San José to propose property transfer tax for March 2020

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With a dire shortage of affordable housing and homeless services in the area, San José plans to ask voters to support a new property tax on the city’s most expensive properties to deal with the crisis.

On Tuesday, city council will assess whether to ask residents in the March 2020 poll to support a real estate transfer tax – a tax paid by the buyer, seller, or shared between the two when selling a property. ownership or transfers of ownership, with a few exceptions. , as for an inheritance. The measure would apply to sales of properties valued at $ 2 million or more, which would be made up primarily of commercial and industrial properties and only about 5% of single-family homes, condominiums or townhouses.

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.

If San Jose council members decide to put the measure on the ballot and voters approve the new transfer tax, the city would join a handful of Bay Area cities such as San Francisco, Oakland. and Berkeley, which have implemented similar transfer taxes recently. year. The city estimates that this would generate around $ 70 million a year that would be used to help build more affordable housing and provide additional services and programs to the city’s thousands of homeless residents.

Michael Lane, deputy director of the housing advocacy nonprofit SV @ Home, described the tax as a “phased and targeted approach” that “invites businesses and the wealthy to be part of the solution.”

Since the state shut down the largest continuous source of income for affordable housing in California – known as redevelopment agencies – in 2011, San Jose has struggled to secure a flow of local and continuous cash flow to cover the annual shortfall of nearly $ 40 million.

“We’re late on this point,” Lane said. “This source will finally allow us to match the funding we lost almost a decade ago and create a strong pipeline to build affordable housing and tackle homelessness. “

This is the second time in as many years that voters will be asked to support a local funding model for affordable housing initiatives. In 2018, Measure V – a $ 450 million general obligation measure aimed at increasing the supply of affordable housing – failed by just two percent to secure the required two-thirds majority.

The proposed property tax will only require a simple majority to pass. But unlike a bond measure, funds raised through the tax would flow into the city’s general fund, and authorities could not legally restrict the use of the money – offering little certainty that the money will go. really affordable housing.

“There is no responsibility whatsoever,” said board member Johnny Khamis, who plans to vote against the measure. “It doesn’t matter what we put on the ballot. None of the money has to go to any of these things – and often doesn’t. “

Mayor Sam Liccardo, however, said he would work with the rest of the council to put in place a “series of procedural bumpers in the bowling alleys” to ensure that any attempt to divert money from initiatives for homeless people and housing “would face public scrutiny and procedural challenge.

These proposed “bumpers” would include multiple public hearings and would require a two-thirds vote of the board to authorize the use of the money as well as a new sub-fund within the general fund so that the public can follow. ‘money earned and how it’s used, Liccardo said.

“Opponents of any measure will give a thousand reasons why there is another better way, but the reality is that the cost of inaction is far too high in the midst of this crisis,” Liccardo said.

City staff looked for three options for raising additional funds for affordable housing and homeless efforts: a property tax only on commercial properties, a vacant property tax, and a real estate transfer tax. Ultimately, they felt the transfer tax would be the most efficient and lucrative option to get started quickly.

As the city’s homeless population continues to grow, the need for affordable housing is hard to ignore. Renters must earn $ 52 an hour – or $ 108,920 a year – to pay the monthly rent for a two-bedroom apartment of $ 2,723, according to the city’s latest housing market update. Over the past two years, the city’s homeless population has increased by 42%, from 4,350 in 2017 to 6,172 in 2019, according to the Santa Clara County point-in-time tally in 2019. More than two-thirds of homeless people interviewed cited their inability to pay their rent as the main reason they could not find housing.

The mayor and city council have set themselves the goal of producing 10,000 new affordable apartments and 15,000 market-priced homes by 2023. Yet the city is only on track to build about a third of affordable apartments. that she hopes.

“We know two things – we’re late to respond and it’s not enough,” said Jen Loving, CEO of Destination: Home, an organization that partners with city and county to house the homeless. . “So San José or any city that is looking for new ways to increase funding and resources to do more to respond to the crisis is really important. “

But not everyone is in favor of the proposed funding mechanism.

Pat Waite, president of Citizens for Fiscal Responsibility, said the city should first wait and see how the millions of dollars in affordable housing funding the city has received from the state and county in recent years before spending more money to the problem.

“The best thing the city can do is make it easier to build housing of all kinds,” Waite said. “I don’t think affordable housing is something the city should get into, but it can make it easier to build. “

The results of a city-commissioned survey this summer found that 59% of those polled said they would support a property tax measure, as well as a general obligation to provide housing for homeless residents.

If council approves the measure at its Tuesday meeting, staff will return on December 3 to approve the draft question on the ballot measure.

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