As a small-business owner and as someone who has rented in San Francisco for many years and as someone who has a disabled mom in The City living in a rent-controlled apartment, allow me to tell you that Proposition G is a terrible idea.
This proposition intends to stop real estate speculation by imposing a 24 percent tax for those buildings that are between two and 30 units or single family homes with in-laws that are sold within five years of purchase.
The prices in San Francisco are rising for a single reason. Too much demand (too many people wanting to live in this beautiful city) and too little supply (not enough homes to satisfy the demand). Prop. G will not solve this problem. But it will make matters worse for everyone with many unintended consequences.
Here are some of these unintended consequences of Prop. G:
More tenants will be evicted: There are tens of thousands of single-family homes in San Francisco with in-laws. Prop. G does not stop with two to 30 units. It also includes single-family homes with in-laws. This will result in thousands of homeowners rushing to eliminate the in-laws and evicting their tenants. Most tenants who live in these in-laws are low-income families. Prop. G will only make housing more expensive for the very people it is intending to benefit.
It will decrease employment: There are thousands of workers who support our local economy by working in construction projects. Because there will be far fewer transactions, there will also be far fewer construction projects. For example let's imagine you purchased a three-unit building last year and want to make considerable investment to improve that building so that you can sell the building this year. You will simply hold off to making these improvements because you can not sell your building before five years. Plumbers, electricians, Sheetrock workers, etc. all will find themselves with far fewer employment options.
Again, Prop. G will hurt the constituencies that it is intended to benefit.
It will decrease inventory and increase rents and home prices: Prop. G will make matters significantly worse for our city because no one in their right mind will sell their building and pay a 24 percent tax. The proposed tax is on 24 percent of the sale price not on profit. In other words, if a landlord wants to sell a $2 million, three-unit building after improving it that same year, they would need to pay $480,000 in taxes to San Francisco! So they will simply not sell before five years.
When there are fewer homes and fewer transactions in our city that will only limit the available inventory and put upward pressure on already-high rents.
It will hurt transfer-tax revenue: Most local economists are expecting less revenue not more for The City as a result of Prop. G. This is because fewer transactions mean fewer transfer-tax dollars. For those unfortunate homeowners who will have to sell their homes and pay the hefty 24 percent tax, the funds will be diverted to the general fund.
Not a single dime that is going to general fund has to be spent on affordable housing.
It may hit anyone: If you lost your job but have to sell your home before five years, you still pay the 24 percent tax. If you are a senior citizen, you still pay the 24 percent tax. If you are going through family death or financial hardship, you still pay the 24 percent tax. If you read the actual fine print of the proposal, you realize that really this proposal could hurt anyone but the speculators. Prop. G does nothing to protect tenants or stop evictions.
I hope you realize how severe the consequences could be for all of us in San Francisco. We are in it together in San Francisco. We need to come up with smart policies to help increase housing availability and lower prices. Prop. G will accomplish the opposite and make matters worse for our city.
Bora Ozturk is the co-founder of March Capital Management, a local investment fund. He is a San Francisco homeowner with two kids in public schools.