Measure J: Removal of Foreclosure Exemption for Real Property Transfer Tax

When you sell your condo, San Francisco taxes the full sale price (https://www.sf.gov/transfer-tax), whether you made money or lost it. When Madison Capital bought the defaulted loan on the 34-story tower at 45 Fremont for $238M (https://sfstandard.com/2026/04/13/shorenstein-skyscraper-san-francisco-madison-capital/) this year and took the building, it paid no transfer tax. Under Prop J it would have owed 6% of what the building is worth, roughly $14M at the price it paid.

The exemption was written in 1967 (https://codelibrary.amlegal.com/codes/san_francisco/latest/sf_business/0-0-0-2397) for a bank stuck with a building it never wanted, and for decades it mostly covered homes. Then investors learned to buy the loan instead of the building, and the Assessor now counts $450M in foreclosure exemptions claimed in the last three years, against $50M in the fifteen years before that (https://www.sfexaminer.com/news/politics/prop-j-targets-foreclosure-tax-breaks-after-big-claims-jump/article_e2ec0283-dcc2-41d7-89aa-11373ed87dcc.html). The tax they skip is the one every ordinary buyer pays, and homes and small buildings keep the exemption either way.

The San Francisco Taxpayers Association argues Prop J would make lending here "significantly riskier and more expensive than anywhere else in the state" (https://www.sfexaminer.com/news/politics/prop-j-targets-foreclosure-tax-breaks-after-big-claims-jump/article_e2ec0283-dcc2-41d7-89aa-11373ed87dcc.html), and we raised the same worry in June (https://growsf.org/news/2026-06-11-lurie-drops-transfer-tax-cut/). But a lender pays only when a loan has failed and the building changes hands, a small extra cost on a loss it is taking anyway, so the premium is the tax times the odds of that happening. Our worst-case estimate, is that Prop J adds about 0.14 points per year to a $100M office loan that carries about 2 points of risk premium, and less in practice, since the tax falls on what the building is worth by then, not on the loan.

New York (https://www.nysenate.gov/legislation/laws/TAX/1401) and Florida (https://floridarevenue.com/Forms_library/current/gt800014.pdf) have taxed foreclosures and deeds in lieu for decades, on the full unpaid debt rather than on what the building is worth (https://growsf.org/voter-guide/san-francisco-voter-guide-november-2026-election/measures/prop-j/legal-text/#prop-j-fair-market-value), and banks still lend there. But those rules are statewide, so no city there loses a loan to the town next door. California exempts foreclosures statewide (https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=RTC&sectionNum=11926), and San Francisco would be the only major city in the state (https://www.sfexaminer.com/news/politics/prop-j-targets-foreclosure-tax-breaks-after-big-claims-jump/article_e2ec0283-dcc2-41d7-89aa-11373ed87dcc.html) taxing them, unless Oakland (https://oaklandside.org/2026/07/09/foreclosure-tax-measure-oakland-election-wang/) passes the same fix this November.

Prop J started as half of a plan (https://growsf.org/news/2026-06-11-lurie-drops-transfer-tax-cut/). Mayor Lurie and Supervisor Mahmood wanted to cut the transfer tax on big sales roughly in half (https://growsf.org/news/2026-02-25-transfer-tax-cut-housing/) so stalled housing gets built, and Prop J was the revenue to pay for it. We want that cut, and the Board can pass it by ordinance (https://www.gtlaw.com/en/insights/2026/3/san-franciscos-build-act-proposed-transfer-tax-reductions-to-stimulate-housing-and-commercial-development). We believe that if Prop J passes, the transfer tax will be cut in the next Board of Supervisors session. For that deal to happen, Prop J must pass and Prop I must fail, because Prop I would take away the Board's power to change the tax.

Source (https://growsf.org/voter-guide/san-francisco-voter-guide-november-2026-election#prop-j)

Yeehaw!  A way for the city to claw back some revenue from real estate hustlers who skirt paying San Francisco’s (reasonable) transfer tax on commercial buildings. Currently, all foreclosures are exempt from the transfer tax. Prop. J would close that loophole for commercial buildings, while keeping small residential buildings, single-family homes, condos, and co-ops (you know, the places people live) exempt. 

Right now, new buyers (including corporations) can just buy the loan from a property’s lender (a type of sale which isn’t taxed) instead of buying the building itself (a sale which is taxed), and then foreclose on the old owner and take over the building without paying a dime to the city. What a scam! 

Under Prop. J, owners of commercial buildings (including corporations) can’t dodge the transfer tax via foreclosures any longer. Prop J will calculate the transfer tax based on the market value of the sale, not the (far, far lower) value of the loan. 

Since the rest of us aren’t affected by Prop J, this is a no-brainer to raise more money for the general fund to pay for vital city services. Jackie Fielder, Bilal Mahmood, SEIU, and Mayor Lurie (ikr??) are all supporting, and so are we. Vote yes.

Source (https://www.theleaguesf.org/#PropJ)

SPUR's Recommendation

San Francisco is facing significant fiscal uncertainty and needs revenue to support basic municipal functions, programs, and services. The city has few ways to generate revenue without increasing the tax burden for working families and small businesses. Closing the foreclosure loophole for commercial and multi-family residential properties offers a way to increase revenue without harming individual homeowners or small landlords. If the city moves forward with plans to reduce transfer tax rates in the future, the additional revenue generated by this measure will be particularly important to avoid negative financial impacts.

What Prop. J Would Do

Proposition J would eliminate an exemption from San Francisco’s real property transfer tax for all foreclosed commercial properties, mixed-use, and multi-family residential properties with more than five units, effective March 1, 2027. Single-family homes and condominium buildings of up to four units would remain exempt. This measure would also temporarily raise the city’s Gann Limit (a state-imposed cap on the total annual revenue that cities may spend) by the amount of transfer tax collected for four years, starting November 3, 2026.

The Backstory

San Francisco collects a transfer tax on most real estate transactions, with rates scaled according to the sale price. Transfer tax revenue goes into the city’s General Fund and cannot be designated for specific purposes. The Board of Supervisors may amend, reduce, suspend, or repeal the transfer tax without voter approval, but proposed increases must go to the ballot. San Francisco voters have approved several rate increases over the past 20 years, including a 2020 measure that doubled rates for transactions over $10 million.

San Francisco Real Property Transfer Tax Rate Scale (2020 Prop. I)

• Property Sale Price: $100 – $250,000; Transfer Tax Rate: 0.50%
• Property Sale Price: $250,001 – $999,999; Transfer Tax Rate: 0.68%
• Property Sale Price: $100,000,000 – $4,999,999; Transfer Tax Rate: 0.75%
• Property Sale Price: $5,000,000 – $9,999,999; Transfer Tax Rate: 2.25%
• Property Sale Price: $10,000,000 – $24,999,999; Transfer Tax Rate: 5.5%
• Property Sale Price: $25 million and above; Transfer Tax Rate: 6%

Currently, San Francisco exempts foreclosed properties and properties transferred to the lender in lieu of foreclosure from paying a transfer tax. San José, Oakland, and all general law cities and counties in California also exempt such properties. Oakland voters are considering a measure to limit the foreclosure exemption to their transfer tax (Measure FF (https://www.spur.org/voter-guide/oak-measure-ff-transfer-tax-foreclosures)).

Foreclosure exemptions encourage economic activity by making distressed properties more affordable and leaving buyers with more money to invest in them. When foreclosure transactions follow the conventional pattern, initial title transfers of foreclosed properties from the borrower to a bank or lending institution are exempt from the transfer tax, but lenders do pay a transfer tax when selling the properties to new buyers. However, in some cases investors will instead acquire distressed debt from lenders and then foreclose on a property, allowing them to assume ownership without paying any transfer tax. San Francisco’s Assessor-Recorder reported a sharp increase in these cases since 2023.

• Between 2008 and 2023, 4,000 foreclosure exemption claims were filed: 80% were for single-family homes, 96% were for properties valued under $10 million, and about 65% followed the conventional foreclosure pattern.
• Since 2023, 600 claims have been filed: only 23% were for single-family homes, 56% were for properties valued over $10 million, and less than 10% followed the conventional foreclosure pattern.
• Between 2023 and 2025, claims for income-producing and investment-oriented properties (multi-family, commercial, or vacant land) acquired through distressed transfer mechanisms allowed investors to avoid paying more than $450 million in transfer tax.

Prop. J would close the distressed transfer loophole while maintaining exemptions for single-family homes, condos, and small multi-family properties (up to 5 units) facing foreclosure, generating an estimated $100 million to $150 million annually over the first five years. However, transfer tax revenue is highly volatile and difficult to project. High rates of foreclosures are projected for the next few years, so the revenue collected could be significant. As the real estate market adjusts, the revenue stream could become negligible.

Additionally, this measure was originally part of a broader plan to halve transfer tax rates for transactions above $10 million (reversing rate increases voters approved in 2020). That legislation was recently withdrawn, but the mayor has pledged to revisit cutting transfer tax rates for high-value properties if this measure helps offset the financial impacts of the proposed reduction. If the Board of Supervisors lowers transfer tax rates, the fiscal benefits of this measure would be lower than projected.

Another measure, Proposition I (https://www.spur.org/voter-guide/sf-prop-i-transfer-tax-set-aside), may alter the impacts of this ordinance. Prop. I (https://www.spur.org/voter-guide/sf-prop-i-transfer-tax-set-aside) would dedicate half of the transfer tax revenue from transactions over $10 million to a set-aside fund for affordable housing and homelessness programs and would require voter approval to reduce transfer tax rates in the future. If both measures pass, some of the revenue generated by Prop. J would support this set-aside fund, and plans to reduce transfer tax rates for properties valued above $10 million would be more difficult to enact.

Prop. J was placed on the ballot by a 10–1 vote of the Board of Supervisors. It requires a simple majority (50% plus one vote) to pass.

Equity Impacts

Transfer tax revenues become part of the general fund and broadly support municipal functions and services, including programs that benefit low-income residents and communities of color. This measure maintains foreclosure exemptions for single-family homes, condominiums, and small multi-family buildings to avoid causing hardship for households and small landlords facing financial difficulties.

Pros

• This measure generates up to $150 million annually to bolster the city’s General Fund at a time of fiscal distress and uncertainty.
• Closing this transfer tax loophole simplifies San Francisco’s tax code and makes the transfer tax fairer overall, in line with other recent tax code changes for businesses and property owners.

Cons

• Lenders may pass transfer tax costs on to buyers or charge higher transaction fees to offset the additional cost, potentially preventing new buyers from purchasing and reviving struggling properties in some cases.
• San Francisco’s commercial office market is still struggling; making it more expensive to buy and sell commercial real estate may slow its recovery.

Source (https://www.spur.org/voter-guide/2026-11/sf-prop-j-transfer-tax-foreclosures)

Removes San Francisco's transfer-tax exemption when lenders take ownership of certain large commercial or multifamily properties through foreclosure, while preserving the exemption for single-family homes, condominiums and residential properties with fewer than five units. CADC supports Prop. J because the majority concluded that large lenders and investors taking ownership of major properties should not automatically receive a transfer-tax exemption unavailable in an ordinary sale and that such properties should contribute to City revenues. Members also considered the opposing concern that imposing a transfer tax during foreclosure could increase lenders' losses, discourage financing or complicate the recovery of distressed properties.

CADC 認為，企業銀行或投資行在大型商業楼宇或公寓住宅遭遇到銀主盤被收回時，無需獲得如獨立屋或小型住宅同樣的轉讓稅的豁免，因此支持提案 J。

Source (https://www.sfcadc.org/11_2026_propositions)

End exemption to real estate transfer tax by banks foreclosing on properties

Source (https://www.sfgreenparty.org/endorsements/123-november-2026-endorsements)

This measure would remove the existing real estate transfer tax partial exemption for properties wherein A) lender foreclosed on the property or B) borrowers transferred the property to lender in lieu of foreclosure. This measure would apply to transfers on or after 3/01/2027. The Controller estimates this measure could bring an average of $100 million to $150 million annually in tax revenue over the next five-years.

We recommend voting No on J. Originally, this measure was supposed to be paired with a reduction in the real transfer tax to be part of a revenue-neutral package. But now that it’s not, all this measure does is raise taxes, hampering Downtown’s recovery. And by just raising revenue, this measure doesn't address the real cause of SF's deficit: overspending. SF doesn't have a revenue problem. It has a spending problem. Reaching for more revenue avoids tackling that fundamental issue.

Source (https://www.sfblueprint.org/advocacy/november-2026-voter-guide)

Removes a longstanding tax exemption and squeezes property owners at their most vulnerable moment. Vote NO.

Source (https://sfgop.org/nov-2026-endorsements)

Prop J - Eliminate Foreclosure Exemptions

What it does: Prop J would eliminate the real property transfer tax foreclosure exemption for all properties other than residential and mixed-use properties with fewer than five residential units,

Endorsement: NO on Proposition J

Since 1984, transfers to lenders in foreclosure have been exempt from the real-property transfer tax. Prop J continues giving a break to lenders with small (fewer than five units) residential and mixed-use buildings and taxes the rest at regular rates. The City Controller reports this measure is “highly volatile” and likely will fade with the downturn of foreclosures.

Closing a loophole that banks and funds use isn’t crazy. Building a budget on a cyclical distress tax is. This measure was conceived as the offset for a transfer-tax cut meant to juice housing (the BUILD Act). The cut was shelved. The tax hike on foreclosure paper kept walking towards the ballot like a severed plotline. Revenue that spikes in a crash and vanishes in a recovery is not a strategy. It is a slot machine with a civic theme.

Vote NO. If you want housing, reform the laws that slow it. Don’t wait for the next wave of failed loans.

Source (https://www.connectedsf.com/2026-voter-guide#prop-j)

What it does: Prop J would eliminate the real property transfer tax foreclosure exemption for all properties other than residential and mixed-use properties with fewer than five residential units,

Endorsement: NO on Proposition J

Since 1984, transfers to lenders in foreclosure have been exempt from the real-property transfer tax. Prop J continues giving a break to lenders with small (fewer than five units) residential and mixed-use buildings and taxes the rest at regular rates. The City Controller reports this measure is “highly volatile” and likely will fade with the downturn of foreclosures.

Closing a loophole that banks and funds use isn’t crazy. Building a budget on a cyclical distress tax is. This measure was conceived as the offset for a transfer-tax cut meant to juice housing (the BUILD Act). The cut was shelved. The tax hike on foreclosure paper kept walking towards the ballot like a severed plotline. Revenue that spikes in a crash and vanishes in a recovery is not a strategy. It is a slot machine with a civic theme.

Vote NO . If you want housing, reform the laws that slow it. Don’t wait for the next wave of failed loans.