AB 736
Help Save Housing Production – No “New Prop 13”
Several jurisdictions in California have passed poorly-designed tax measures that are hindering housing production and threaten to severely harm the state’s ability to fund vital services like housing, schools, public safety, and fire protection. AB 736 caps transfer taxes statewide at 1.5%, with specific exceptions that allow some transfer taxes to be higher.
Under the bill’s provisions, cities with existing transfer taxes of 3% or less will be allowed to continue collecting these taxes, provided they support the general fund (as opposed to special or specific funds, like parks or roads). The bill also allows unlimited transfer taxes on the sale of “mansions” valued above $5.4 million at time of sale, while exempting such homes that were re-built following a disaster, such as wildfire.
The bill does not exempt new, multi-family homes from transfer taxes, but does limit these taxes to 1.5%, or 3% in jurisdictions that had such taxes prior to the bill’s enactment.
Since the passage of Prop 13 in 1978, local jurisdictions have had to identify new sources of revenue to fund vital services like police, schools, and fire protection. Among other revenues like bonds and sales taxes, most local governments in California also rely on “real estate transfer taxes” – fees charged to a property seller when their property changes hands. Most of these bonds and taxes must be approved by voters.
Transfer taxes are usually established as a percentage of the value of the property sale. In most cases, these percentages are high enough to generate meaningful revenue, but not so high that they discourage property sales altogether.
Over the past few years, several California cities have experimented with high real estate transfer taxes. The results are concerning:
Rather than achieve the stated goals of increasing revenues AND increasing the housing stock, ULA tax was set too high – and has stalled both residential sales and urgently-needed new housing construction.
Santa Monica’s mansion tax of $56 per $1,000 yielded similar results – residential sales over $8M dropped from 32 to 15, and commercial sales over $8M fell from 18 to 5, while the tax brought in less than 35% of the projected revenue.
San Francisco’s Prop I, which imposes a transfer tax of 5.75% and up on property sales over $10 million, adds significant costs to housing development and has contributed to the city’s steep decline in housing production since 2020.
In addition to harming local housing production, these taxes have spurred a backlash from the same anti-tax organization that wrote Prop 13 in the first place: the Howard Jarvis Taxpayers Association has placed a measure on the November ballot that would devastate the ability of most California jurisdictions to raise revenue.
The measure would cap transfer taxes at rates well below what’s needed to maintain local services. It would also raise the threshold for all voter-approved special taxes from 50%+1 to 66% – making it virtually impossible for most jurisdictions to raise new revenue of any kind.
The measure would also kill existing voter-approved tax measures throughout the state that provide funding for important services like fire protection, public safety, childcare, schools, and affordable housing.
AB 736 caps transfer taxes statewide at 1.5%, with specific exceptions that allow such taxes to be higher.
By passing these urgent reforms, the California legislature and Governor’s office could fix the problems with poorly-designed transfer taxes, preserve the ability of local governments to expand housing supply and fund vital functions, and pressure the Howard Jarvis Taxpayers Association to remove their measure from the ballot.
Updates
| Feb 18, 2025 | Introduced as a previous bill |
| Jun 22, 2026 | Amended in the Senate |
Authors
- Mark González (AD 54)
- Buffy Wicks (AD 14)
- Lena Gonzalez (SD 33)
- Tim Grayson (SD 9)