See our March 2024 SF Election Guide for a nonpartisan analysis of measures and contests on the ballot in San Francisco for the election occurring March 5, 2024. Voters will consider the following proposition in that election.
Proposition C would change San Francisco’s tax policy to allow a one-time transfer tax exemption for owners of properties converted from commercial to residential use the first time they are sold following conversion, as long as the change of use is approved before Jan. 1, 2030.
San Francisco currently requires a transfer tax of 6% on properties that sell for more than $25 million. The proposed exemption could be applied to up to 5 million square feet of converted properties. The measure would allow the Board of Supervisors to amend, reduce, suspend or repeal the transfer tax without voter approval, although voters would have to approve increases. It would also let the city increase the amount of commercial development allowed in a given year by adding to that tally the square footage of property that has been converted or demolished.
Under this measure, the transfer tax exemption could be applied to portions of buildings converted from commercial to residential if other parts of the properties continue to host business operations.
The opportunity to use Proposition C transfer tax exemptions would expire at the end of 2054.
The controller’s office estimates that the city could lose between $34 million and $150 million over 30 years if it allows transfer tax exemptions on 5 million square feet converted from commercial to residential use. By removing space occupied by businesses, the city could lose additional revenue currently provided by commercial operations, including gross receipt and other taxes that would not apply to residential properties. However, the city could see an increase in property taxes because the assessed value of residential property is often higher than it is for commercial property of the same size.
The calculations are complicated and are based on guessing what will happen: “If the transfer tax exemption makes residential conversion of an office building financially feasible, but that building would have been eventually occupied by future office tenants, the exemption would most likely lead to a net negative revenue impact for the City,” wrote Controller Ben Rosenfield in his analysis of Proposition C.
Mayor London Breed submitted this measure for inclusion on the ballot. It is also supported by Supervisors Matt Dorsey, Joel Engardio, Rafael Mandelman and Catherine Stefani, who together signed the official rebuttal to the opposition statement.
“San Francisco’s Downtown is undergoing a period of change — and there is a tremendous opportunity to attract investment and excitement in the future of what Downtown can be: a thriving, 24-hour neighborhood filled with residents, workers, arts and culture, and successful small businesses,” Breed wrote in her official statement supporting Proposition C.
More than a dozen business associations and organizations and nearly 50 individuals signed onto paid arguments submitted in support of the measure, including state Sen. Scott Wiener, along with groups including Housing Action Coalition, GrowSF, San Francisco Bay Area Planning and Urban Research, and SF Yimby.
Proposition C is opposed by organizations including the Council of Community Housing Organizations, the San Francisco Democratic County Central Committee, Affordable Housing Alliance, the San Francisco Tenants Union, Senior and Disability Action, the Harvey Milk LGBTQ Democratic Club and Small Business Forward. In their statement against Proposition C, they called it “a deceptive ballot measure that takes power away from voters and allows City Hall politicians to hand out corporate tax breaks to billionaires and huge property owners.”
They noted in their rebuttal that current law allows tax exemptions for converting office buildings to affordable housing, and that the measure would extend that benefit to developers of luxury housing.
This measure requires more than 50% affirmative votes to pass.
A “yes” vote means you support changing San Francisco’s transfer tax policy to allow a one-time transfer tax exemption for the owners of properties converted from commercial to residential use the first time they are sold following conversion.
A “no” vote means you do not want the proposed changes to the city’s transfer tax policies.
