New plan floated to stymie foreclosures in San Francisco
Lenders would lose a potentially lucrative exemption from San Francisco’s transfer tax on foreclosed properties, under the newest plan by city officials to help financially struggling homeowners from losing their homes.
John Avalos: Legislation has teeth
Under current law, lenders and financial institutions that take possession of a foreclosed home don’t have to pay the real estate transfer tax. All other purchasers of foreclosed homes, however, must pay the levy.
“We see a real problem in this city and we want to be able to have an adequate response,” said Supervisor John Avalos, chief sponsor of the legislation. “This ordinance is really about trying to make sure we’re inhibiting foreclosures in San Francisco.”
If the exemption for lenders had not been on the books last year, the city would have received an estimated $8 million extra in transfer tax revenue on 831 foreclosed homes. In 2005, when there were 26 foreclosures that would have been affected, the extra revenue would have been just a couple hundred thousand dollars, said City Assesor/Recorder Phil Ting.
He helped craft the new legislation to eliminate the tax exemption, which he said would help level the playing field. Avalos will formally introduce the plan at the Board of Supervisors’ meeting Tuesday. His co-sponsors are Supervisors David Campos, Malia Cohen, Eric Mar and Christina Olague.
San Francisco’s transfer tax rate escalates with the value of the property. For example, the rate is $6.80 per $1,000 for homes that sell for between $250,000 and $1 million. The charge is $7.50 per $1,000 for homes that sell for more than $1 million but less than $5 million. The tax rate is higher for pricier properties.
On a $700,000 foreclosed home that wasn’t sold at auction, the one-time tax hit on the lender that held onto the property would be $4,760, if the new rules were in place. Would that be enough to get the lender to work out a new loan-repayment arrangement with the homeowner rather than to foreclose? The answer: We’ll have to wait and see.
The Board of Supervisors can propose the change, but voters would have to approve it. The plan is to hold at least one City Hall hearing on the proposal before placing it on the November ballot, the same election in which all of the co-sponsors except Cohen are up for re-election.
The Board of Supervisors already went on record in April calling for a halt to foreclosures in the city.
“This is finally something that actually has some teeth to it,” Avalos said.