It’s been a week of polarizing housing conversations. The mayor of Sacramento has proposed the idea of increasing the real estate transfer tax as a way to generate revenue for housing affordability. I talked with three reporters on Monday about this, and I wanted to take some time to scratch out some thoughts. This is NOT a red or blue issue for me. My interest is considering how something like this could affect the housing market. So, let’s talk about it.
UPCOMING SPEAKING GIGS:
10/23/25 CREB Meeting (at SAR & Zoom)
10/24/25 Fusion Rally in Denver, CO
11/4/25 SAR Main Meeting
11/5/25 KW Elk Grove
12/9/25 Downtown Regional MLS Meeting
12/10/25 SAFE Credit Union (TBA)
1/13/26 Joel & Mike Event (TBA)
1/14/26 Windermere EDH / Placerville
2/11/26 San Joaquin County presentation (TBA)
2/20/25 PCAR Presentation
3/25/25 Coldwell Banker EDH
A PROPOSED TAX AT THE HIGHEST PRICES
The mayor of Sacramento has floated an idea of raising the city’s real estate transfer tax to help generate funds for first-time buyers and homelessness. The details are still in progress, and there is nothing definitive yet. News 10 reports that the city’s real estate transfer tax could go from 0.275% to about 1% if voters approved at the ballot. The idea for now is that this will only apply to higher-priced transactions (maybe $1M or $2M – to be determined). In real numbers, this means the tax would go from about $2.75 to $10 for every $1,000 in property value. In other words, if you sold a $1M house today, there would be a tax at $2,750 under the current system, but it would be about $10,000 under the new proposal (assuming it is about 1%). If the house was $4M, it would be $11,000 currently, but $40,000 with the new proposal.
TAX POLICY CAN AFFECT THE HOUSING MARKET
Sometimes the government creates policy that ends up affecting the housing market in unexpected ways. This is what we’ve seen in Los Angeles with the “mansion tax” (Measure ULA) that taxes 4% for homes at $5M and 5.5% for homes above $10M. This ends up being big money because an owner is taxed $200,000 when selling at $5M. This “mansion” tax actually applies to commercial properties also. A study from UCLA concluded the number of sales above $5M has fallen as much as 50% since Measure ULA was enacted (and commercial transactions are down 30-50% in volume). For me, I’d like to see future stats when they become available to see if the trend has persisted, but these numbers are stunning. So far, it looks like the tax measure has produced about half the revenue that was projected too. It’s worth noting voters approved Measure ULA at 58%.
If you live or work in a market with a higher tax rate, I’d love to hear what you’ve seen too. Please comment if you’d like.
SACRAMENTO IS NOT LOS ANGELES
Look, I’m not equating a potential tax in Sacramento at 1% with a 4% tax in Los Angeles, but it’s worth talking about a more extreme example to highlight that tax policy can affect real buyers and sellers in the marketplace. If the tax is too high, it can have negative consequences for the number of sales. In Sacramento, would 1% make a difference? What do you think? My advice? Be careful about sensationalism here, but don’t ignore the power of policy to shape the real estate market too. And please know I’m not callous to affordability and homelessness. I think we need to give serious consideration to how to create more affordability as we have a real problem on our hands.
ABOUT 5% OF THE MARKET IS ABOVE $1M
When looking at MLS sales in the City of Sacramento, about 5% of all sales in 2025 have been above one million dollars, which means this tax would essentially apply to about 5% of the residential marketplace. There are going to be other private transactions too, but that’s not easy to calculate here. My stats only include residential properties (not commercial).
OTHER COUNTIES HAVE MORE MILLION-DOLLAR SALES
Some have been surprised the City of Sacramento only has 5% of the market above $1M, but the median price is $490,000 as of September, so there are a ton of properties at lower prices. Some other counties have much different numbers. For instance, 14.7% of sales in Placer County have been above $1M in 2025, and 20.6% of sales in El Dorado County have been above $1M.
Anyway, I hope this was interesting. Thanks for being here. I’ll keep following this conversation and putting out analysis if it’s relevant.
LEAVING COMMENTS: The captcha is not working perfectly. If you open up a new browser, that should solve the issue. It’s been a problem to comment when clicking from my weekly email. My apologies.
Questions: What do you think of the tax proposal? Do you think it could affect the housing market at 1% or not? I’d love to hear your take.
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Not being red or blue and these are the kind of policies short-sighted politicians make rather than fixing the root of the problems that cause a lack of housing affordability that will require systemic change and most of that change has to happen at the local and a little at the state level. Instead we get band aids that tweak the market with unintended consequences.
Thanks, Jon. I appreciate your take. You know, I think the easy solution is to tax more. What else can we do? Change zoning laws, decrease permit fees, streamline development, create programs, etc…
Maybe the government can lower how much property tax they keep taking and regulate insurance companies better and then it will be affordable! I know crazy talk right?
Oh man, insurance is such a mess. Something has to give here. And yeah, so crazy. 🙂
This is kind of like the camel in the tent. If he gets his nose in the rest is sure to follow. Has anyone ever seen a tax end or decrease? It’s easy to tax the rich, they are different, they can afford it, they need to pay more. Has a politian ever ended a program? Eventually something has to give. Just throwing money at a problem will not make it go away.
Thanks David. Yeah, taxes seem to stay forever for the most part. I struggle at times with local bond measures with good intentions. Consumers only have so much money, and taxation isn’t always the solution.
How about a transfer tax on all single-family homes bought by legal entities like corporations, LLCs, etc., and no (or smaller) transfer tax on single-family homes bought by “natural persons”?
Oh, interesting. So, transacting with a regular Joe so to speak gets rewarded? Thanks John.
Wow, more taxes is always the solution, Not!!!!
People who have worked hard to have a nice home are being targeted. I have a nice home, but I don’t claim to be rich by any means. I just work hard in order to have a nice home. Not sure what the solution is, just don’t agree with it being more taxes if I sell my home.
Thanks Carol. I suspect many consumers feel similar. Taxes are almost always floated as the solution, and it can be very frustrating as a resident. I think of this frequently at the gas pump. Ha. 🙂
Taxes? We don’t need more taxes. Why punish the people who are creating jobs with their businesses? Why create a disincentive to sell? You will get less sales that way.
A better solution would be to give tax breaks for a limited time period to those that create housing that meet their new low income housing stock criteria for home buyers. And keep track of the ones that get the tax break (title lien) so that a mandatory resale is done at an affordable price to people that don’t make above a certain income. If you limit the income of the next buyer, the resale price remains lower and affordable. Rental units created can also qualify for a tax break based on the rent amount.
I appreciate you pitching in your thoughts. Sorry for the delay on my end as I was out of town. I think there is room for creativity for sure. The solution is often simply to tax more, but let’s try to be creative first. 🙂
Excellent essay and observations. A tax on corporate sales of SFR may reduce overall yield rates and cash back at time of sale. All else being equal the owner increases lease rates up front to compensate or puts assets in a different market.