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.