An unoccupied home is a wasted asset in a typical market, according to new Realtor.com data and expert analyses—with homeowners continuing to pay property taxes, insurance, maintenance, utilities, and other services while equity is stuck and no rent is received. However, the recent research shows that in some areas, the math has begun to “bend the other way.”
According to a survey by Flock Homes, in some 49 metro areas, the expected tax hit from selling a house was greater than the modeled cost of keeping it unoccupied for at least five years. Before vacancy in Los Angeles becomes more costly than selling, holding fees would need to be incurred for almost 19 years.
Analysts suggest it’s a startling discovery for some because the reasoning goes against everything that a housing shortage should encourage: some owners may discover that selling results in a tax hit so significant that it makes more financial sense to hold onto an empty home—keeping properties out of circulation when the market needs them most—even though home prices are close to all-time highs and buyers are desperate for more listings.
“Everyone knows that we have a ‘stuck’ real estate market right now,” says Kimberly Schmidt, a real estate agent in San Diego—where it takes an estimated 14.5 years of holding costs before vacancy becomes more expensive than selling, according to Flock’s analysis. “We have 20% fewer homes on the market so far in 2026 than we did in 2025, and these long-term holds are most definitely part of the reason why.”
Additionally, some owners may have even more motivation to hold off now that tax reform is being discussed at both the federal and local levels.
Selling vs. Vacancy
Flock examines two distinct tax policies in his analysis: depreciation recapture and capital gains tax. But it’s crucial to remember that not all owners are subject to the same taxes.
The more well-known and widely applicable tax is the capital gains tax. When a property sells for more than the owner paid for it, this tax is applied to the owner’s profit. If they meet ownership and use standards, primary home sellers are protected from that hit by excluding up to $250,000 in gains if they are single or $500,000 if they are married and filing jointly.
However, as previously revealed by Realtor.com, those exclusions have not kept up with inflation, and as of right now, over 29 million households have more equity than the current single-filer exclusion protects. 56% of homes will surpass that cutoff by 2030.
Investment houses and second residences, however, do not receive the same treatment. Years of appreciation may be subject to federal capital gains taxes of up to 20% for these owners, in addition to any applicable state taxes and an additional net investment income tax for some sellers with higher incomes. Depreciation recapture might result in an increased tax burden for owners who used a home as a rental property and claimed depreciation.
Renters can lower their taxable rental income while they own the property by deducting a part of the building’s value each year to account for wear and tear. However, the IRS may use depreciation recapture to tax the depreciation that was previously claimed when they sell. Homeowners may be subject to tax rates as high as 25%, depending on their location and income level.
According to Flock’s research, those two obligations are combined into a single, harsh exit tax. The analysis explains why selling doesn’t always seem like cashing out for some owners, but it doesn’t imply that every owner would have the same burden or that every empty house is being retained for tax purposes.
To read the full report, click here.
