A moderate bloc within the Board of Supervisors, along with several members of the mayor’s office, is discussing the possibility of repealing Proposition 1 this year. However, the decision has been temporarily postponed to prioritize the approval of a family rezoning plan. Nevertheless, informed sources indicated that efforts to repeal the increase in the real estate transfer tax—approved by a majority of voters—may resume next year.
Proposition 1 was approved in 2020, doubling the real estate transfer tax rate on property sales exceeding $10 million, raising it from about 3% to 6%. For example, when a property valued at $25 million is sold, the seller pays $1.375 million in taxes instead of $687,000 prior to the adoption of this measure.
In this context, a spokesperson for Mayor Daniel Lurie declined to comment on the issue. Meanwhile, the Office of Economic and Workforce Development stated through a spokesperson that it has not introduced any legislation or conducted a fiscal impact study to reduce the transfer tax. The spokesperson emphasized that the office remains committed to removing barriers that hinder construction activity in the city.
If efforts to reduce the tax resume next year, the office and the city’s chief economist would be required to analyze the fiscal impact of the proposed reduction and engage in negotiations with supervisors to offset any potential revenue shortfall. It is worth noting that only two of the supervisors who supported Proposition 1 in 2020 remain on the current board: Shamann Walton and Rafael Mandelman.
This renewed focus comes amid a broader movement to restructure San Francisco’s tax system, as the business community views it as a burden that makes investment in the city excessively costly.
For instance, voters last year approved Proposition “M,” which rebuilds the corporate tax system to support both small and large businesses, and Proposition “C,” which exempted office-to-residential conversion projects from taxes. Notably, the latter measure grants the Board of Supervisors greater authority to reduce, suspend, or eliminate the transfer tax without requiring a citywide voter referendum.
However, the city is facing growing political divisions over these issues. Business groups and labor unions have walked back from compromises they previously agreed to regarding Proposition “M,” and there is increasing concern about potential voter “fatigue” due to the growing number of tax-related measures expected at both the local and regional levels next year.
Although reducing the transfer tax does not require voter approval, concerns over its impact on public revenues may be the decisive factor shaping supervisors’ positions on this move.
This debate is also unfolding as San Francisco’s real estate market continues to struggle despite some signs of recovery. More than 20 million square feet of office space remain vacant, and well-known commercial corridors such as Powell Street and Van Ness are still lined with closed storefronts. Even the city’s largest shopping center, San Francisco Centre, currently hosts only a single outlet of the Panda Express restaurant chain.
