If you have bought or sold real estate in and around San Francisco, you will probably be familiar with transfer taxes. Bay area counties levy these amounts when a home is sold according to its particular tax rate as part of the real estate transaction “closing costs.” The transfer tax amount is specific to each San Francisco area county, and some cities also have additional transfer taxes. Bay area property is already expensive, and transfer taxes can add a considerable sum to a real estate sale. These taxes could soon be twice as much for San Francisco commercial property priced or valued at $10 million or higher. Here is more on San Francisco’s proposed plan to double transfer taxes on real estate:
How do Transfer Taxes Work in San Francisco?
When you purchase real estate in San Francisco, you will be charged a one-time transfer tax by the city and county. Not all cities divide these costs between parties in the same way. In San Francisco, the property seller is typically responsible for the payment of the transfer tax. At the same time, buyers usually pay the recording, title, and insurance costs on the property.
San Francisco’s Real Estate Transfer Tax
In November, San Franciscans will see the real estate transfer tax on the ballot as Proposition I. The measure was proposed by San Francisco Supervisor Dean Preston and reportedly has “support from five other members of the San Francisco Board of Supervisors.” Voters will have to decide whether to double San Francisco’s real estate transfer tax on commercial real estate priced or valued at $10 million or more. Under Proposition I, the transfer rate would change from 2.75% to 5.5% on properties priced between $10 million and $24 million and from 3% to 6% on those sold for $25 million or more.
Arguments For and Against Prop I
According to a recent article, one of the reasons for the proposed tax increase is to deter post-COVID-19 speculative investment by opportunistic buyers. Another driving force behind the tax increase is to help fund the city’s pandemic-related financial recovery efforts. Proponents estimate that doubling the transfer tax rate could bring in an additional $150 million in revenue for the city.
Opponents argue that this action would raise San Francisco’s transfer tax rate to be the highest in the country. The feared net effect is that the city’s major businesses will move away from the area because of the increase and that other companies will avoid relocating their operations here because of the financial burden. Additionally, if the tax hike is imposed, there are worries that commercial property will be devalued as much as 3% to offset the expense. There are also concerns because the language of Proposition I would permit the Board of Supervisors to enact future ordinances “without future voter approval that will exempt rent-restricted affordable housing, as the Board may define that term,” from the transfer tax increase.
Contact the Law Office of Raffy Boulgourjian
Attorney Raffy Boulgourjian is a California real estate attorney with over twenty years of experience representing clients in residential and commercial real estate matters. He has the knowledge and expertise to protect your real estate interests. Contact Mr. Boulgourjian today to schedule a free legal consultation to discuss your California real estate legal needs.