge.
Revenue from the tax would be deposited into San Francisco’s General Fund. It would not automatically be restricted to grocery programs, although the Board of Supervisors could direct money toward food-access initiatives through the city budget.
The original package sought to place both measures before voters on November 3, 2026. The fund’s removal and the grocery tax measure’s pending status have left that ballot strategy uncertain.
The Incentive Plan Shifts Toward Store Openings
Mahmood has also outlined a different approach that would rely on legislation approved by the Board of Supervisors rather than a voter-approved ballot package.
The revised strategy focuses on reducing the cost and administrative difficulty of opening grocery stores in neighborhoods with limited access to full-service markets.
One component would restore support for Healthy Retail SF, a program that helped small neighborhood stores add fresh produce and healthier products. The program operated from 2017 through 2021 and worked with 12 stores, according to a program analysis cited by KQED.
“It’s time for the city to help accelerate what we’ve seen work well,” Mahmood told KQED while discussing earlier healthy-retail programs.
Another proposal would waive certain building and permit fees for qualifying grocery operators. Mahmood’s office estimated that the relief could reduce startup expenses by approximately $50,000 to $80,000 for an eligible location.
The plan could also provide support for construction and interior improvements needed to convert existing commercial spaces into functioning grocery stores. Supermarkets often require refrigeration equipment, loading areas, storage capacity, food-preparation facilities, and electrical systems that standard retail spaces do not have.
A third proposal would create zoning incentives for residential developments that include grocery stores on the ground floor. The concept draws from programs that allow additional development capacity when projects provide qualifying neighborhood food retail.
The approach could be relevant to areas working to fill long-empty storefronts. Recent activity around Mid-Market retail vacancies has shown how new commercial uses can return activity to corridors affected by business closures and reduced foot traffic.
The final form of the incentive package will depend on legislation submitted to the board, available city funding, eligibility standards, and reviews by the departments responsible for planning, permits, and economic development.
Store Closures Keep Food Access at the Center
The policy debate follows several prominent grocery closures across San Francisco, including Safeway in the Fillmore, Whole Foods in Mid-Market, and Lucky in Bayview.
A supermarket closure can create challenges beyond the loss of a single retailer. Large grocery properties often have specialized layouts, parking arrangements, loading facilities, lease conditions, and utility systems that make them difficult to divide or lease to smaller businesses.
Those complications can leave former supermarkets vacant for extended periods, particularly when a replacement grocery operator is not prepared to take over the entire property.
The closures have also renewed attention on food access. KQED reported that nearly one-third of San Franciscans living below the poverty line were food insecure, citing a 2024 report from the city’s Food Security Task Force. Nearly 110,000 residents were using CalFresh at the time of the report.
Similar pressures have been documented across the region as higher household expenses increase demand for assistance. Reports on Bay Area food insecurity have highlighted longer food-distribution lines and growing reliance on local support organizations.
Frequently Asked Questions
Is the Grocery Tax a Tax on Food Purchases?
No. The proposed grocery tax would apply to certain owners or lessees of properties formerly used by chain grocery stores or pharmacies. It would not be added to a shopper’s receipt or charged to an operating grocery store solely because it sells food.
What Happened to the Affordable Groceries Act?
The proposed Affordable Grocery Fund was listed as killed on July 20, 2026. The separate vacancy-tax measure remained pending committee action, with a Board of Supervisors hearing scheduled for July 21.
How Much Would the Vacancy Tax Charge?
The proposed rate would be $3 per square foot during the first year a covered property qualified as vacant. It would rise to $5 in the second year and $10 per square foot in later consecutive years.
What Does the Incentive Plan Include?
The developing plan includes reviving healthy-retail assistance, waiving certain fees for grocery stores in underserved areas, and supporting housing projects that include ground-floor grocery space. The measures would still require formal legislation, review, and approval before taking effect.
When Could the Proposed Tax Begin?
The filed measure states that the tax would begin in the 2027 tax year if it receives the required approvals and reaches voters. Its placement on the November 3, 2026, ballot had not been finalized at the time of review.
