In a bid to create more affordable housing in San José and expand services to the city’s homeless, city council on Tuesday decided to ask voters to support a new tax on the city’s most expensive properties. .
Opponents, however, have criticized the proposed electoral measure, stressing that it offers voters little certainty that the money raised by the tax will in fact go to these goals.
In an 8-2 vote, the council agreed to move forward with a March 2020 voting measure for a new general tax on land transfers – a tax paid by the buyer, seller or shared between the two when a property is sold or transferred of ownership, with a few exceptions such as for inheritance.
Council members Johnny Khamis and Sergio Jimenez were both dissenters. City Councilor Dev Davis was absent.
If passed by a simple majority of voters in March, the tax will apply to properties valued at $ 2 million or more, which would consist primarily of commercial and industrial properties and only about 5% of residences. Staff will return on Dec. 3 for council to approve the draft voting metrics question.
A city-funded survey conducted by a research firm earlier this month found that at least 60% of San Jose voters polled would support the new real estate transfer tax, according to a staff memo.
While supporters of the tax applauded the city for finding a steady stream of funding for the homeless and housing shortages, opponents noted that the money raised could go to any projects for which members of the council decide to use it.
Unlike a bond measure, funds raised through the new transfer tax would go to the city’s general fund, and authorities could not legally restrict the use of the money.
Khamis told colleagues on Tuesday afternoon that he would support the measure if it were put on the ballot as a special tax rather than a general tax. However, his proposal was rejected.
“It sounds like we’re going to spend all this money on housing veterans and the homeless, but it’s a general tax,” he said. “It can – and most likely will – be spent on anything in the future.”
The majority of council members supported the general tax instead of a bond measure, as it requires the support of a smaller percentage of voters and the funds raised could be used for services and programs rather than just for construction and improvement of fixed assets.
“True fiscal responsibility is when you have excess money to spend and choose to spend it responsibly,” said board member Lan Diep. “It is rare to find a source of income like this, and given the situation in this city, I must approve the measure.”
Mayor Sam Liccardo said he would work with fellow council members to add a series of guarantees to ensure the money goes to housing, including several public hearings and a required two-thirds vote of council members to authorize the use of the money and a new sub-fund in the general fund so that the public can follow the money.
The tax would vary depending on the transfer value of a property – $ 3.75 per $ 500 for properties of $ 2-5 million, $ 5 per $ 500 for properties of $ 5-10 million, and 7 , $ 50 per $ 500 for properties valued over $ 10 million. For affected properties, the new tax would be in addition to the city’s existing land transfer tax, which is applied to properties at a rate of $ 3.30 per $ 1,000.
The city estimates that the new tax would generate up to $ 73 million per year and even $ 22 million during a year of recession.
Resident Tobin Gilman, who opposed the tax, said it was “misleading” to suggest that it would only affect 5% of property transfers because it ignores inflation.
“In 15 to 20 years, the median price of a home in San José will be $ 2 million, and that 5% figure will likely be 50% or more,” Gilman said. “So what you’re really considering here is whether or not you want to impose a tax today on future generations of first-time homebuyers and empty-nest seniors who might consider lowering their costs. workforce and put their house on the market. “
San Jose has struggled to find local cash flow for affordable housing since the state in 2011 ceased operation of redevelopment agencies – the largest continuing source of income for affordable housing in California.
As rents become increasingly inaccessible to working class residents and people are forced into their cars or onto the streets, calls for more affordable housing and homeless prevention services have multiplied.
The city aims to produce 10,000 new affordable apartments by 2023, but is only on track to build about a third. Over the past two years, the homeless population in San Jose has increased by 42%, affecting more than 6,000 residents in 2019, according to the Santa Clara County Point Count in 2019. More than two-thirds of those residents said the main reason they were on the streets and unable to pay their rent was job loss.
Adrienne Keel, director of programs at LGBTQ Youth Space, told council members that some of the young people she works with are forced to stay in toxic living conditions because they cannot pay rent in the city.
“It’s unrealistic that we are all tech employees, but I think there should be a place for all of us here,” Keel said at the meeting. “And I think the alternative message is if you’re not rich you’re not welcome here.”