San Jose Considers Transfer Tax Exemptions for Non-Profits

As housing advocates drum up support for Measure E, the San Jose City Council is figuring out how to spare non-profits from the impact of the property transfer tax.

The March 3 ballot initiative, dubbed Measure E by the Santa Clara County Registrar of Voters, would tax the sale of homes valued at $2 million and up. Though proceeds from the assessment would go into San Jose’s general fund, the council has vowed to earmark it for specific uses. Specifically, to prevent homelessness, provide rental subsidies and build permanent housing, among other things.

In December, Mayor Sam Liccardo initiated a proposal at a council subcommittee to exempt taxing transfers to or from 501(c)(3) non-profits when the property is donated or used to build or preserve affordable housing. While a gift or donation would already be exempt from the tax under federal law, city officials have been reviewing other guidelines for handling transfers to non-profits.

But due to the lengthy development process, Housing Director Jacky Morales-Ferrand and Lee Wilcox, the chief of staff for City Manager Dave Sykes, advise against a simple exemption. “Some projects go through the early phases of this process without being constructed,” they wrote in a Jan. 27 memo. “While the new landowner may have the best intentions, circumstances may cause the project to not come to fruition.”

Instead, they suggest that when a property is transferred to a non-profit, the tax-exempt organization be eligible for pre-development assistance from the city’s housing department. Under their recommendation, the non-profit would also enter into a pre-development agreement with the city, which would require information like the number of intended units and affordability restrictions. Funding help would be subject to availability and only apply to sites where 100 percent of the units are reserved for tenants who make, at most, 80 percent of the area median income.

Morales-Ferrand and Wilcox have also laid out parameters to encourage non-profits to acquire existing apartments and convert them into affordable housing. Under the proposed terms, once the development is transferred to a non-profit, the organization would be eligible for funds equal to the amount of the real property transfer tax.

But Councilman Johnny Khamis, who has taken a stance against the tax, wants to go a step further by exempting “all home builders who are making significant additions to the housing stock at all levels of affordability.”

“To achieve this goal of affordable housing in the Bay Area, new housing supply is needed across the spectrum—from very low income and low income units and small, more naturally-affordable units to market-rate units,” Khamis wrote in a memo ahead of today’s meeting. “Each home that is built that reduces the supply deficit helps to moderate the housing costs across the market spectrum, therefore I am proposing that ALL transfers of real property, whether to non-profit or for-profit homebuilders, be exempted from MeasureE, if approved by voters.”

The San Jose City Council meets at 1:30pm today at City Hall, 200 E. Santa Clara St. Click here to read the entire agenda. 

Grace Hase is a staff writer for San Jose Inside and Metro Silicon Valley. Email tips to [email protected]. Follow her on Twitter at @grace_hase.

6 Comments

  1. I don’t see why this is so difficult.

    This is a regressive tax and any real progressive or a person with a heart should see that fact.

    What ever you extract from these property will get paid for by consumers, and that cost hurts the poor the most. Like gas tax and sales tax.

    If you want a fair, progressive tax, take it from homeowners, on the average they have profited well and they can pass that cost on to the poor.

    For people who like to brag how good you are, you BA progs like to stick to the poor, a lot.

  2. The predatory, pernicious parasites a.k.a.”Non-Profit and or Public Benefit Corporations” should be taxed.

    Personally, I would not give “Non-Profit and or Public Benefit Corporations” any taxpayer money in the first place.

    If “Caesar ” gives “Caesar” can take. Render unto Caesar what is Caesar’s.

    Tax “Non-Profit and or Public Benefit Corporations” without mercy and or the slightest consideration otherwise.

    David S. Wall

  3. > San Jose Considers Transfer Tax Exemptions for Non-Profits

    What an outrageous tax!

    What percent of San Jose RESIDENTS benefit from government?

    Why, isn’t it ONE HUNDRED PERCENT? (Maybe it might be ninety-nine percent if you exclude jailbirds).

    What percent of San Jose RESIDENTS will likely PAY this tax?

    Exclude people who don’t own real estate, exclude real estate owners who DON’T transfer their property; exclude seniors; exclude “non-profits”.

    The percent of residents who will PAY this tax is likely LESS THAN ONE PERCENT!

    Why is it that LESS then one percent is paying for the government that benefits the HUNDRED PERCENT?

    Shouldn’t everyone be paying for “democracy”?

    When citizens of a “democracy” rely on someone else to pay for their “democracy”, is it still “democracy”?

  4. @SJ Kulak – How do home owner’s profit? The county/city already collect lots of property taxes with all the magical assessment included. Every year the property taxes goes up $500-1000 because of bon and measure . Even though prop 13 exists and should limit the money grab the people running the place still manage to get everyone’s money – home owner or not.

    Here is why, if you rent you still pay the same taxes, because the land lord will just include that in the rent. When an average track home is $1M and the property taxes are $10K+/year that breaks down to about $800 month passed on to the renter. Wouldn’t you like to save $800/month?

    Doing some tax math. If you follow the prop 13 tax rate, if you bought a house 15 years ago you would have paid over $100K in proper taxes. However, the bonds and other essentials taxed on to the “rich people” living is dumpy track homes are paying nearly $130K over that same period? The approximate rate is 1.15% (yes the .05 makes a difference).

    Doing some house price tax. If you bought a house 15 years ago the average growth is about 3.5%/year. Then subtract out the 1.15% taxes, You are actually at about 2.35% growth. That’s not a good investment.

    Back to my original question, how do home owner’s profit?

    Measure E is a scam. They did this in the London (capitol gains tax) and everyone thought it would never be their home. Well guess what, everyone pays it now because the housing prices are high. The tax floor is never adjusted for growth in measure E. The same thing will happen here in less than 10 years. As the house price goes up so does the rent. Please do the math.
    I will close with the city has no obligation to use the funds for the homeless. They can redirect it too create yet another ice rink if they want.
    https://www.eastbaytimes.com/2020/02/13/letter-san-jose-may-not-use-the-measure-e-funds-for-the-homeless/

  5. You write:

    “Here is why, if you rent you still pay the same taxes, because the land lord will just include that in the rent. When an average track home is $1M and the property taxes are $10K+/year that breaks down to about $800 month passed on to the renter. Wouldn’t you like to save $800/month?”

    Thank you for so perfectly explaining why renters pay property taxes too!!! It’s nice to see someone put that in writing. A landlord gets to watch his land and the structure on it, go up and up and up and up in value. However, he still passes on all the property taxes onto his renter! Renters are actually the people paying property taxes in rentals!!! I wish homeowners would stop always saying how great they are because they pay property taxes….so do renters!!!

    And unrelated, I’m against this measure for SO many reasons.

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