Everyone knows that home prices in San Francisco are exorbitant, and politicians campaign on promises to make housing more affordable. One lesser known aspect, however, is that the upper echelons of luxury homebuyers are actually giving a nice little boost to the city’s budget because of how SF taxes building purchases.
Since Proposition I passed in 2020 (opens in new tab), the transfer tax rate for properties that sell for between $10 million and $25 million grew to 5.5%, among the highest in the country, and more than double the 2.25% rate for properties between $5 million and $10 million. The bulk of eight-figure sales in SF come from commercial properties, but as more homes than ever fall into that bracket, it bolsters a volatile source of tax revenue for the city.
“It certainly helps,” said chief economist Ted Egan.
High-end office buildings can sell for hundreds of millions, but the value of downtown offices plummeted during the pandemic and is slowly crawling back. In the residential market, however, fierce competition among buyers is raising the number of luxury homes that hit the higher tax level.
“Commercial property sales can be very volatile in San Francisco and the growth we get from upper-end residential sales can be an important stabilizer for that revenue stream,” Egan said.
San Francisco had 19 residential real estate sales in the $10 million-plus bracket in the year ended June 2025, according to Compass data. In the year that ended this summer, it had 34. In October alone, there have been six sales over $10 million, which is the highest monthly total in several years.
“That segment of the market is extremely popular,” according to Vanguard Properties co-owner Frank Nolan. The number of sales over the magic $10 million mark is “much more than previous years,” and will continue to grow, he predicted.
While that increase may price out the simple millionaires from the centimillionaires and billionaires, it could be a silver lining for the city’s coffers.
“It’s a good thing for the city’s fiscal situation that this is happening,” Egan said. “It’s not an enormous driver, but it is part of a set of changes to the housing market that are part of the city’s recovery and are helping.”
Proof of San Francisco’s rebound is reflected in the past year’s property transfer tax revenue, which is expected to hit $417 million, a 42% increase from the year before. Transfer taxes from the sale of single-family and multifamily homes accounted for 58% of the total, while commercial buildings made up 42%. Egan estimates that, of the properties sold for more than $10 million last year, about 5% were residential. (All 2026 numbers are preliminary until SF releases its annual financial report (opens in new tab).)
The high home prices are a sign of the “strength of the housing market that is associated with the AI boom,” he said. “If this continues enough to jumpstart production, that would have all kinds of other economic and fiscal benefits for the city.”
The surge in transfer taxes started after June 2024, when the city’s property transfer tax revenues dropped to a long-term low at $177.7 million. It bottomed out thanks to the commercial real estate industry, which saw few large building sales (with reduced prices for those that did trade hands). But sky-high residential sales are no silver bullet, according to Egan. “A couple of big office sales are just so much more lucrative for the city than a whole year’s worth of mansion sales,” he said.
Fiscal year 2022 ended with two “once-in-a-generation” commercial property sales: the $800 million purchase of PG&E’s former headquarters and the $1 billion sale of a Mission Bay office complex (opens in new tab).