We lost on transfer taxes — but will keep fighting

For months, California YIMBY has worked on a state-level solution to fix bad transfer taxes that are crushing new housing construction in many cities. In the process, we also hoped to prevent the passage of an anti-tax ballot measure that would harm the finances of virtually every jurisdiction in California.

We failed. Yesterday, the Legislature passed ACA 22 in exchange for the Howard Jarvis Taxpayers Association removing their initiative from the ballot.

The result: Cities that currently have transfer taxes so high that they kill housing will not be required to lower those taxes. This fall, voters will be asked to raise the vote threshold for ballot measures on new special taxes from 51% to 67%.  

The situation in Sacramento was fluid and chaotic, and our opposition included some unlikely allies. Affordable housing and tenants’ groups joined with the California Association of Realtors and anti-tax zealots with the Howard Jarvis Taxpayers Association to block AB 736, a compromise bill supported by California YIMBY that would have capped transfer taxes statewide.

In its place, they advanced a new ballot measure that will ask Californians to make it harder to raise taxes in the future – in essence, a reversal of a recent court decision, known as “Upland,” that allows voter-initiated tax measures earmarked for specific purposes to proceed if they secure 51% of the vote (taxes proposed by elected government officials must secure 67% of the vote).*

The two bright spots of ACA 22 are that new transfer taxes are unlikely to pass, and that previously passed sources of local funding with under 67% of the vote will not need to be rescinded (that could severely harm local governments who bonded against future revenue).

It’s a victory for both the Howard Jarvis Taxpayers Association, and the non-profits and unions that financially benefit from maintaining infeasibly high transfer taxes in a handful of California cities. 

Our goal of reducing transfer taxes to make it more financially feasible to build housing in Los Angeles, San Francisco, and Santa Monica – which have the worst transfer taxes in the state – is now dead.

That said, much like how SB 827 and SB 50 went down in defeat before we passed SB 79, we’re not done fighting for transfer tax reform.

While we’re disappointed in this outcome, we’re grateful to all the YIMBYs and pro-housing activists who joined us in the fight, and who will join us again as we continue the work of making California an affordable place to live, work, and raise a family for everyone.

Thanks for your ongoing support, and stay tuned for next steps,
Brian

*Technically, the Upland decision itself did not explicitly reduce the threshold of local citizen initiatives from 67% to 51%, but subsequent appellate decisions citing the Upland decision upheld that change.