Oakland is considering a November ballot measure that would apply its real estate transfer tax to certain foreclosure transactions that are currently exempt.
The city estimates the change could generate roughly $4 million to $13 million per year (quite the wide estimate).
I understand the appeal. Oakland needs revenue, and the proposal reportedly exempts single-family homes and certain smaller properties.
But this creates the wrong incentive for a city already dealing with a lot of distressed and vacant commercial real estate.
When a property is failing, foreclosure can be part of the process that gets it out of the hands of an owner who can no longer support it and into the hands of a lender or new investor who can recapitalize, redevelop, or sell it.
Adding another potentially significant tax to that process increases the cost of transferring distressed properties.
Oakland’s existing transfer tax can reach 2.5% on transactions above $5 million, so we’re not necessarily talking about a small amount of money on a large commercial building.
While commercial properties usually don’t get foreclosed often, that’s not the case in Oakland.
The Clorox Building at 1221 Broadway went back to lenders in June. Edgewater Park Plaza near Oakland Airport headed to foreclosure with more than $21M unpaid. The biggest example was 601 City Center, a roughly 600,000-sq.-ft. office tower with about $265M in debt, went through foreclosure this spring.
I think there’s an interesting policy tradeoff here:
Does taxing foreclosures raise badly needed revenue, or does it make it more expensive to recycle distressed properties and ultimately contribute to blight?
Sources:
https://www.sfchronicle.com/eastbay/article/oakland-forecolsure-tax-real-estate-22353148.php?
https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=RTC§ionNum=11926
https://www.bizjournals.com/sanfrancisco/news/2026/06/18/clorox-tower-foreclosure-oakland-tmg.html?