The plain language of Proposition 13 prohibited real estate transfer taxes, but the California courts carved loopholes that have allowed some cities to impose them. Unlike capital gains taxes, which are levied on profits, transfer taxes are a percentage of the entire sale price when real estate is transferred from one owner to another.
Before Proposition 13, state law allowed a documentary transfer tax of 0.11%, and Prop. 13 didn’t change that. But new transfer taxes were not permitted.
That changed in the 1990s, when a series of court decisions opened the door for general-purpose transfer taxes to be levied by charter cities, which are cities that have adopted their own local constitution. “General law” cities that did not have a charter were still limited to the 0.11% documentary transfer tax limit in state law.
More and more charter cities adopted new transfer taxes. HJTA’s attorneys observed that even some “general law” cities seemed to be interested in becoming charter cities just to take advantage of the transfer tax loophole.
That ends when the Howard Jarvis Taxpayers Association’s new initiative qualifies for the November 2026 ballot and is approved by a majority of voters.
The Local Taxpayer Protection Act to Save Prop. 13 closes the transfer tax loophole by banning all new transfer taxes above the original 0.11% allowed by state law. Existing transfer taxes over the 0.11% limit will “sunset” two years after the initiative is adopted.
This includes Measure ULA in the city of Los Angeles, a massive real estate transfer tax of 4% on properties sold for more than $5 million and 5.5% on properties sold for more than $10 million. The tax also applies to the value of non-sale transfers of ownership. Although promoted to voters as a “mansion tax,” Measure ULA is a tax on all real estate valued at more than $5 million. It hits commercial properties, apartment buildings, even affordable housing developments.
Measure ULA was an initiative on the November 2022 ballot. It is not a general tax but a special tax, dedicated to funding specific kinds of homelessness programs and housing. The 1990s court decisions said charter cities could enact general-purpose transfer taxes, not special-purpose transfer taxes.
But Measure ULA went through two court-created loopholes: the transfer tax loophole from the 1990s, and the “Upland” loophole from the 2017 California Supreme Court decision in California Cannabis Coalition v. City of Upland. In that case, the court used ambiguous language that suggested a special tax that required a two-thirds vote could instead pass with a simple majority vote if it was proposed by a citizens’ initiative instead of a city council.
The Local Taxpayer Protection Act to Save Prop. 13 will close both loopholes. Measure ULA will be ended, and so will roughly two dozen other transfer taxes in cities including Berkeley, Oakland, Palo Alto, San Francisco, Pomona, Culver City and Santa Monica.
Proposition 13 banned transfer taxes in 1978 because Howard Jarvis knew that local governments would look for ways to take back the money that Prop. 13 had stopped them from grabbing. Collected at the time of sale, transfer taxes are a way of stealing the equity that property owners have built up in their homes or business properties.
Please tell everyone you know that the Howard Jarvis Taxpayers Association is doing something about it. They can learn more and sign the petition at SaveProp13.com.
Thank you for your help to get this important initiative qualified for the ballot.