Here’s Welch’s outline of how an Anti-Speculation Tax would work: The city already charges a transfer tax every time property is sold, and it’s graduated – sales of less than $250,000 pay 0.5%, and that tab increases to 2.5% for properties over $10 million. The new tax would add a surcharge based on how long the owner held the property.
It could start at a fairly dramatic level: If you buy and sell a property within one year, you pay 50% of the profit on the sale. That number would go down each year, until after five years of ownership, a seller would pay no extra tax at all.
The idea, of course, is to take some of the profit, and thus incentive, out of what’s happening all over the city: Out of town speculators are buying property, evicting the tenants, and then flipping it quickly as TICs to make a big killing.
Welch later sent me some background on the issue:
Twice over the last thirty-five years an “anti-speculation”, graduated transfer tax proposal was considered for adoption: once initiated by the Board of Supervisors, and second, by the mayor.
In 1978, Supervisor Harvey Milk introduced an ordinance to create an “anti-speculation” tax” by creating a graduated surtax (a tax upon a tax) on the existing transfer tax based upon the time between transfers. The measure was initially proposed by the San Francisco Housing Coalition, a community based coalition of housing and anti-urban renewal organizations. Milk’s ordinance called for graduated anti-speculation surtax to the existing transfer tax rate charged depending on the length of time between transfers with the highest rate charged if a transfer occurred within one year, and lesser amounts each year to the 5th year when the surtax ended and transfers were taxed at the base rate. Mayor Moscone was in strong support. The measure was slated to be heard before the Finance Committee of the Board on Wednesday, November 29, 1978. Moscone and Milk were both assassinated on Monday, November 27th. New Mayor Diane Feinstein was adamantly opposed to the measure and the issue died at the Board.
It wasn’t until after the Feinstein administration was over and Art Agnos was elected Mayor a decade later that the matter was taken up again. Waiting until his re-election year, 1991, Agnos introduced a version of the tax that dedicated a portion of the funds, away from affordable housing production and tenant protection to the Police and Fire Depts., angering the liberal majority of the Board of Supervisors, and the measure was defeated, as was Agnos the following November.
There are plenty of ways to set up the tax. Since the revenue stream is going to be volatile – in down markets, there won’t be much money at all – it should go where it’s most needed – buying up housing. Of course, you can’t designate where the money goes without getting a two-thirds vote on the ballot, so it’s going to have to be General Fund money.
But Welch points out that the main purpose of the law wouldn’t be revenue generation anyway. The idea is to discourage speculation, to make it expensive to buy and flip properties. That encourages neighborhood stability and discourages the kinds of evictions we’re seeing right now.
A lot of people expressed support for an office at City Hall that would provide assistance and help to renters. New York has an Office of the Public Advocate; an Office of the Tenant Advocate might be popular. But small property owners would scream that they need help, too.
A recurring theme, though, was that small property owners – the mom-and-pop landlords who have owned a single building for many years – aren’t the source of the eviction epidemic. A small number of speculators are doing a lot of the Ellis evictions, and most of the people at the event seemed to agree that the focus of this year’s political action should be on them.
Among the other popular ideas: Monitoring and regulating buyouts (which are, of course, a form of eviction themselves); mandating that existing tenants get a “right of first refusal” when a building turns into TICs; and mandating that in-law units that are legalized be treated as rent-controlled units that can’t be Ellised.
The ideas from the various tenant conventions will come before a citywide convention Feb. 8, with the idea of taking the measures the supervisors won’t approve and putting them on the ballot in November.