Why a Punitive New Tax on Housing is Not the Answer

On November 4th voters in San Francisco will be asked to vote Yes or No on Proposition G.

Prop. G imposes an additional 14 – 24% tax on residential properties with 2 – 30 units and single-family homes with in-law units, if they are sold within 5 years of ownership. The tax applies to the entire sale price of the property and is in addition to the existing transfer tax that is applied to residential property.

Who is Impacted by Prop G?

This tax is levied if you sell your affected home or property within five years of purchase. Since the average home turns over every seven years, this tax could affect thousands of San Franciscans.

Additionally, because the measure applies to properties with 2 – 30 units and fails to provide specific protections for homes with secondary units, an estimated 30,000 to 50,000 single-family homes with in-law units will be affected.

Prop. G will devastate everyday homeowners who face real-life emergencies and unexpected difficulties. The tax makes no exemptions for circumstances such as job loss, job transfer, death in the family, sale to a family member or financial hardship. If a homeowner loses their job and is forced to sell their home, this measure will force them to pay up to 24% or more in housing taxes.

Why Prop G Is Not the Answer?

As we are all aware, San Francisco is facing a major housing crisis. Tight supply and increased demand have resulted in some of the highest real estate prices in the nation.

Unfortunately adding an additional tax to the cost of housing makes no sense. While current owners will absorb some of these costs, much of it will be passed on to new renters and new owners. In the end, middle-class renters and homebuyers will pay for the housing tax.

Proponents of Prop G claim that the measure will prevent evictions of long-term tenants.

However, because of political backroom deals or simple ignorance, this measure leaves out over 40,000 residents in buildings with 30 or more units. If it is a good idea for some, why not all? We need smart policies, not backroom deals or last minute slip ups.

Another goal of Prop G is to utilize the funds collected through the transfer tax to fund affordable housing in San Francisco. The problem is, none of the revenue raised from Prop G is guaranteed to go towards affordable housing. It can all be diverted to other uses.

The Solution

We need to bring all parties to the table to create thoughtful solutions that create more housing of all types and protect tenants from eviction.

Let’s call on our elected officials do come together to create long-lasting solutions where everyone’s voice is heard.

I encourage you to Vote No on Prop G on November 4th.

A punitive new tax on housing is certainly not the answer to San Francisco’s housing challenges. We need thoughtful solutions that create more housing of all types, not a poorly crafted measure that levies a new tax on housing and yet, provides no guarantees that any of the revenue raised will go to new affordable housing or any housing at all.

NO on G | WE NEED MORE HOUSING, NOT LESS

We need to bring more housing onto the market. But this measure creates an immediate incentive for homeowners to take secondary units, commonly known as in-law units, off the market or face a tax that could be $240,000 (or more) when they sell their properties.

NO on G | A MASSIVE NEW CHARGE WILL NOT LOWER HOUSING COSTS

San Francisco is facing a major housing crisis, but imposing an additional tax that makes housing more expensive makes no sense. While current owners will absorb some of these costs, much of it will be passed on to new renters and new owners. In the end, middle-class renters and homebuyers will pay for the 24% housing tax.

NO on G | POORLY CRAFTED OR OVERTLY POLITICAL

NO on G | READ THE HISTORY

Proponents say Supervisor Harvey Milk first proposed this idea. That is misleading. The measure Milk proposed only levied a fee on profits gained by owners, not on the sales price. Milk’s measure exempted the up to 50,000 single-family homes with a secondary (in-law) unit. He also exempted any owner over 63, understanding that many seniors use their homes as retirement nest eggs.

NO on G | TENS OF THOUSANDS WILL BE AFFECTED

This tax is levied if you sell your home or property within 5 years of purchase. Since the average home turns over every 7 years, this tax will affect tens of thousands of San Franciscans.

NO on G | NO PROTECTIONS FOR EMERGENCIES

Prop. G will devastate everyday homeowners who face real-life emergencies and unexpected difficulties. The tax makes no exemptions for circumstances such as job loss, job transfer, death in the family, sale to a family member or financial hardship. In the event of a person who loses their job and is forced to sell their home, this measure will force you to pay up to 24% in housing taxes.

San Francisco currently collects a “transfer tax” on sales of most real property in the city. The tax rate is based on the amount for which the property is sold. The lowest tax rate is 0.5% for property sold for $250,000 or less. The highest tax rate is 2.5%, for property sold for $10,000,000 or more.

Prop. G imposes an additional 14 – 24% tax on residential properties with 2 – 30 units and single-family homes with in-law units, if they are sold within 5 years of ownership. The tax applies to the entire sale price of the property and is in addition to the existing transfer tax that is applied to residential property.

THE TABLE BELOW SHOWS THE TAX RATE THAT WOULD APPLY:

LENGTH OF OWNERSHIP - TAX RATE

One Year and Less - 22%

One to Two Years - 20%

Two to Three Years - 18%

Three to Four Years - 18%

Four to Five Years - 14%

Prop. G would not apply in the following circumstances: single-family home with no in-law unit; the property contains more than 30 residential units; the owner of the property has used it as a primary residence for 12 consecutive months immediately before the sale; sale at a loss; sale within one year of property owner’s death; property is deed-restricted affordable housing; property is new construction; property contains no more than two dwelling units and the seller applied on or before July 1st, 2014 for a building permit for a project with a total construction cost of $500,000 or more, and last permit was issued no more than a year before the sale of the property.

 

Kelly Kang

Sotheby's International Realty, 117 Greenwich St., San Francisco, United States

My Background: As a former litigation attorney, I love counseling clients through a complicated process. And in this local real estate market, buying or selling your home could be a full-time job. As a busy professional, you’ll need an informed partner to help you through the process. From drawing up a personalized plan to celebrating the close, I will be with you every step of the way. As a previous Director of the San Francisco Association of Realtors’ Board, I am actively involved in the fast-paced San Francisco real estate market. I have an intimate knowledge of the City. Along with my background as an attorney and real estate investor, I am an agent who knows exactly how to find you your dream home and I will work hard to help you get it. My clients trust me to be their greatest advocate, whether I’m keeping them safe from the fine print or aggressively negotiating on their behalf. And when I’m not at the office: You can find me at the climbing gym on Crissy Field or climbing granite outdoors weekends with my husband and our puppy, Gracie. I love San Francisco and would love to share my love of this City with you.