Thanks to rising property values, the property tax rate for the City and County of San Francisco is slated to decrease from $1.1880 per $100 of assessed value in the current Fiscal Year to $1.1743 per $100 of assessed value for Fiscal Year 2014-2015, a drop of 1.15 percent.

For properties that haven’t changed hands or been improved, assessed values will increase 0.454 percent, thanks to Proposition 13, down from the maximum allowable increase of 2 percent last year.

A breakdown of how the property tax dollars collected in San Francisco will be allocated in 2014-2015:

San Francisco Property Tax Allocation 2014-2015

San Francisco’s Board of Supervisors is slated to ratify the new rates next week.

Comments from Plugged-In Readers

  1. Posted by eddy

    The city must be raking it in with the number of $5M+ homes that have traded in the past few years.

  2. Posted by Sierrajeff

    Don’t mean to look a gift horse in the mouth, but – what’s the total $$ the City could have made by keeping the tax rate the same? If people are already expecting the higher rate, why not put those funds to use on some of the many urgently-needed projects around the City (transit, water/sewer infrastructure upgrades, park maintenance, etc.)?

    • Posted by medalist

      please, don’t give the city any more money. They are like a spoiled rich kid with no concept of budget.

  3. Posted by shza

    Utterly ridiculous policy, particularly w/r/t the old Prop 13 properties. That those properties should only have an increase of .454 — based entirely on one-year appreciation on other homes — doesn’t even make logical sense. It is not as if increasing the assessments the full (paltry) 2% would get them anywhere near true value, let alone result in overvaluation or over-taxation.

    Work harder and make more money with beneficial labor = higher tax rate.
    Get a luck windfall by sitting on unimproved property = lower tax rate.
    Glad we have our policy and incentives in order.

    • Posted by BTinSF

      There’s no “luck” involved. Just time, life and a little planning. I am approaching 70 years old and retired. I’ve lived where I do for over 35 years. I couldn’t afford to buy the place at today’s value and I couldn’t afford to pay the taxes on it based on today’s value. If Prop 13 changes or goes away, I will be leaving San Francisco and probably California. In my case and in many others, Prop 13 is doing just what it was intended to do. Without it, San Francisco would be a lot closer to being a city of only people who can afford $1000 per square foot homes and the taxes based on that valuation. That appears to be what you want but I’m glad you aren’t running things.

      • Posted by rabbits

        Wrong. The market would stop that from happening, unless you are a very extreme case. There would be an enormous amount of inventory freed up, many second homes, but also some primary residences of long-term owners. Market values would fall reflecting the new inventory, and so would the tax basis of most properties. After a period of adjustment we would reach a new, lower equilibrium of both prices and taxes, in which case you could apply for an assessment at that level. (Though your taxes would likely be higher than they are now.)

        I know of 3 properties on my block that are basically being land-banked because their tax basis is low enough to allow it. They are vacant (not even being rented or Airbnb’d). I am sure this is the case in many affluent areas of CA, and prop 13 is what allows for this.

        • Posted by MrTibbs

          Freed up inventory from people who can longer afford to stay in their homes? That’s brilliant! Do you really think there are sooooo many people “benefiting” from Prop 13 that it artificially restricts supply? That’s the same kind of analysis that creates failed policies that truly do restrict supply. I agree with BTinSF — glad you folks aren’t running things…

          • Posted by Anon

            are you serious? it’s a given that prop 13’s house rich/ income poor effect restricts supply. everyone should know that by now

        • Posted by Keepitup

          Wrong, Charleston VA is a prime example of seniors getting taxed out of their homes. Many other cities/states around the country have no limits on their counties or cites ability to increase property taxes on citizens. And the most vulnerable citizens are at risk of losing their homes. Prop 13 is doing just what it was intended to do. Starve the beast, make cities and counties live within their means and allow seniors to remain in their homes.

          If you want to address the real problem why cities in CA are starved for funds, how about looking at the all the self serving public labor unions? These public unions fund politicians that vote to increase wages and benefits for their members at public expense. And then the politicians cry and whine about not having enough funds to pay for services. Give me a break. It’s a never ending circle of political hacks voting for lucrative wage and benefit packages to support bakers.

          How about we institute 2 year term limits on all elected political hacks. Make it so they can not run for reelection until one term has pasted once termed out? Abolish public unions. Or cap lucrative wage and benefit packages with 2% increases caps just like Prop 13.

      • Posted by Sierrajeff

        Rabbits is right – there’s a large 2-unit, 2-story at 11th & Cabrillo just sitting empty – ridiculous that our tax regime is so screwed up that it’s economically viable to leave a property like that vacant, given both our property values and our housing costs (for absence of available stock).

        • Posted by Keepitup

          It’s vacant because of property control….i.e. rent control.
          The owner is smart to just leave the property vacant until they sell it. It makes perfect business sense. No messy tenant issues to deal with. No government rules and restrictions standing in the way of making a profit on your risk.

          • Posted by Sierrajeff

            But the only reason they can “profit” by letting a building sit empty is because the property taxes they pay on it are frozen in time. If Prop 13 didn’t give the owner protection against property tax increases, then the carry costs would be substantially higher and the units would be rented out.

            And that’s all setting aside the argument about rent control… These units could each be leased for $4,000/month right now. So someone’s willing to give up $96K a year, because there’s a chance that they might not get to raise the rent more than 1% next year? Mularkey.

          • Posted by parklife

            Sierrajeff,

            The value of a vacant duplex vs a rented duplex in the inner Richmond could be as much as $500k. So in your example, if an owner was considering selling within 5 years they might want to hold off on renting. It’s not just the minimal rent increases that make owners reticent to rent out vacant units, particularly in two unit buildings that can condo convert.

      • Posted by observant neighbor

        BTinSF–

        The fair way to deal with people in your situation would be to authorize owners who can show hardship to accept a tax lien which would be paid off (eventually) by their estate. Your yearly tax payment could be restricted to increasing no more than 2% annually, but eventually your estate would have to pay the taxes that you “borrowed” from the city. Why your heirs should benefit from your hardship escapes me.

        • Posted by anon

          Correct, this is exactly what should happen. I’m so tired of the “poor retired person” story where the dude owns an asset worth millions of dollars and is crying poverty. Sickening.

          • Posted by medalist

            You all forget it was ruled unconstitutional to finance schools mostly by property taxes due to equal protections clause. Why pay more property taxes if you see no real benefit?

      • Posted by James

        Simple solution that BC uses:

        Investors pay 100% of the tax due
        If it’s your primary residence you pay 2/3 of tax due
        If you are a senior or disabled you pay 1/3 of the tax due

        Of course it’s far too sensible to ever be put in place in CA

    • Posted by Wai Yip Tung

      I welcome my tax bill to get a bit lower. But this is most ridiculous that prop 13 get a break from their already too low 2% appreciation cap! This is a wrong policy getting worst. I am speaking as a beneficiary of prop 13 myself.

  4. Posted by England

    And once again, property owners can pass on their property taxes to renters through higher rents.

    • Posted by S

      that value is capped so I don’t think anything they pass on to the renters will come close to a hypothetical tax increase (if Prop 13 is revoked)

  5. Posted by SFrentier

    Finally, frisco does something for property owners. Yay!

  6. Posted by RobBob

    I don’t understand, what is the point of trying to get passenger vehicle fee increases when they could just raise the rate 2% every year and pay for schools, transit, bike improvements, etc. through the general fund. Why not raise the rate at the 2% maximum every year? Does legislation prevent this or am I missing something?

    • Posted by Sierrajeff

      The 2% cap is on the increase in assessed value. That’s different than the tax rate, which is the amount you pay based on that assessed value. (Year one: $100,000 home times 1.18% rate = $1,180. Year two, $102,000 home value, times 1.17% rate = $1,193.40 (instead of the $1,203.60 if the tax rate had been kept the same). Hence my question above about why the City’s so willing to forego otherwise-anticipated revenue, when there are so many pressing needs.)

  7. Posted by jill

    the real question is ” why did the school district fund amount in our taxes increase so much?” i understand the drop in the general fund, but dont get the big rise in the school fund.

    • Posted by Wai Yip Tung

      This involve some “state shift”. Funding seems to shift from CCSF to SFUSD. What is fishy is that CCSF is taking like 90% of the funding initially??? I assume SFUSD should get more funding or at least similar given they have lot more students. Why do CCSF siphon all the money???

  8. Posted by Jamie Whitaker

    Article XIIIA of the California Constitution limits the increase in assessments to the lesser of 2% or the change in inflation (using California CPI measured year over year for the month of October). The California CPI increased by just 0.454% between October 2012 and October 2013 – Los Angeles Metro’s inflation much lower than San Francisco’s for those two snapshots in time. Here’s the BOE letter that includes the history of the allowed inflation rates year-to-year: http://www.boe.ca.gov/proptaxes/pdf/lta13059.pdf
    I’m posting this info as something I’m quite familiar with as I am the guy responsible for it at City Hall, but I’m posting it on my own time and as an individual who happens to know about it. 🙂

  9. Posted by JR "Bob" Dobbs

    James Whitaker – many thanks for that clarification! I did not realize that CPI (for California) was so low last year. I’ll take it – should save me a few hundred bucks this year over what I expected.

    More generally, of course Prop 13 and rent control both serve to drive up housing prices and rent prices respectively by limiting supply (in a location like SF, where the addition of new supply through building is severely constrained). It is foolish to argue otherwise. But these laws have both been on the books for 35 years and both are very popular. So they are not going anywhere. It is very easy to use them to your benefit. If you own your place (either to live in or rent out), keep it a long time. If you rent your place, stay there for a long time. The rules are simple. You can either complain about them and accomplish precisely nothing, or use them to your advantage.

  10. Posted by Rillion

    Really interesting to see the big change in the numbers between when Prop 13 first went into effect and what they have been recently. If housing prices tracked inflation then in the first ten years of Prop 13, a homeowner who bought in 1976 would have only seen the assessed value of their home increase by 20.7% over ten years compared to an increase of 110% if it had increased with inflation. Yet, if someone bought in 2003, the Prop 13 assessed value went up 17.6% in ten years compared to the 28.8% it would have gone up if it tracked inflation.

    While Prop 13 is still providing a discount for more recent homebuyers, it is nothing compared to the discount it generated in the late 70’s/early 80’s. If it were not for people being able to inherit the Prop 13 tax basis from their parents or grandparents, the reality is that the worst of Prop 13 would have been mitigated by the downward trend in inflation rates during the last 35 years and population ‘turnover’.

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