San Francisco’s real estate prices are already some of the most expensive in the nation. Now high-dollar sales will be hit with more expensive transfer taxes following the passage of Proposition I.
The measure won by more than two-thirds of the vote. It faced steep opposition from local business and real estate industry groups as well as from some of the city's largest landlords, all of whom collectively spent more than $5.3 million in a failed attempt defeat it.
As approved, Proposition I will increase the property transfer tax for property sales priced between $10 million and $25 million from 2.75% to 5.5%. Properties sold for more than $25 million will be taxed 6%, double the current 3% rate. The transfer tax for sales priced less than $10 million ranges between 0.5% to as much as 2.25%.
Prop I, which is expected to bring in as much as $100 million annually, will reallocate funds to renters and assistance programs for small landlords.
Like many major cities, San Francisco has taken a severe beating due to the coronavirus-induced economic crises. Occupancy and rents have plummeted since the beginning of the year. The ultimate success of Prop 1 is dependent upon the commercial real estate market rebounding.
"It will really destroy the economy," Public Policy Director for the San Francisco Chamber of Commerce Jay Cheng told CoStar News. "Most of the property sales or transfers impacted by Prop I are housing developers buying vacant lots, not big commercial developments. This literally doubles someone's line item, and it will mean a lot of proposed projects will stall out."