What Prop. J Would Do
Proposition J would eliminate an exemption from San Francisco’s real property transfer tax for all foreclosed commercial properties, mixed-use, and multi-family residential properties with more than five units, effective March 1, 2027. Single-family homes and condominium buildings of up to four units would remain exempt. This measure would also temporarily raise the city’s Gann Limit (a state-imposed cap on the total annual revenue that cities may spend) by the amount of transfer tax collected for four years, starting November 3, 2026.
The Backstory
San Francisco collects a transfer tax on most real estate transactions, with rates scaled according to the sale price. Transfer tax revenue goes into the city’s General Fund and cannot be designated for specific purposes. The Board of Supervisors may amend, reduce, suspend, or repeal the transfer tax without voter approval, but proposed increases must go to the ballot. San Francisco voters have approved several rate increases over the past 20 years, including a 2020 measure that doubled rates for transactions over $10 million.1
San Francisco Real Property Transfer Tax Rate Scale (2020 Prop. I)
Property Sale Price | Transfer Tax Rate |
$100 – $250,000 | 0.50% |
$250,001 – $999,999 | 0.68% |
$100,000,000 – $4,999,999 | 0.75% |
$5,000,000 – $9,999,999 | 2.25% |
$10,000,000 – $24,999,999 | 5.5% |
$25 million and above | 6% |
Currently, San Francisco exempts foreclosed properties and properties transferred to the lender in lieu of foreclosure from paying a transfer tax.2 San José, Oakland, and all general law cities and counties in California also exempt such properties.3 Oakland voters are considering a measure to limit the foreclosure exemption to their transfer tax (Measure FF).
Foreclosure exemptions encourage economic activity by making distressed properties more affordable and leaving buyers with more money to invest in them. When foreclosure transactions follow the conventional pattern, initial title transfers of foreclosed properties from the borrower to a bank or lending institution are exempt from the transfer tax, but lenders do pay a transfer tax when selling the properties to new buyers. However, in some cases investors will instead acquire distressed debt from lenders and then foreclose on a property, allowing them to assume ownership without paying any transfer tax. San Francisco’s Assessor-Recorder reported a sharp increase in these cases since 2023.4
- Between 2008 and 2023, 4,000 foreclosure exemption claims were filed: 80% were for single-family homes, 96% were for properties valued under $10 million, and about 65% followed the conventional foreclosure pattern.
- Since 2023, 600 claims have been filed: only 23% were for single-family homes, 56% were for properties valued over $10 million, and less than 10% followed the conventional foreclosure pattern.
- Between 2023 and 2025, claims for income-producing and investment-oriented properties (multi-family, commercial, or vacant land) acquired through distressed transfer mechanisms allowed investors to avoid paying more than $450 million in transfer tax.
Prop. J would close the distressed transfer loophole while maintaining exemptions for single-family homes, condos, and small multi-family properties (up to 5 units) facing foreclosure, generating an estimated $100 million to $150 million annually over the first five years.5 However, transfer tax revenue is highly volatile and difficult to project.6 High rates of foreclosures are projected for the next few years, so the revenue collected could be significant. As the real estate market adjusts, the revenue stream could become negligible.
Additionally, this measure was originally part of a broader plan to halve transfer tax rates for transactions above $10 million (reversing rate increases voters approved in 2020). That legislation was recently withdrawn, but the mayor has pledged to revisit cutting transfer tax rates for high-value properties if this measure helps offset the financial impacts of the proposed reduction. If the Board of Supervisors lowers transfer tax rates, the fiscal benefits of this measure would be lower than projected.
Another measure, Proposition I, may alter the impacts of this ordinance. Prop. I would dedicate half of the transfer tax revenue from transactions over $10 million to a set-aside fund for affordable housing and homelessness programs and would require voter approval to reduce transfer tax rates in the future.7 If both measures pass, some of the revenue generated by Prop. J would support this set-aside fund, and plans to reduce transfer tax rates for properties valued above $10 million would be more difficult to enact.
Prop. J was placed on the ballot by a 10–1 vote of the Board of Supervisors. It requires a simple majority (50% plus one vote) to pass.
Equity Impacts
Transfer tax revenues become part of the general fund and broadly support municipal functions and services, including programs that benefit low-income residents and communities of color. This measure maintains foreclosure exemptions for single-family homes, condominiums, and small multi-family buildings to avoid causing hardship for households and small landlords facing financial difficulties.
Pros
- This measure generates up to $150 million annually to bolster the city’s General Fund at a time of fiscal distress and uncertainty.
- Closing this transfer tax loophole simplifies San Francisco’s tax code and makes the transfer tax fairer overall, in line with other recent tax code changes for businesses and property owners.
Cons
- Lenders may pass transfer tax costs on to buyers or charge higher transaction fees to offset the additional cost, potentially preventing new buyers from purchasing and reviving struggling properties in some cases.
- San Francisco’s commercial office market is still struggling; making it more expensive to buy and sell commercial real estate may slow its recovery.