Angry building owners threaten lawsuit over anti-speculation tax

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Supporters of the measure are playing up its origins.

Opponents of the anti-speculator tax that will appear on the November ballot blasted the proposal in a City Hall hearing yesterday [Thu/10] — pledging to defeat the measure in court even if voters approve it — but they were overwhelmed by a strong turnout from supporters who said real estate speculation drives up the cost of housing without adding any value.

“We can sue you in court on the many of the unconstitutional aspects of this and we will do that,” Janan New, director of the San Francisco Apartment Association, said of the measure that would charge a 24 percent tax on properties flipped within a year of purchase down to a 14 percent tax if flipped within five years.

New and other allies — including San Francisco Association of Realtors, Small Property Owners of San Francisco, and Sup. Katy Tang — claimed that the measure is illegally retroactive because it affects those who recently bought property and that it doesn’t account for people who need to sell their properties because of job loss or other life changes.

“This is almost tantamount to a confiscation of property,” Peter Rich of SPOSF said at the hearing.

But Sup. David Campos — who placed the measure on the ballot along with Sups. Eric Mar, Jane Kim, and John Avalos — refuted allegations that the measure isn’t legally sound and carefully questioned City Attorney’s Office staff to clarify the laws that allow for the measure.

“I know there’s a lot of ulterior motives here because we do know this is going to be challenged in court, so I want to be very clear,” Campos said in response to a line of questioning from Tang, who continued to maintain, “So it’s retroactive in a sense” after being told by the deputy city attorney that it wasn’t retroactive because the tax only applies to future property sales.

The anti-speculation tax was first introduced by then-Sup. Harvey Milk shortly before his assassination in 1978 (Dianne Feinstein killed the measure after becoming acting mayor), and it was revived this year during a series of tenant conventions and sponsored by Mar.

“What we’re proposing is very reasonable to deal with the affordable housing crisis,” Mar said at the hearing, noting that it exempts single-family homes, projects larger than 29 units, and sales triggered by the death of the property owner. “It’s been crafted with enough exemptions to protect the small guy and really go after the profiteers.”

During the public comment period, where supporters on the measure vastly outnumbered opponents, several speakers referenced Harvey Milk and said housing in San Francisco wouldn’t be so expensive today if the measure had passed back then, a time when evictions and displacement were also on the rise.

“He was assassinated before it came to fruition. The parallels to that time and today are striking,” testified Tom Temprano, president of the Harvey Milk LGBT Democratic Club, who urged supervisors to “honor the legacy of Harvey Milk by passing this thoughtful and well-crafted legislation.”

Brian Basinger, head of the AIDS Housing Alliance, played old video footage of Milk talking about the measure back in 1978, shortly after he was evicted from his Castro Street camera store by a landlord seeking higher rents, noting that profiteering forces San Franciscans to spend too much on housing and have too little left over for other needs.

“So when you look at that, it’s going to affect the larger economy,” Milk said of real estate speculation.

Gen Fujioka, who works at Chinatown Community Development Center and spoke for San Franciscans Against Real Estate Speculation, cited recent evidence of properties snapped up by speculators and quickly flipped for profits of 50 percent of more.

“Basically, what we’re seeing today is an escalation in the sales prices of multi-unit buildings beyond what people can pay in rent,” Fujioka testified, noting how that essentially forces landlords to evict rent-controlled tenants to make the investments pencil out. “That kind of price escalation is causing instability in our communities.”

But opponents lashed out at the measure and the characterization that they were profiteering in ways that hurt people. “It’s a housing tax and it doesn’t make sense to have a housing tax in the most expensive city in the country,” said Jay Chang of the Association of Realtors.  

Aaron Jones said he and his wife invested their children’s college savings in a small apartment building, and that they’re good landlords who should be able to sell the property when they want to without penalty.

“We can’t sell until 2017 with this retroactive, punitive tax,” Jones said, saying there were many other small investors like him who were afraid to speak up because “in San Francisco, to be an investor — not a speculator — is to be the devil.”

But supporters of the measure say their intention isn’t to demonize property owners but to do something about the eviction and displacement crisis that is changing the face of the city, and to create a disincentive to bad behavior.

“It’s really the most vulnerable people who are being affected by evictions,” said Erin McElroy of the Anti-Eviction Mapping Project, citing her group’s research showing 72 percent of recent evictions have been of the elderly or disabled.

“Speculation is the commodification of housing and housing is essential,” said Chris Durazo of the Veterans Equity Center.

Campos said most landlords should support the measure as check against speculators that are pushing up the price of housing, triggering evictions, and creating a divisive politcal climate: “Speculators are giving landlords in San Francisco and property owners in San Francisco a bad name.”