San Jose City Council: How will the property transfer tax increase be spent?

Eight months after voters approved Measure E — a property transfer tax increase— the city will decide how to spend the money intended for affordable housing projects and homelessness prevention services.

Under the plan coming to the City Council Nov. 10, councilmembers propose using the $30 million in tax revenue to create new properties for low- and middle-income families. The money would also fund permanent supportive housing projects, homeless prevention services and accessory dwelling units (ADUs).

The Housing and Community Development Commission, which oversees the spending of Measure E dollars, wants to take $6 million from affordable housing projects and create rental assistance programs for those potentially facing eviction, contrary to the original plan proposed by the council. This means only 59% of the funds would go toward housing projects.

Measure E, as passed by voters, allows the money to be put into the city’s general fund for any purpose, but councilmembers promised 80% of the dollars would go toward low-income housing and supportive housing.

The ADU program, meant to support middle-income housing, would also be scrapped under the commission’s plan.

Fifty three percent of San Jose voters approved Measure E, which went into effect July 1. According to a memo by Rachel VanderVeen, deputy director of housing, and Budget Director Jim Shannon, the tax would have raised about $70 million if it went into effect in 2017-2018, before the onslaught of COVID-19. Voters also approved the creation of an oversight committee.

Jennifer Loving, chief executive officer of Desirination: Home, an organization working to end homelessness in Santa Clara County, championed the measure prior to the March election. In an op-ed for this publication, Loving called the spending plan “a common-sense approach for addressing our homelessness and housing crisis.”

The measure has become all the more important in light of the pandemic, as thousands are facing eviction in Santa Clara County, Loving said.

“Now more than ever, given what we have faced this year with COVID and the disproportionality of who COVID has affected, it is our responsibility to do everything we can to prioritize the lowest-income families of color, and that’s what this expenditure plan aims to do,” Loving told San José Spotlight.

Loving said the city should not be taking away from the money being allocated to much-needed affordable housing, especially when the city and community worked together previously to agree upon a plan.

Pat Waite, president of Citizens for Fiscal Responsibility, an organization working to ensure San Jose responsibly allocates tax dollars, opposed the measure, expressing concerns the city wouldn’t use the money for its intended purpose.

Waite also criticized San Jose’s zoning process in an op-ed.

“Our zoning philosophy remains geared more toward protecting the value of existing homes than encouraging creative solutions to the housing problem. San Jose is making it very difficult to build housing of any sort,” Waite said. “This needs to change before the city goes deeper into the housing construction business.”

Now that he sees the city is committing the money for housing and homelessness, he said he can accept whatever plan they come up with so long as the money continues to go toward the those services.

“Shuffling money around within the categories that measure was meant to address doesn’t give me any grief,” he said. “One of the best ways to afford to avoid having homeless people is to make sure that they don’t become homeless to begin with.”

Before Measure E passed, the property transfer tax was $3.30 per $1,000 of assessed property value. Now, the transfer tax is $7.50 per $1,000 for properties valued between $2 million and $5 million and $10 per $1,000 for properties priced between $5 million and $10 million.

The proposal will be up for discussion at the Nov. 10 council meeting. The meeting begins at 1:30 p.m. To watch, visit San Jose’s YouTube page.

Contact Carly Wipf at [email protected] or follow @CarlyChristineW on Twitter.

Editor’s Note: Jennifer Loving, Chief Executive Officer of Destination: Home, serves on San José Spotlight’s Board of Directors.