Supervisor Bilal Mahmood and Mayor Daniel Lurie are pausing their plan to halve the city’s transfer tax on sales of multi-million dollar properties, Mission Local has learned.
Mahmood said he recognizes San Francisco is in a budget crisis, and he and the mayor are “shifting focus” to find new revenue streams for the city. “Until that is resolved we are not proceeding,” Mahmood said.
The idea behind the proposal was to stimulate housing development and provide jobs for union construction workers, but the so-called BUILD Act raised concerns because even sellers of properties of $10 million or more that provided no new housing or construction work would have received a hefty tax break.
A controller’s office report from March estimates that the city’s present tax rate would raise some $400 million for the general fund in the next few years, critical income for the city amid a massive budget deficit that has already resulted in widespread cuts to jobs and services.
The mayor and Mahmood were proposing to halve that tax.
The BUILD Act would have slashed the transfer tax rate put in place by Proposition I in 2020: Taxes would drop from 5.75 percent to 2.75 percent for properties worth over $10 million, and from 6 percent to 3 percent for those over $25 million. Prop. I, which increased those rates to where they are today, was a major achievement of Mahmood’s predecessor, former District 5 Supervisor Dean Preston, and passed with 58 percent of the vote.
Mahmood says he pledged city labor that he would not proceed with the tax break unless he could make it revenue neutral. To do so, Mahmood and Lurie had promised a November ballot measure to apply the tax to certain properties, namely foreclosures, that are currently exempt from the existing transfer tax. Mahmood would not comment on whether that ballot proposition is still planned for November.
“From my perspective this is still generally good policy,” Mahmood said, but added that he hopes to develop a plan with more universal support.
Mahmood also said that separate legislative efforts to generate housing have been encouraging in the months since the BUILD Act was first proposed in February, like the expansion of the Housing Trust Fund and reductions to the inclusionary housing requirements, rendering the need for the BUILD Act less urgent.
The change in direction comes days after Mahmood told Mission Local at an event last week that he was open to paring back the tax break and that he was looking into responsible ways to “restructure” the plan. It is unclear how long the BUILD Act, not yet approved by the Board of Supervisors, will remain on hold.
In a statement to Mission Local, the mayor’s office said little about the reason for the abrupt change in plans.
“We appreciate Supervisor Mahmood’s partnership and will continue moving aggressively to build affordable homes and drive our economic recovery,” said Lurie’s spokesperson, Charles Lutvak.