Four years ago, San Francisco hiked the transfer tax for the sale of large apartment buildings.
Now a candidate for mayor wants to lower the tax for those backed by union pension funds.
San Francisco Supervisor Ahsha Safaí has proposed a law that would temporarily lower transfer taxes for multifamily properties backed by union pension investment to spur housing construction, the San Francisco Business Times reported.
Safaí’s proposed legislation would cut transfer taxes for qualifying properties to 3 percent, from 5.5 percent for buildings valued between $10 million and $25 million, and from 6 percent for buildings worth more than $25 million.
The hourglass for the tax would run out for existing buildings after five years, and in 10 years for just-completed projects.
To qualify, the apartments must have at least 12 percent affordable units, use 100-percent union labor and have a minimum of $25 million in investment from a union pension fund.
Safaí said he expects the proposed ordinance would be most effective for approved projects yet to secure financing, or break ground.
In 2020, San Francisco voters hiked transfer taxes for properties valued between $10 million and $25 million to 5.5 percent, from 2.75 percent; and to 6 percent, from 3 percent for properties valued at $25 million or more.
Safaí’s ordinance would temporarily lower those rates for union-pension-backed projects in an attempt to incentivize their investment in San Francisco apartments.
Pension fund investment, and the tax break, could jumpstart pipeline projects, which could generate construction jobs for union workers, he said.
Asked whether the city should consider a broader reduction in transfer taxes, Safaí, who is running for mayor, said his measure was a good place to start.
“It will be interesting to see what kind of impact this has,” Safaí told the Business Times. “And then we can make further decisions as we move forward.”
Housing production in San Francisco has hit a wall, jeopardizing the city’s ability to meet state housing goals and leaving many union workers without work.
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“Right now we’re in a moment where the market has stalled. It costs more to develop a project than it is worth when you’re done. So any avenue of adjusting the cost structure could lead to an increase in feasibility,” said Marc Babsin, principal at Emerald Fund, a locally based developer.
Union pension funds, he said, often serve as equity partners for large multifamily projects in the city — and are “one of the tried and true believers in San Francisco development.”
This year, San Francisco voters approved Measure C, meant to encourage developers to convert office buildings into homes by allowing for a one-time transfer tax exemption.
— Dana Bartholomew