SD County Cancels 5,500% Transfer Tax Hike - 2026 Update

Understanding Documentary Transfer Tax: The Basics

Before we dive into the implications of this canceled proposal, it's essential to understand what Documentary Transfer Tax actually is and how it currently works in San Diego County.

Documentary Transfer Tax is a fee imposed when property ownership transfers from one party to another. In California, the base rate is $1.10 per $1,000 of the property's sale price, or $0.55 per $500. This rate has been standard for decades across most California counties.

Current County Rates

• Standard rate: $0.55 per $500 of property value
• On a $500,000 home: $550 in transfer tax
• On a $750,000 home: $825 in transfer tax
• On a $1,000,000 home: $1,100 in transfer tax

Locally, this cost is typically split between the buyer and seller, though the exact arrangement can be negotiated during the transaction. The tax is calculated on the property's sale price minus any existing liens or encumbrances that the buyer assumes.

It's worth noting that the county uses only the standard California rate, unlike some charter cities that impose additional local transfer taxes. This relatively low rate has been one advantage for homeowners compared to their counterparts in Los Angeles or San Francisco.

The Proposed 5,500% Increase: What Nearly Happened

The proposal that county officials just canceled would have transformed San Diego's real estate transaction landscape overnight. Here's what homeowners nearly faced:

According to CBS8 reporting, Supervisor Terra Lawson-Remer had described this as "a one-time small transfer fee on the sales of the top 1% of the county's properties" to fund affordable housing and homelessness programs. The revenue projection suggested the measure could generate $1 billion annually for county programs including affordable housing, health services, public safety, childcare, and in-home supportive services for older adults.

However, critics—including the mayors of Vista and El Cajon—argued that the "top 1%" designation was misleading. With the county's median home price hovering around $906,000 in fall 2025 and reaching $895,000 to $990,000 by November 2025, the tax would have affected a significant portion of homeowners, not just the ultra-wealthy.

Impact by Neighborhood

For context, here's how the canceled proposal would have impacted sellers in various areas based on typical home values:

These numbers illustrate why the proposal faced such strong opposition. For homeowners already dealing with real estate commissions (typically 5-6% of sale price), title fees, and other closing costs, an additional $45,000 to $150,000 would have been financially devastating.

The Budget Crisis Behind the Tax Proposal

To understand why county officials considered such a dramatic tax increase, we need to examine the financial pressures facing the region.

According to CBS8, the county is confronting a one-time funding gap of $138.5 million for fiscal year 2025-26. More concerning is that this shortfall grows to $321.8 million by fiscal year 2029-30 if left unaddressed.

Key Budget Challenges

1. Declining Revenue Streams: County budget officials told the Board of Supervisors that after a period of robust growth, the county is starting to see a slowdown in sales tax revenue, mirroring a statewide trend.
2. Federal Budget Uncertainty: Anticipated federal budget cuts have created additional pressure on county finances, making local revenue sources more critical.
3. Unfunded Obligations: Ongoing budget requests from county departments exceed available resources, with ongoing requests totaling more than $180 million and one-time requests exceeding $310 million.
4. Mandatory vs. Discretionary Programs: Chief Financial Officer Joan Bracci told supervisors that "the picture is not rosy" and that the county doesn't have funding to respond to all funding requests. County officials acknowledged that difficult decisions will need to be made, with a focus on mandated programs while reviewing the effectiveness of discretionary programs.

The canceled transfer tax was just one potential solution county officials were exploring. Other revenue options under consideration include:

• Sales tax increases
• Creating a stormwater district with infrastructure fees
• Hiring consultants to conduct public polling on various tax proposals
• Identifying operational efficiencies and cost reductions

The fundamental challenge remains: the county needs to find $138.5 million in additional revenue or equivalent budget cuts—and that number only grows larger in coming years.

Why the January 8, 2026 Cancellation Matters

The decision to halt the lobbyist hiring request on January 8, 2026, represents more than just a temporary reprieve—it signals a significant shift in county strategy.

What Happened

The Board of Supervisors was scheduled to approve hiring lobbyists who would lay groundwork at the state legislature for enabling the transfer tax increase. Since the county operates under general law (not as a charter county), it needs state legislative authorization to impose transfer taxes above the standard $0.55 per $500 rate.

For homeowners, this cancellation provides breathing room but not permanent certainty. The underlying budget pressure guarantees that county officials will continue seeking revenue solutions throughout 2026 and beyond.

Comparing to Other California Counties

To appreciate the current situation, it's helpful to understand how other major California counties and cities handle transfer taxes—and the lessons their experiences offer.

Los Angeles County - Measure ULA ("Mansion Tax")

Los Angeles provides the most relevant cautionary tale. In April 2023, the city implemented Measure ULA, which imposes:

• 4% tax on properties between $5 million and $10 million
• 5.5% tax on properties above $10 million

While the proposed local rates would have been different, the L.A. experience reveals important market dynamics:

Transfer Tax Rates Comparison

The decision to cancel the transfer tax increase keeps the region in the lowest-cost tier for California real estate transactions. This competitive advantage could make the area more attractive to buyers and sellers compared to Los Angeles and San Francisco markets burdened with significantly higher transaction costs.

What This Means for Homeowners in 2026

The cancellation of the transfer tax proposal creates a specific window of opportunity and certainty for homeowners, but it also raises important strategic questions about timing.

Current Transaction Cost Structure

With the massive transfer tax increase off the table, homeowners can plan with confidence that their total selling costs will remain at current levels—at least through 2026 and likely into 2027. Here's what sellers can expect to pay:

The Policy Uncertainty Factor

While the immediate threat is gone, the $138.5 million budget deficit remains. This creates ongoing uncertainty:

1. Future Proposals Likely: County officials will continue exploring revenue options throughout 2026. Alternative proposals could emerge by late 2026 or 2027.
2. State Legislative Changes: California's legislature could authorize new local revenue mechanisms that don't require state approval, expanding counties' taxing authority.
3. Federal Budget Cuts: If anticipated federal funding reductions materialize, pressure on county finances will intensify, potentially reviving transfer tax discussions.
4. Political Landscape: The 2026 Board of Supervisors elections could shift the political balance, either making future tax proposals more or less likely.

The Cash Buyer Advantage in Times of Tax Uncertainty

The recent transfer tax uncertainty highlights one of the key advantages of working with cash home buyers: transaction cost predictability and speed.

How Cash Sales Provide Certainty

Traditional home sales involve multiple parties—listing agents, buyer's agents, lenders, appraisers, inspectors—and each adds time, cost, and potential for complications. Cash buyers streamline this process dramatically:

1. No Financing Contingencies: Traditional sales can fall through if the buyer's financing doesn't materialize. Cash sales eliminate this risk entirely. Cash closing timelines range from 7 to 14 days locally, compared to 30-45 days for financed purchases.
2. Lower Closing Costs: Cash sales typically result in lower closing costs and fewer fees since there are no lender-related charges. Many cash buyers cover closing costs entirely, meaning sellers receive the full offer amount.
3. Cost Certainty: Traditional sales involve variable costs—commission negotiations, unexpected repairs after inspections, buyer credits, and potential appraisal gaps. Many local cash buyers offer no-commission, no-closing-cost transactions, providing absolute clarity on net proceeds from day one.
4. As-Is Purchases: Cash buyers typically purchase properties as-is, eliminating the need for costly repairs, staging, or updates before selling. For a homeowner facing a property that needs $30,000-$50,000 in repairs, this represents significant savings.
5. Locking In Current Tax Structure: With county revenue proposals evolving throughout 2026, closing quickly means locking in current transfer tax rates before any potential changes. A 7-14 day cash closing provides much more certainty than a 30-45 day traditional sale that could extend into periods when new tax proposals emerge.

Financial Comparison: Traditional Sale vs. Cash Sale

Let's examine a typical scenario for a $750,000 home:

This example illustrates that while cash offers are typically below market value, the elimination of commissions, closing costs, and repair expenses often results in similar or better net proceeds—plus the certainty of closing and speed advantages.

What Happens Next: Timeline and What to Watch

For homeowners planning to sell in the coming months and years, understanding the likely timeline of county budget discussions helps with strategic planning.

2026 Timeline

Key Indicators to Monitor

1. Board of Supervisors Meeting Agendas: Particularly budget-related sessions and revenue discussion items
2. County Budget Documents: Fiscal year 2026-27 budget (released spring 2026) will show revenue strategy
3. State Legislative Activity: Any bills authorizing new local revenue powers for counties
4. Public Opinion Polling: If consultants are hired to poll tax proposals, results often leak and signal direction
5. Supervisor Lawson-Remer's Communications: As the leading advocate for the canceled proposal, her office's statements will indicate whether transfer taxes remain on the agenda

Frequently Asked Questions

Conclusion: Relief Now, Vigilance Ahead

The January 8, 2026 cancellation of the proposed 5,500% Documentary Transfer Tax increase provides genuine relief for homeowners across the region. The decision saves sellers anywhere from $42,000 to $150,000+ in additional transaction costs and provides certainty about selling expenses through at least 2027.

However, the underlying budget crisis—$138.5 million in fiscal year 2025-26, growing to $321.8 million by 2029-30—guarantees that officials will continue pursuing revenue solutions. Whether those solutions involve property transfer taxes, sales taxes, or other revenue mechanisms remains to be seen.

For homeowners considering selling in 2026 or 2027, this environment creates a unique opportunity: take advantage of the current certainty window while transaction costs remain predictable and among the lowest in California. Whether you choose a traditional listing or explore cash buyer options for speed and simplicity, acting during this period of clarity can help you avoid potential future policy changes.

Cash buyers provide particular advantages in this environment—not only do they offer 7-14 day closings that lock in current tax rates, but they also eliminate commissions, repair costs, and other variables that can add uncertainty to traditional sales. For homeowners who value certainty, speed, and predictability, a cash sale may offer the best path forward.

As the county navigates its budget challenges through 2026 and beyond, staying informed and understanding your options will be crucial for making the best decision for your unique situation.