SAN JOSE (CBS SF) — Ahead of the March 3 California primary, proponents of a new tax on mega real estate deals in Santa Clara County are stepping up efforts to raise awareness about the proposal – Measure E – that elected officials say will raise funds for affordable housing. But opponents say there is a catch.

Measure E would impose a graduated transfer tax on properties valued at $2 million and up, to raise more than $70 million annually to pay for housing for seniors, veterans, disabled, low income families, and homeless.

Santa Clara County voters will see the following description on the ballot for Measure E:

“To fund general City of San José services, including affordable housing for seniors, veterans, disabled, and low-income families, and helping homeless residents move into shelters/permanent housing, shall an ordinance be adopted enacting a real property transfer tax including unrecorded transfers at these rates: EXEMPT transfers under $2,000,000 adjusted for inflation, $2,000,000 to $5,000,000 at 0.75%, $5,000,000.01 to $10,000,000 at 1.0%, and over $10,000,000 at 1.5%; generating approximately $70,000,000 annually, until repealed, with all money staying local?”

“You cannot solve the affordable housing crisis without government money, subsidies. You can’t do it,” said Santa Clara County Tax Assessor Larry Stone.

Stone said the vast majority of real estate transactions are for residential listings, far below the $2 million threshold, and would not be subject to the Measure E tax. Stone said the proposed tax is meant to target megadeals. In 2019-2020, San Jose saw its fair share of large transactions:

SJ Cityview LLC (Jay Paul Co.) – $283,500,100
Valley Tech Centre (Lincoln Properties/Pccp) – $180,000,000
SC SJ Holding LLC (Eagle Canyon Capital) – $154,055,000
Valley Tech Centre (Lincoln Properties/Pccp) – $135,000,000
KT North First – $132,500,000

In recession years, Measure E is estimated to generate $22 million per year, but in boom times, that could go as high as $70 million per year.

“We really have to deal with our housing crisis or it will have a serious negative impact upon the economic engine of this country, which is high tech,” said Stone.

Stone brushed off any concerns that the transfer tax would scare businesses away from San Jose.

“Real estate taxes, whether they’re transfer taxes or just simple real estate taxes, aren’t of serious concern to most corporations because California’s Proposition 13 has very low property taxes,” said Stone.

San Jose councilmember Johnny Khamis, a staunch opponent, called the push for Measure E “disingenuous.”

“I think it’s dishonest to call it a measure that will raise money for affordable housing because it raises money for our general fund,” said Khamis.

Because Measure E would raise taxes to go into the city’s general fund, it only requires a simple majority vote. If the generated tax revenue were to be earmarked for a specific purpose such as housing, it would require a two-thirds majority.

Khamis was skeptical of promises from elected officials that Measure E funds would be used for affordable housing.

“Maybe these elected officials in the next couple years (would do so), but the mayor is leaving office two years from now. And this money can be spent by any council any way they like because it’s a general fund tax,” said Khamis.

“People that make the argument that ‘Well, they promise to do it but they can’t do it’ are people that don’t want the measure to pass anyway because they know that if there’s a two-thirds vote it makes it increasingly difficult to make it happen,” said Stone.

At Second Street Studios in downtown San Jose, the city’s first supportive housing complex for formerly homeless people, the 150-unit apartment building is nearing its one-year anniversary.

Raymond Ramsey and his wife were homeless and living on the street for a year when they passed the months-long application and got a one-bedroom studio unit several months ago. Ramsey credits the housing with saving his life.

Ramsey is conflicted about the Measure E proceeds going into the city’s general fund, but had an idea to make sure city leaders keep their promise.

“Let’s go ahead and get Measure E passed. Like I said, I’m in support of Measure E, generally,” said Ramsey. “And then hopefully, there will be an oversight committee, that will see that the money does go towards affordable housing.”

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