San Jose may put new property transfer tax on ballot

With San Jose facing a growing crisis over a lack of affordable housing and rising homelessness, the city says it desperately needs more money to fix the problem. But getting enough voters in the nation’s 10th largest city to willingly foot the bill has proven difficult.

According to a new survey of more than 1,200 registered voters, a general obligation bond measure aimed at providing housing for homeless residents would be unlikely to clear the two-thirds majority required to pass in 2020. So instead, the city is considering a new real property transfer tax — a tax that is paid by the buyer, the seller or split when a property is sold or ownership transfers, with some exceptions, such as for an inheritance.

Unlike a bond measure, such a tax would only require a simple majority to pass. If it goes that direction, San Jose would join a handful of East Bay cities that approved new or amended real property transfer taxes in 2018 — including Berkeley, which named addressing homelessness as a key priority.

“We’re exploring every option,” said Mayor Sam Liccardo on how officials are addressing the city’s affordable housing needs and homelessness.

Now, San Jose currently charges a tax of $3.30 per $1,000, which goes to libraries, fire, parks and other services. That amount is relatively low compared to San Francisco, which starts at $5 per $1,000 and increases incrementally, and Oakland, which starts at $10 per $1,000 and goes up.

If San Jose went ahead with an additional tax of $4.99 per $1,000, the city would pull in about $54 million annually, some of which could be used to address homelessness, with some going to cleaning up litter, graffiti and other services.

The survey — which was commissioned by the city and conducted by FM3 between May 3-9 in English, Spanish and Vietnamese and had a margin of error of +/-2.8 percent — found that 59 percent of those asked would support a real estate tax measure. Support for a general obligation bond to provide housing for homeless residents similarly garnered 59 percent support (but would need more than 66 percent to pass), while voters were even less enthused about supporting a general obligation bond to fund affordable housing for the homeless near transit.

“We need to make decisions that are data driven,” Liccardo said.

In 2018, Measure V — a $450 million general obligation bond measure aimed at increasing the supply of affordable housing got 64 percent of the vote. Even though the measure narrowly missed the two-thirds margin it needed to pass, Liccardo said the results show “strong support” for addressing the issue.

“Our residents are telling us they want to support an affordable housing solution,” Liccardo said.

In a memo to the City Council, housing director Jacky Morales-Ferrand and Lee Wilcox, chief of staff in the city manager’s office, caution that moving forward with a tax is a “highly volatile” option for the city. But, they said, with limited alternatives for addressing “a crisis of homelessness” and other issues, they would recommend further study of a possible tax.

If council approves that idea on Tuesday at the City Council meeting, staff will come back in the fall with a potential tax measure for either the March or November 2020 ballot.

Jerry Mungai, vice president of the San Jose-based group Citizens for Fiscal Responsibility, doesn’t think a new tax will help. Instead of a tax, Mungai said, he’d like to see the city “streamline” the process that builders must navigate and cut environmental regulations and fees to spark more development.

“Every single year there’s a demand for more tax money,” Mungai said. “There’s an accountability problem in government in general…nothing gets done.”

The need for affordable housing is pressing. According to the memo, the median price of a single-family home has risen a whopping 174 percent — by $715,000 — over the last decade. At a median cost of more than $1 million, the average home requires an income of more than $220,000 to purchase. The price of condos has gone up more than 250 percent over that same timespan, and average rent has also skyrocketed while earnings have increased only around 21 percent.

All of that has meant more families struggling to get by and more demand for affordable housing. Around 27 percent — more than 84,000 people — of San Jose’s 314,000 households are low income, meaning a family of three is living on less than $94,000. Of those low-income families, 13 percent — or around 40,000 households, are extremely low income, meaning a family of three is trying to get by on about $40,000. Yet the city has only slightly more than 21,000 affordable units with rent restrictions — about 6 percent of the city’s total housing stock. At last count, San Jose had more than 6,000 people sleeping on the streets.

The city points to the state scrapping redevelopment agencies in 2012 as a major loss of resources to fund new affordable housing. The state is considering lowering the threshold for such measures to 55 percent, but for now passing a bond measure requires a yes vote from more than 66 percent of the people casting ballots.

“We’re not waiting for that to happen,” Liccardo said. “We know that this is a crisis now.”