William Shakespeare excelled at many things, but marketing was not one of them. Of course “a rose by any other name would smell as sweet,” but it wouldn’t be as marketable.
The Bard was also no whiz at politics. Of note, he bequeathed his “second-best bed” to his widow.
In San Francisco, politics has, in large part, been subsumed by marketing. And that brings us to the ingeniously marketed “BUILD Act,” which Mayor Daniel Lurie, Supervisor Bilal Mahmood and the Building Trades tell us is a Balanced Update to Incentivize Local Development.
You know all those multifamily housing developments that aren’t being built and all those downtown offices sitting empty?
The BUILD Act would purport to fix this by cutting the taxes sellers of real estate must pay when properties worth more than $10 million — big apartments, office buildings, ostentatious mansions — change hands.
That would roll back Proposition I of 2020, which doubled that rate.
Some 58 percent of voters six years ago went for Prop. I, in part because its backers, also, deployed damn good marketing.
Did you know that Donald Trump is a part-owner of the Bank of America building? Would you like to sock him with a bigger tax bill when that building changes hands? For San Francisco voters, that smelled pretty sweet.
Conversely, Would you like to give Donald Trump a tax break? is bad marketing in this city. But that’s just what the BUILD Act would do.
Oof. That’s when you know you need to come up with a really killer acronym.
Is the BUILD Act a bad idea? Objectively no, at least not in the way that driving on the railroad tracks is a bad idea.
There are sound claims to be made that the city’s present approach to taxing large real-estate transactions is suboptimal or even counterproductive.
Ted Chandler, the senior adviser to the AFL-CIO housing investment trust fund — which has put hundreds of millions of dollars into developing more than 1,000 units in the city — sums it up well: “San Francisco is not in the position to impose materially different taxes than the surrounding area.”
Indeed, San Francisco’s transfer taxes were on the high end even before we doubled them. And, with more than a third of our offices downtown now sitting vacant and residential construction stalled, we can’t be as reflexively demanding as we once were.
Still, you’d think there’s a middle ground between “Richie Rich can afford it, no matter what the city economist says” and the BUILD Act’s Reaganesque Field of Dreams “lower the tax, and more investment will come.”
The BUILD Act, as its (killer acronym) name implies, is ostensibly about building.
But it does not actually require the building of anything. If a giant office tower or apartment complex changes hands and no housing is added, no work is done and the structure continues serving its prior purpose, the seller still would get a tax break.
Our specific questions to the mayor’s office and legislative quarterback Supervisor Bilal Mahmood regarding why the BUILD Act was not more narrowly tailored to apply to the building of things the city so ardently desires did not receive straightforward answers. Fine.
But that won’t be an option when the BUILD Act is, at a to-be-determined date, debated before the Board of Supervisors.
Expect legislators to ask questions about why it’s a good idea to keep these tax breaks broader instead of narrower, leaving revenue uncollected during famine times.
But expect more than questions: Legislators could potentially introduce amendments moving to limit the scope of the tax breaks.
That would force BUILD Act proponents to explain why a local tax break marketed as a golden spigot that will pour out housing and union jobs does not contain any stipulations for these ostensibly desirable things.
Would rolling back taxes help dispel the vibe among buyers and sellers of large real-estate properties that San Francisco is “anti-business?” It could certainly help.
But the problem with vibes-based governing is that you can’t quantify anything. But you can certainly quantify the haul of Prop. I. Since its enactment in January 2021, it has amassed more than $500 million for the city general fund.
The controller predicts that eliminating it would blow a $400 million hole in the city’s general fund over the next four years.
Mahmood pledges that this won’t happen. He says he’s promised public-sector unions — which are sensitive about revenue reductions, that, by their nature, trigger job reductions — that this tax break will be revenue-neutral.
A spokesperson for the controller’s office confirms that it’s plugging and chugging numbers, but nothing is yet complete. Mahmood said he expects the tax cut to lead to a 20-percent spike in real-estate transactions.
But that alone won’t offset the tax breaks, so Mahmood is working on a November ballot measure to repeal tax exemptions on foreclosure sales. Between these two, he anticipates revenue neutrality.
Now, there are a lot of moving parts here. And modeling is harder to do now, because the ebbs and flows of earlier real estate investment never resembled today’s post-COVID, post-everybody-works-from-home-in-their-pajamas, post-AI world.
But is it realistic to expect that slashing the transfer tax — one of many issues real-estate buyers and sellers must deal with on the municipal, state, federal and global levels — will lead to one-fifth more transactions?
The smart people I talk to say that it is realistic — but on the optimistic end of realistic. They also say that the city would reap more money by establishing taxes on foreclosure sales than it would by cutting transfer taxes to encourage big real-estate transactions.
This has the makings of an intriguing future discussion at the Board of Supervisors. Because, naturally, a less sweeping tax break would be easier to sell as “revenue-neutral.”
San Francisco, alas, has entered an era of permanent deficits — and, in this town, the notion of handing tax cuts to the extremely wealthy has never been an intuitive or easy sell. It could be even tougher after June 1, when the mayor’s preliminary budget may spark a fiscal bloodletting rivaling the last scene of “Hamlet.”
If the labor-backed Prop. D loses on June 2, and some $300 million fails to materialize for the city’s general fund, the notion of giving hefty tax breaks to anyone, let alone the wealthy, becomes that much harder to countenance.
It may take more than marketing to push the BUILD Act over the finish line. Perhaps, if matters go truly sideways, someone will call it the CRAP Act: Capital Requires a Prize.
They can’t all be killer acronyms.
It’s a shame that this doesn’t mention the effort currently underway to preserve Prop I and strengthen it by legally dedicating the funds to affordable housing and tenant eviction defense! Many people will probably be aware that there is a petition currently circulating for affordable housing, and this is that! It’s called the San Francisco Affordable Housing Guarantee Act and you can read about it/get involved here: https://sfsocialhousing.org/guarantee-act?source=missionlocal
I do not think that we should give any more funding to affordable housing nonprofits until there is a commission overseeing the allocation of scarce affordable housing dollars so that allocations are done in open session under sunshine, not wrangled behind the scenes.
The San Francisco Affordable Housing Guarantee Act will fund both traditional affordable housing, and an alternative model of affordable housing: a municipal Social Housing Program. The municipal program will be ran by the city, not non-profits.
We kind of don’t have a choice. The affordable housing developers are notoriously corrupt and wasteful but the city refuses to build public housing even though that would be the best way to provide housing to the most vulnerable.
It is up to us to organize to change that. Nonprofits have made such a mess of the Mission that there are half a dozen or so nodes of organizing going on right now.
When we unify them into a pan Mission organization, we will be able to bring power to the table to challenge nonprofit dominance here.
I would think it would be more of a priority for the Mayor and Supe Mahmood to find a way to incentivize property owners to fill the office buildings we already have with workers as wells as filling vacant retail spaces with businesses. It is historic, and off the charts how long these spaces have remained vacant. It hurts the entire city in all kinds of ways… and yet the band plays on.
I don’t complain when I pay an 8.625% sales tax on a used pair of jeans from Community Thrift. But we hear no end of complaints from downtown landlords about paying a 5.5% to 6% sales tax when they buy a used skyscraper. Why can’t landlords pay their fair share too? Why is the second one the tax that City Hall is trying to cut?
Voters approved Prop I in 2020 with the intent to spend these funds on affordable housing and rent relief. There are just two problems. One, politicians have diverted about $300m of the $500m raised so far to other things than affordable housing, exploiting the lack of a legally binding requirement to fund housing. Two, Lurie and Mahmood are now trying to repeal it entirely, as this column discusses. But there’s a ballot measure that will fix both problems. Help us get the Affordable Housing Guarantee Act onto the ballot to protect voters’ intent to tax rich real estate investors to fund affordable housing: https://fairhousingsf.com/
If costs are such that no one is ‘spending’ (building) then reevaluating the tax is worth looking at. The tax represents $33k in overhead per unit and if construction is at a standstill, 6% of ~0 brings in less than a lower rate multiplying a higher quantity.
Maybe “costs” aren’t the reason the skyline isn’t plastered with cranes, but rather it’s the still historically-high vacancy rates (i.e. lack of demand at the current asking prices)?
rents are going up again in SF as vacancy rates plummet and exorbitant “mansion” transfer taxes on apartment buildings, along with onerous inclusionary requirements and development impact fees have brought new housing creation to a standstill — but OK.
If construction is at a standstill, then if the transfer tax is the line between “pencils” and “does not pencil,” then the project has other, bigger problems.
Transfer taxes are paid by sellers, not buyers in California.
You da best, kid,
Been loving your writing for neigh on a quarter century now.
SF Land talk always reminds me of a work by Einstein’s favorite writer on the topic who was, in fact, a San Franciscan.
This guy said that the City should buy every piece of property it could and put the dirt itself into a kind of Land Bank.
Like that kid in the nuclear war poster, I didn’t understand what he said but I believed him deeply.
Take the land itself out of the Speculation sphere.
Ask Supervisor Fielder, whose name comes from fields ? or, whatever, she is the local Front for SF’s Land Trust force which has, I think, over the hundred years or so since Henry George wrote ‘Progress and Poverty’ purchased a grand total of a half dozen buildings cause there are great forces such as you write about here who love to speculate in SF soil.
Is that convoluted enough ?
Problem is, we’re just living in an area that is way too popular due mostly to where we are situated on the globe which gives us great weather and water and then on the Social side there’s Sex and Drugs and Rock n Roll and Harvey Milk and Janis Joplin and the Dead and the views are to die for and many have.
I’ll look for Mahmood’s ‘Crap’ legislation and vote against it cause of this piece.
go Niners !!
h.
CLT has 174 homes across 17 properties. Fielder is most closely tied to the affordable housing development nonprofits that build new housing construction more than acquisition of existing and maintenance.
The CLT and Social Housing are hybrid models that can acquire existing units for conservation as permanently affordable, stabilizing families at risk of eviction or can build new housing. It is much more efficient to acquire existing housing for conservation as affordable than to build new.
The housing developer nonprofits see acquisition in cutting into affordable housing dollars that they view as their private property for new construction. The Rube Goldberg machine of new affordable construction is tough to make work, which is why we in general see a new building every 5 years or so. There is no way that can come close to scaling.
For the modest playwright who left generations richer for having once lived, Mr. Eskenazi’s assessment of Shakespeare’s marketing skills had me wondering about the strength of his political skills.
I turned to Socialism AI (https://ai.wsws.org/en) to query:
“What lessons about politics, specifically, can be learned from studying the works of Shakespeare?”
Its answer in brief:
1. Power Corrupts and Deceives — and the Powerful Are Deceived First
2. Authority Is Arbitrary — “Which Is the Justice, Which Is the Thief?”
3. The Poor Are Not Invisible — They Are the Foundation of the World
4. The Oppressed Have Every Right to Assert Their Humanity
5. Tyranny and Illegitimate Power Undermine Themselves
6. History Is Not Made by Great Men Alone
Finally it notes that while in some circles today he is under attack, Shakespeare still teaches us, in the deepest sense, lessons about the nature of class society itself — its violence, its mystifications, its cruelty, and the humanity that persists beneath it.
That is why they remain urgently relevant.
It doesn’t matter that it’s just a tax break, it’s got the word BUILD, so the yimby people will just vote for it regardless of the facts.
The transfer tax increase and the efforts to roll it back are not about ideal resident-centered public policy, they are about a tug of war catering to the moneyed interests at CCHO and of private developers.
These two interests share one thing in common: they both view existing residents and our neighborhoods as problems that need to be suppressed and solved.
A pox on both of their self serving houses!
Sorry, you lost me at “the moneyed interests at CCHO.”
Luis Granados: $424,000/yr
Sam Moss: $314,000/yr
John Elberling: $314,000/yr
These are 2020 figures. CCHO, along with public sector labor, are the moneyed interests, those with economic business before the government, that leverage that economic advantage to dominate Mission District politics.
They’ve made such a mess of our neighborhood that I believe that dominance and contempt for residents is spurring existential challenge.
Meanwhile, Connie Chan has Willie Brown on her side.
2024 figures, not 2020. Granados made $363 in 2020. 8% raises for poverty charity executive directors each year is the problem here. We’re going to have to pry this from their cold, politically nonviolently dead fingers.
If you taxed people at 150% of their incomes, then lowered the rate to 120%, that would also be a massive tax break.
SF and CA have deficit problems not due to revenues, but to expenses. Deal with the cost side first, or watch the top line go to Texas, Florida and Nevada. Please don’t wave bye-bye.
Apparently SF unions looked at high costs, struggling retail, and closed businesses and said: you know what would make this worse? A CEO tax, which is really a second gross receipts tax tied to executive pay ratios rather than a direct tax on CEOs. Businesses will pass costs on to consumers, resulting in higher prices for groceries, retail, and services, as well as potential job losses and broader economic drag over time. The damage caused during COVID wasn’t enough—let’s do it all over again!
You’re commenting on the wrong article. Your comment appears to be about the proposed Overpaid CEO tax on the June ballot, Prop D. This column is about the already existing transfer tax on sales of high-valued real estate properties. Before getting into your dubious claims about the former, the comment is simply offtopic.
I like the ceo tax because it gives our small businesses a fighting chance against these mega billionaire corporations!