What do Mayor Daniel Lurie, the Democratic Socialists of America, and the Howard Jarvis Taxpayers Association have in common? They all want to tweak transfer taxes.

San Francisco’s transfer tax, paid when real estate sells or changes ownership, has been a policy battleground for years. Progressives have called for increasing rates to raise revenue, while moderates argue that reducing them could jump-start housing construction. 

Experts say the reason so many people seem fixated on this boring tax is simple: It’s the rare tax over which cities have authority, and it’s politically popular, as most voters aren’t forced to pay it. 

Proposition 13 limits property tax increases to 2% per year, while sales taxes are regressive and can be unpopular. This means that when California cities are looking to raise revenue, they don’t have many alternatives.

“It’s a lack of options,” said tenant organizer Shanti Singh. “We can’t tax property reasonably in this state, and we can’t tax income locally, so a lot of San Francisco’s and other municipal economies’ services are funded through transfer and parcel taxes.” 

SF’s transfer tax revenue last fiscal year was nearly $300 million (opens in new tab).

Now, competing camps are angling to put measures in front of voters in November, or push them through the state legislature.

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Lurie and District 5 supervisor Bilal Mahmood on Thursday announced an effort to remove a transfer tax exemption for foreclosed properties. That means lenders and banks would be forced to pay when they sell large foreclosed apartment buildings and commercial buildings. Single-family homes and small multi-unit apartments would be exempt.

The announcement came less than a week after the mayor and Mahmood suspended a legislative effort to halve the transfer tax on properties worth more than $10 million, in part because of the hit to the city’s bottom line. It represents a bit of an about-face. Instead of cutting taxes, they are attempting to raise revenue by closing a loophole. 

“We’ve left billions of dollars on the table for years,” Mahmood said. Now, he and Lurie want to make sure financial institutions transacting off foreclosed property pay their fair share. It’s a way to raise revenue without squeezing the little guy: “This doesn’t affect families or struggling individuals,” Mahmood said. “This is only going to tax large institutions and corporate capital.”

Revenue from the tax would bankroll the recently expanded (opens in new tab) Housing Trust Fund, which aims to provide consistent public funding for affordable housing.

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But for some members of the San Francisco Democratic Socialists of America, that isn’t enough. They have revived a dormant effort to direct revenue from the 2020 Prop. I transfer tax increase to affordable housing and are racing to gather signatures to qualify the measure for the November ballot. 

“We expect to have enough to qualify well ahead of the deadline,” the group said Thursday in a statement. “A lot of voters we talk to on the street didn’t even know that the money they approved hasn’t been spent as they directed, so it’s a pretty straightforward argument.”

The effort has enlisted nearly 100 volunteers along with paid signature gatherers and has received endorsements from former supervisors Aaron Peskin and Dean Preston, among others. The group did not disclose how much it has spent on the effort. 

Mahmood, who doesn’t support that measure, believes putting two affordable housing measures on the same ballot makes it less likely that either will pass. UC Davis professor and YIMBY wonk Chris Elmendorf argues that the DSA proposal constrains city leaders’ ability to move around public money according to need.

“People really like voting for things that give money to good stuff without considering trade-offs,” Elmendorf said.

DSA SF said there is no conflict between the Housing Trust Fund measure and the transfer tax dedication measure. 

“Housing isn’t built overnight; it requires consistent investment to scale,” the group said, adding that the measures together would commit nearly $250 million per year to housing over a 15-year period.

While these local fights play out, Assemblymember Buffy Wicks, who represents the East Bay, is rumored to be working on an effort to standardize transfer taxes across the state. Wicks has not released any information about her plan and did not respond to interview requests, but sources suspect her effort is meant to head off the Howard Jarvis Taxpayers Association’s quest to cap cities’ ability to raise transfer taxes (opens in new tab). 

The anti-tax group’s measure, which will be on the November ballot, would also raise the vote threshold needed to pass ballot-initiative tax hikes from 50% to 66%. 

Singh, the tenant organizer, recognizes that transfer taxes are an inconsistent source of funding, but a lumpy stream of money is better than a dry one.

“We do what we can with what we’ve got,” she said.