The Yimby movement is backing a bill in the state Legislature that would make it more difficult for local government to raise real-estate transfer taxes—a key source of revenue for affordable housing.
AB 698, by Assemblymember Buffy Wicks of Berkeley, would do exactly what the Yimbys and their allies complain about: Add a “constraint” to passing taxes on high-end real-estate transactions.
Transfer taxes are fees collected by local government based on the sales price of real estate. That type of tax is one of the few progressive revenue sources that cities are allowed to impose under state law.
Both San Francisco and Los Angeles have used progressive transfer taxes to create a fund for affordable housing (former Mayor London Breed refused to spend the money, and Mayor Daniel Lurie hasn’t changed that position, but the funds are available). In LA, a tax on sales of more than $5 million has already raised $400 million, and 800 new units are under construction.
As state and federal budget cuts devastate local government, and tools to raise revenue are very limited, it’s likely more communities are going to be looking at high-end transfer taxes.
The Wicks bill, endorsed by California Yimby and SF Yimby, would make that more difficult.
The measure would impose a CEQA-like mandate on transfer taxes: Before any local government agency could pass the tax, it would have to fund and publish a study showing the impact of the tax on, among other things, market-rate housing.
The bill
would require a legislative body of a city, as specified, before it adopts any transfer tax on the sale of real property, to develop and post on its internet website an analysis that examines, at a minimum, the effect of the proposed transfer tax on, among other things, the production of affordable housing, including affordable housing produced by market-rate housing projects.
That sounds fine; more information is always good. But in this case, the irony is that a study would delay the new tax and increase the cost to cities, particularly smaller cities, of imposing the tax—and do exactly what the Yimby say studies do to delay new housing.
Except that in this case, it would delay funding for affordable housing.
Wicks presented the measure at the Assembly Local Government Committee April 30, and argued—in classic fashion—that some transfer taxes are okay, in some circumstances, but they can also (get ready) interfere with the production of luxury housing.
The tax “impacts new construction, making projects less profitable” and thus hinders new market-rate housing, Wicks said.
Most of the money that San Francisco has raised has nothing to do with new housing. The tax mostly hits very expensive existing residential and commercial properties that change hands, mostly through transactions between massive corporations.
That line reminds me of the real-estate industry arguments we used to hear about rent control: If you impose rent control, nobody will build new housing. Never mind that under state law, anything built after 1979 is exempt from rent control anyway. Now it’s not rent control, it’s zoning, or CEQA, or now transfer taxes.
Wicks said that housing developers who buy a piece of property have to pay the transfer tax, and then when they sell the fully finished project, they have to pay another transfer tax.
Corey Smith, director of the San Francisco-based Housing Action Coalition, testified that the current “financing gap” for new housing in the state is 20-30 percent—that is, it costs at least 20 percent more to build market-rate housing than the housing is worth. The vast majority of that is the cost of land, labor, and interest on loans. It doesn’t seem likely that a transfer tax on the sale of the land is going to make or break these projects.
The building trades unions, which are hardly Nimbys, are against the bill. So are affordable housing groups all over the state. But it passed the Local Government Committee 7-0, with San Francisco Assemblymember Catherine Stefani voting Yes.
I have asked Assemblymember Matt Haney and Senator Scott Wiener if they are supporting the bill. They have not responded.
