To address the lack of affordable housing and increase in the homeless population, the San Jose City Council voted to place Measure E, a Real Estate Transfer Tax increase, on the March 3rd, 2020 ballot. Measure E was approved by San Jose voters with 53.45% of the vote.
Q. Why does the City of San Jose need more funding?
A. The City of San Jose needs an additional $520 million to meet its affordable housing goal of 10,000 new units by 2023. At the time that redevelopment agencies were dissolved in 2011, San Jose generated $40 million annually in funding for affordable housing. Since that time, the city has lacked a consistent revenue source to produce more affordable housing.
San Jose, like the region surrounding the city, has a housing crisis. Homelessness has increased 40% since 2017, which is visible as you move around the city. People are being displaced at an alarming rate due to the rising home prices. Renters in San Jose must earn $52 an hour – totaling almost $109,000 a year – to afford monthly rent for a 2-bedroom apartment, while affording a median priced single-family home demands around $108 an hour, or $224,000 annually. The city’s minimum wage currently sits at $15.25 an hour.
Q. What is a Real Estate Transfer Tax?
A. A Real Estate Property Transfer Tax is a one-time tax paid whenever real property is sold or transferred from one individual or entity to another. The City of San Jose’s current real estate property transfer tax is $3.30 per $1,000 of assessed value. The revenues raised through the current transfer tax rate are allocated to libraries, fire protection facilities, parks, maintenance yards, communication facilities, and general municipal improvements. The city has one of the lowest transfer tax rates compared to other cities across the Bay Area region.
Unlike a bond, Measure E funds will not owe any interest and will require no debt service; all funds collected will be used to provide direct benefit to San Jose residents. Additionally, Measure E is not restricted to capital projects and has the flexibility to support both capital projects and more creative, intermediary solutions to housing and homelessness.
Q: Who is impacted by this tax?
A: Only those who are buying or selling property worth more than $2 million will be impacted. It is estimated that this will only impact the top five percent of property transactions in the city. Buyers and sellers can negotiate who pays the tax at the time of sale. Measure E does not apply when an owner refinances, protects small businesses, and is only enacted when a property changes hands.
Q. Does Measure E have any exemptions?
A. YES. Measure E exempts properties valued below $2 million thereby ensuring it is not prohibitive to would-be first-time homebuyers or a burden on average San Jose residents. It also exempts properties that are transferred through an inheritance, gift, divorce, or certain government transactions.
Q: How much will Measure E raise?
A: It is expected that, on average, Measure E will raise $50 million a year.
Q. How much will the Transfer Tax be increased?
A: Measure E will increase the current Real Estate Transfer Tax from $3.30 per $1,000 of assessed property value to:
– $7.50 per $1,000 of transfer value on properties priced between $2 million and $5 million
– $10 per $1,000 of transfer value on properties priced between $5 million and $10 million
– $15 per $1,000 of transfer value on properties priced at $10 million and above
Q. How is the City of San Jose planning to use the funds raised by Measure E?
A. On December 10, 2019, the San Jose City Council adopted a spending plan that prioritizes the revenues raised by the measure for the following purposes:
– 45% of the funds raised will go toward permanent supportive and affordable rental housing for Extremely Low Income households (for a family of 4 this would be up to $43,900)
– 35% of the funds raised will go toward affordable rental housing for households considered Low Income (for a family of 4 this would be up to $103,400)
– 10% for below market-rate for-sale housing and rental housing for households considered to be Moderate Income (for a family of four this would be up to $157,700). These funds could be used to provide forgivable loans for rent-restricted ADUs or “granny” units, down payment assistance, and other first-time homeownership opportunities.
– 10% of the funds raised will go toward homelessness prevention and rental assistance solutions, which may include but is not limited to emergency rental assistance to prevent eviction.
Q. How do I know that these local funds would be spent as promised?
A. Funds raised through the Real Estate Transfer Tax will go into the city’s General Fund. To ensure the funds raised go toward investing in affordable housing and homelessness prevention solutions, the San Jose City Council adopted the following accountability measures:
– Requiring a two-thirds Council majority vote (8 out of 11 members) to make changes to the adopted spending plan,
– Requiring a 60-day notice, and at least two public hearings prior to the Council taking action on any proposed changes to the adopted spending plan, and
– The creation of an Oversight Committee with audit authority that will oversee the expenditure of the funds to ensure they are spent appropriately, including a separate accounting for the revenues.
Q. Do other cities have a Real Estate Transfer Tax?
A. Yes, other cities have a Real Estate Transfer Tax. In comparison, the City of San Jose has the lowest transfer tax rate across the Bay Area region. See table below for comparison figures with City of Oakland and San Francisco.