Proposition J

Removal of Foreclosure Exemption for Real Property Transfer Tax

Proposition J would permanently apply a transfer tax of between 0.5% and 6% of a property’s fair market value, on the transfer of properties such as commercial, industrial, and large residential properties, that are transferred to a lender because of foreclosure or to avoid foreclosure, for estimated annual revenue of $100 million to $150 million.

This measure requires approval by a majority of voters voting on the measure to pass.

Fiscal Impact: Proposition J would significantly increase the City’s Real Property Transfer Tax revenues although the amount generated each year would be unpredictable and likely to change significantly year-to-year. The measure could bring an average of $100 million to $150 million annually over the first five years. The total revenue in any given year will be highly dependent on the number of foreclosures and real estate conditions. It is likely that revenue increases would be highest in the near term then decline significantly over time.

See Endorsements for Proposition J

Pro:

Supporters argue that Prop J ends the unfair tax break for corporate lenders. Right now, corporate lenders are taking advantage of a tax break that was meant for struggling homeowners. And it's draining the fund we use to pay for our firefighters, street cleaners, and public health workers.

In 1984, to protect San Francisco families who were financially struggling, the city created a tax break for homeowners who couldn't pay their mortgage and would lose their homes to foreclosure. But the same tax break is also being given to financial institutions and corporate lenders when they acquire office towers, mega apartment complexes, and industrial buildings through foreclosure.

A YES vote on this measure means: you support permanently applying the transfer tax to foreclosed commercial, industrial, and large residential properties.

Con:

Opponents argue that Prop J imposes heavy tax penalties on property foreclosures and deeds-in-lieu, severely crippling San Francisco's economic recovery and housing market by creating a punitive, unpredictable environment for commercial and residential lending. They argue that it disproportionately harms San Francisco’s credit and lending environment, stifles housing production and downtown recovery, and forces destructive fire sales and abandonment.

A NO vote on this measure means: you are against permanently applying the transfer tax to foreclosed commercial, industrial, and large residential properties.

Background

The City's real property transfer tax applies to transfers of real property in the City. Existing law partially exempts from this tax transfers where the lender forecloses upon the property or where the borrower transfers the property to the lender in lieu of foreclosure (a "deed in lieu of foreclosure"). In such cases, tax applies only to the extent the consideration or value exceeds the unpaid debt on the property, including accrued interest and foreclosure costs.

Proposal

If passed, Proposition J would remove the partial exemption described above for transfers of all properties other than single-family residences, multi-family residential properties with fewer than 5 residential units, and mixed-use properties with fewer than five residential units and only a single floor of non-residential space for transfers on or after March 1, 2027.

For transfers to the lender by foreclosure or deed in lieu of foreclosure that are no longer subject to the partial exemption, the transfer tax base would be the fair market value of the property being transferred to the lender. The ordinance would also make non-substantive changes declarative of existing law and would increase the City's appropriation limit under the California Constitution by the amount of real property transfer tax collected for four years from November 3, 2026.

Source: Proposition J: Legislative Digest

City and County of San Francisco Office of Elections

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Background

Proposal

2026 Propositions

2026 Local Ballot Measures

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