In a move that would make housing in the region even less affordable, officials in six East Bay cities are trying to siphon off tens of millions of dollars of property owners’ equity to balance their budgets.
Voters should reject measures on the Nov. 6 ballot in Oakland, Berkeley, Richmond, Hayward, Union City and El Cerrito that would raise property transfer taxes to rates that would dwarf almost all other cities in the state.
The taxes are typically split between buyers and sellers. In most cases, the changes would cost homeowners thousands — often tens of thousands — of extra dollars when they buy or sell their homes.
For property buyers, that means more money that they must borrow to finance their homes. For sellers, the transfer taxes are subtracted from the hard-earned equity left after their mortgages are paid off. That’s less money for the down-payment on the next home or for retirement savings.
And for the cities, struggling to balance their budgets as they face increasing payments for public employee pensions, transfer taxes are yet another way to generate revenues.
The transfer tax rates in the six cities would be seven to 25 times those in almost all other California cities. Berkeley and Oakland already have the highest transfer taxes in the state. Their latest measures would raise even more money. The other four measures would also place those cities among the top 10 in the state.
This adds insult to injury for homeowners who have already paid property taxes for years, including extra annual levies for items like public employee pensions, roads, homeless and libraries.
It’s rational to ask existing property owners to pay annually toward public services. But charging exorbitant additional taxes for selling or buying the same properties makes no sense. It’s simply legal theft of property owners’ assets.
The relevant law
Under state law, property owners in almost all California cities pay a county transfer tax of $1.10 for every $1,000 of sale price, or 0.11 percent of the sales price. The counties usually split the proceeds with the cities.
But cities that operate under their own charters, as opposed to the general laws set by the state, can increase their transfer taxes with majority approval of voters.
If they do, their property owners must still also pay the county transfer tax. All six ballot measures fail to mention that the county tax would still be levied. However, we include that in our summaries below.
Also, two of the six cities, El Cerrito and Union City, are not currently charter cities. Their ballot measures to raise their transfer taxes also include provisions that would make them charter cities.
Becoming a charter city is a major step that has far-ranging implications for laws governing, for example, the cities’ personnel, elections and campaign finance rules, public contracts and mechanisms for levying taxes.
It’s a decision that voters should make on its own merits. Indeed, the melding of a charter city vote with a transfer tax increase might violate the California Constitution’s requirement limiting ballot measures to one subject.
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The six measures
Here is a summary of each of the six measures:
Berkeley Measure P: While the city suggests this is a tax increase for mental health and the homeless, transfer taxes go into the general fund and can be used for any purpose. The city’s current transfer tax rate is 1.61 percent of the sales price. Measure P would raise the rate for 10 years to 2.61 percent for property that sells for more than $1.5 million.
El Cerrito Measure V: El Cerrito residents currently pay the county rate of 0.11 percent when selling property. Measure V would make El Cerrito a charter city and increase the total transfer tax rate to 1.31 percent.
Hayward Measure T: Hayward currently has a transfer tax rate of 0.56 percent. Measure T would increase the rate to 0.96 percent.
Oakland Measure X: The city’s current transfer tax rate is 1.61 percent of the sales price. Measure X would reduce the rate to 1.11 percent for properties sold for up to $300,000; keep it at 1.61 percent for properties from $300,000 to $2 million; and increase the rate to 1.86 percent for properties between $2 million and $5 million, and to 2.61 percent for properties over $5 million.
Richmond Measure H: Richmond currently has a transfer tax rate of 0.81 percent. Measure H would increase that to 1.36 percent for properties between $1 million and $3 million; to 2.61 percent for properties between $3 million and $10 million; and to 3.11 percent for properties over $10 million.
Union City Measure EE: Union City residents currently pay the county rate of 0.11 percent when selling property. Measure EE would make Union City a charter city and permanently increase the total transfer tax rate to 1.11 percent.
There are no good policy reasons for property transfer taxes. The actual government cost of processing sale-related documents are covered under separate fees.
Rather, these cities are trying to take your equity because they can. If you let them. Don’t. If you live in one of these six cities, vote no.
