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Prop D
Commercial Rent Tax for Housing and Homelessness
Additional Tax on Commercial Rents Mostly to Fund Housing and Homelessness Services

Imposes a tax on commercial landlords in San Francisco to fund housing and homelessness programs.

No Recommendation

Jump to SPUR’s Recommendation

What the Measure Would Do

This measure would impose a tax on individuals and businesses that receive income from the lease or sublease of commercial space, primarily offices. The measure would exempt spaces used for production, distribution and repair (including industrial, warehouse and similar uses); retail sales and services (including chain stores); and entertainment, arts and recreation. Gross receipts received from leases to nonprofits would also be exempt from the tax, as would small business enterprises (defined for tax year 2017 as those with annual gross receipts under $1,090,000). The city controller estimates that 22 percent of San Francisco’s commercial tax base would be exempt under this proposal.

Gross receipts from the lease of commercial space in San Francisco would be taxed at an additional rate of 1.7 percent. Currently, the gross receipts tax rate for all real estate ranges between 0.285 percent and 0.3 percent. This measure would effectively increase the tax rate for commercial rent income to 1.985 or 2 percent for most types of commercial space.

The measure would deposit all revenues into a fund that would be appropriated on an annual or supplemental basis. After administrative costs, in fiscal year 2018–19, up to $1.5 million could go to the General Fund for any purpose, as determined in the budget process. In 2019– 20, $3 million would go to the General Fund. In 2020–21 and all following years, the $3 million would be adjusted based on inflation. The rest of the fund would be divided as follows:

  • Forty-five percent would go to the Department of Homelessness and Supportive Housing (DHSH) for uses that would help homeless adults, families or youth.
  • Ten percent would go to the Mayor’s Office of Housing and Community Development (MOHCD) for the acquisition, rehabilitation and operation of single-room occupancy buildings and the protection of extremely low-income and very low-income households (those earning up to 50 percent of the area median income1).
  • Thirty-five percent would go to MOHCD for two uses: to acquire and rehabilitate existing rent-controlled apartment buildings of three units and larger to serve households that earn on average 80 percent of area median income, and to build and preserve housing for middle-income households (those earning 70 to 150 percent of area median income2).
  • Ten percent would go to MOHCD to provide permanent project-based subsidies to extremely low-income senior households (at least one person is 62 years old or older) in income-restricted developments (where residents earn up to 40 percent of the area median income).

The controller’s office estimates that this tax would generate $70 million annually. (For perspective, the total business tax budgeted for 2017–18 is $752 million.)

The measure would go into effect on January 1, 2019, and would require the Board of Supervisors to create a five-member citizens advisory committee to make recommendations (three to be appointed by the mayor, two by the Board of Supervisors).

This measure could be amended or repealed by the Board of Supervisors by ordinance without going back to the voters unless the amendment is intended to increase or extend the tax.

There are two commercial rent taxes on the ballot this election, Propositions C and D. Each measure has a “poison pill” that ensures that only one of them will take effect (generally, the one with the greater number of votes; however, because Prop. C requires a simple majority to pass and Prop. D requires two-thirds of the vote, Prop. C could win with fewer votes than Prop. D).

The Backstory

In 2012, San Francisco switched its system of taxing businesses from a payroll tax to a gross receipts tax. In developing the current gross receipts tax, the mayor’s office and the city controller’s office conducted extensive outreach to affected business sectors. However, the gross receipts tax has not grown sufficiently to fully phase out the payroll tax. Neither of the commercial rent tax measures on the June ballot addresses this issue. See “The Backstory” section of our Prop. C write-up for more details on this history and the development of these two measures.

This measure was put on the ballot by five supervisors. As a tax measure placed on the ballot by the Board of Supervisors, it requires the support of two-thirds of voters to pass.


  • Homelessness and housing affordability are two of the major challenges facing San Francisco today. This measure would create an ongoing source of funding for affordable housing that serves a wide range of people, from those exiting homelessness to moderate-income households.
  • Currently, a major share of local funding for affordable housing development in San Francisco is provided by market-rate developers, who must include affordable housing in all new developments. This tax would slightly broaden the base that contributes to funding affordable housing in San Francisco.
  • Since buildings, unlike businesses, cannot leave San Francisco, increasing the gross receipts tax on commercial real estate would be unlikely to push commercial building owners out of San Francisco or to reduce the city’s economic competitiveness overall.


  • The 2012 decision to convert San Francisco’s business tax system from a payroll tax to a gross receipts tax underwent a carefully considered process that involved the participation of myriad stakeholders in an effort to balance their needs and priorities. While the authors of this measure did some outreach to the business community and others, it is unclear whether the authors studied the impact of this tax or undertook analysis to determine which industries could bear an additional tax burden and how much.
  • $70 million is not enough to make a significant dent in the affordable housing shortage.
  • Although the number of jobs lost would be small, economic modeling by the controller’s office predicts that this tax would have a net negative economic effect on San Francisco (including a loss of GDP and a loss of disposable income per capita).
  • While buildings cannot leave San Francisco, tenants can. To the extent that this tax would be passed on to tenants, some business tenants might move to other jurisdictions, impacting the strength and diversity of San Francisco’s economy.
SPUR's Recommendation

SPUR’s Board of Directors was torn on this measure. SPUR has fought for more housing for everyone for over a hundred years, and we are challenged to vote against a measure that would help build more housing for homeless San Franciscans and middle-income families who are not well served by today’s housing solutions.

On the other hand, there are serious concerns that singling out one segment of one industry is not an equitable way to establish tax rates and does not follow SPUR’s principles of good tax policy. A more comprehensive effort to update and reform the gross receipts tax is needed, one that adjusts gross receipts rates to complete the phasing out of the payroll tax and, ideally, one that takes all of the city’s funding needs into account comprehensively. Prop. D’s scattershot effort is not a step in the right direction, nor does it set a good example for others seeking funding for their agendas. SPUR also believes in broadening the tax base for funding affordable housing beyond businesses. This measure would not do that.

SPUR’s board was divided on these points and was not able to reach enough votes to recommend either a “yes” vote or a “no” vote on this measure.

No Recommendation on Prop D - Commercial Rent Tax for Housing and Homelessness

1 $40,350 for a single-person household. MOHCD, “Maximum Income by Household Size,” http://sfmohcd.org/eligibility

2 $64,550 for a single-person household, $92,250 for a four-person household. MOHCD, “Maximum Income by Household Size,” http://sfmohcd.org/eligibility