Real Estate Ballot Issues

There are two real estate issues on this November's ballot.

One is Prop. L, which proposes to double the transfer tax on properties that sell for more than $1 million.

The second ballot measure is Prop. R, which would allow apartment buildings to be converted to condominiums, subject to certain conditions and tenant protections.

Prop L

Proposition L was placed on the ballot by Supervisors Tom Ammiano, Matt Gonzalez, Sophie Maxwell and Aaron Peskin. If passed, it would increase the real estate property transfer tax of properties which sell for more than $1 million from its current .75 percent to 1.5 percent of the sales price upon transfer of the property. The sellers of the transaction typically pay the cost.

The reason the supervisors said they were proposing the increase is because the City needs more money to support vital city services, including 911 emergency dispatcher training, care at San Francisco General Hospital, homecare services for seniors, housing and support for people with HIV/AIDS and programs for disadvantaged youth. The controller believes that the increase, based on the past five years of real estate sales, would bring in an increase of about $31 million annually.

The arguments against Prop. L are that the transfer tax is already high enough, as it was raised just a few years ago, and that out of a $5 billion budget, $31 million is not a significant sum ­ surely the Board of Supervisors can find that money elsewhere, instead of raising taxes.

I believe the solution lies in reducing waste in city government rather than increasing taxes.

If the proposition were to pass, what would stop the supervisors from doubling the tax again or increasing the transfer tax across the board to the sale of all properties?

From my position as a real estate broker and from countless meetings with sellers, I know for a fact that sellers in general are not aware of a transfer tax until they sell a property. And then they always ask me what the tax is for because it is always the largest expenditure in the sales transaction, other than the brokerage fees. In some cases, they ask if it is OK for them to not pay the tax.

The transfer tax is high enough already and if doubled, even only for sales of $1 million and up, it will eventually be pushed down to lower-priced sales. I also believe that singling out a certain group of people to pay the tax is unfair to that group. I urge you to vote no on Prop. L.

Proposition R

Proposition R, also known as the HOPE (Home Ownership Program for Everyone) initiative, would provide a new condominium conversion process that would allow one percent of the housing stock in San Francisco to be converted to condos, about 3,400 units per year, for the next 25 years. And then 200 units per year thereafter, subject to certain requirements.

The new process would allow buildings of any size to go through the conversion process. Currently only buildings of six units or less can be converted to condominiums.

The proposal was drafted with the intent of increasing home ownership in San Francisco with the thought that more people will be able to purchase the home they live in instead of renting. If an owner wants to convert an apartment building into condominiums, the tenants must be offered the option to purchase the unit they reside in. If the tenants from 25 percent to 40 percent of the building agree to purchase their units, they would be able to do so.

Tenants who do not wish to purchase their units will be given lifetime leases with rent control limits. In addition, buildings that have undergone an owner move-in or been removed from the rental market due to the Ellis Act are not eligible for conversion.

Because Prop. R hopes to provide homeownership opportunities and not speculative purposes, re-selling a converted unit within two years results in a penalty.

The opponent's argument to Prop. R is that it takes away rental stock from the housing market, and thus with less supply and the same demand, rents will increase. They also claim tenant protections for those who do not want to purchase their units are inadequate.

I believe that with the passage of Prop. R, many San Franciscans will be given the opportunity to realize their dreams.

Yes, the passage of Prop. R will take away some rental stock, but the rental stock that will be taken away will be housing the same people who are living there currently, resulting in less demand for rental stock. So the end result will be less supply, but also less demand, and probably no effect on rents. I urge you to vote yes on Prop. R.

But no matter what your position on these issues are, don't forget to vote on Nov. 5.

John M. Lee is a real estate broker at Pacific Union, specializing in the Richmond and Sunset Districts. For questions about real estate, call him at (415) 447-6232 or e-mail him at johnlee@isellsf.com.