Measure E, a Real Estate Transfer Tax on properties that are valued at more than $2 million, was passed by San Jose Voters in March, 2020 with 53.45% of the vote. The Council adopted a spending plan to direct Measure E funds toward activities that respond to the city’s affordable housing and homelessness crisis.
SV@Home’s partner organization, the SV@Home Action Fund, is proud to have led the campaign, working in partnership with Mayor Sam Liccardo and a broad based coalition of philanthropy, health care, public education, urban and environmental justice groups, neighbors, and community groups to ensure the measure’s successful passage.
The tax began being levied and funding from the new source was included in the city’s Fiscal Year 2020-21 budget. Originally expected to generate $30 million during its first year, the measure generated closer to $40 million. In Fiscal Year 2021-2022, the measure is expected to generate an additional $40 million, making Measure E the single largest ongoing funding source for homeless prevention and affordable housing development in San Jose.
On November 10, 2020, in its first year of review, San Jose council members reaffirmed their intent to use the tax revenue to create new homes for low- and middle-income families. The money will also fund permanent supportive housing projects, homeless prevention services, and accessory dwelling units (ADUs). This was important, since some voters were concerned that Measure E funds wouldn’t be used for housing– despite the spending plan– because the funds are deposited in the city’s general fund.
Measure E Frequently Asked Questions
Q: Why does the City of San Jose need more funding?
A: The City lost a major ongoing source of funding for affordable housing when redevelopment agencies were dissolved in 2011. At the time of dissolution, San Jose generated $40 million annually for affordable housing, which it used to leverage other public and private funding sources at a rate of 3 to 1. Since that time, the city has lacked a consistent revenue source to produce more affordable housing.
San Jose, like the surrounding region, is in the midst of a housing crisis. Homelessness increased 40% from 2017 to 2019, the last year the Santa Clara County Homeless Census and Survey was conducted. 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. Unlike a bond, Measure E funds do not owe any interest and don’t require debt service; all funds collected are 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 are 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, in an average year, Measure E will raise $50 million. During recessions this number will be lower.
Q: How much has the Transfer Tax been increased?
A: Measure E increases 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 in 2020)
- 35% of the funds raised will go toward affordable rental housing development and preservation for households considered Low Income (for a family of 4 this would be up to $103,400 in 2020)
- 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 in 2020). 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.
It is important to note, however, that the Council can change this spending plan every year during the budget process subject to the accountability measures mentioned below.
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. The Housing and Community Development Commission was appointed as the Oversight Committee in 2020.