On November 4th, San Francisco voters, by a decisive 54% to 46% margin, said NO to Prop. G!
The draconian so-called “anti-speculation law” would have added onto the current transfer tax (0.5 to 2.5%, based on the sales price), a huge new tax on certain sales based for the first time on how long a property is held – from a low of 14% if held for four to five years and to a maximum 24% if held for less than a year.
The tax would have applied to the property’s entire sales price and affected properties of two to 30 residential units, including single-family homes with in-law units and tenancy-in-common interests.
Prop. G Was Based on a False Premise
Prop. G was based on the erroneous belief that anyone who buys rental property and sells it in less than five years is a “greedy speculator.” Clearly ludicrous, yet many voters, especially diehard tenant advocates, firmly believed it. Quite aside from the basic question – does government have the right to dictate when you can sell your property? – there are many good reasons people sell in less than five years that have nothing to do with speculation. Many SPOSFI members expressed outrage that Prop G. could put them or any middle-class property owner in a financially untenable position if illness, job transfer, or other sudden change of circumstances forced them to sell in less than five years.
By way of example, imagine that you bought a small duplex earlier this year for $1.5 million. You lived in one unit and rented out the other, but suddenly circumstances forced you to sell. Due to some improvements you made and a strong market, you were able to get $1.6 million for the property, enough to at least cover your sales costs. If Prop. G had passed and you completed the sale before the one-year mark, you’d have owed the City $384,000, due and payable at close of escrow! Prop. G offered no exemption for hardship or family emergencies.
Bogus Claims by Prop. G Advocates
Proponents of Prop. G claimed it would be good for the City, raising needed revenues and helping to alleviate the housing crisis. They were wrong. Prop. G would have made the housing situation worse and put many small property owners in dire financial straits.
The Claims of the “YES on G” Folks Didn’t Wash
- More money for affordable housing: NO. Prop. G revenues were not allocated to affordable housing.
- More tax revenue for the City: NO. Had Prop. G passed and had its intended effect, both transfer tax and Prop. G revenues would have decreased.
- Improved housing situation: NO. The pool of available housing would have shrunk because Prop. G applied to the City’s 40,000 to 50,000 homes with in-laws.
- An end to speculation: NO. Prop G. would have contributed to higher housing prices and rents.
The people who would have been hurt the most by the passage of Prop. G are middle-class home buyers and renters. As the SF Chronicle concluded in its argument against Prop. G, “a significant new tax on real estate is not the answer to our housing affordability crisis. It will only make housing harder to find and more expensive.”
We couldn’t agree more. We’re thankful that the voters saw through the smokescreen and rejected Prop. G, but we can’t afford to rest on our laurels. The folks who brought us Proposition G will probably be back for another try in the future.
Reprinted with permission of the Small Property Owners of San Francisco Institute (SPOSFI) News. For more information on becoming a member of SPOSFI or to send a tax-deductible donation, please visit their website at www.smallprop.org or call (415) 647-2419.