After putting the larger BUILD Act proposal on hold, which would have cut transfer taxes in half on property sales above $10 million, Mayor Lurie and Supervisor Mahmood are pursuing a commercial foreclosure tax that’s initially expected to  generate $67 million a year.

Mayor Daniel Lurie and Supervisor Bilal Mahmood’s proposed foreclosure tax, which was pulled from the now-paused BUILD Act, would impose a transfer tax of 3% to 6% when commercial properties change hands through foreclosure, as the Chronicle reports. Single-family homes, condos, and residential buildings with fewer than five units would be exempt from the tax.

This would reportedly close a longstanding loophole that currently allows those transactions to avoid the city's transfer tax altogether while generating around $67 million a year for the first three years.

The measure would repeal an exemption that San Francisco created in 1984 for foreclosed properties, which Mahmood and Lurie argue has cost the city substantial revenue over the years.

According to Mission Local, the proposal already has support from several supervisors and is expected to qualify for the November ballot.

As SFist reported previously, the larger BUILD Act, which would have cut transfer taxes in half on property sales of $10 million or more, was shelved earlier this week. Mahmood cited the city's ongoing budget crisis and the need to identify replacement revenue before moving forward.

The aim of the BUILD Act was to increase housing development and construction jobs, but it drew criticism because it would have extended tax breaks to high-value property sales regardless of whether they produced new housing. It would have also reduced the city’s revenue by an estimated $400 million over the next several years.

Mahmood reportedly said the new foreclosure measure would ensure large lenders, hedge funds, and other financial institutions pay the same taxes as other sellers when they acquire or dispose of foreclosed properties.

The Chronicle reports that former Supervisor Dean Preston is developing a measure alongside the Democratic Socialists of America called the Affordable Housing Guarantee Act, which would preserve the current transfer tax rate and dedicate revenues to affordable housing, in the event the BUILD Act proposal is revived.

Previously: Lurie, Mahmood Shelve Proposal to Halve Transfer Taxes on Property Sales Over $10M

Image: Bilal Mahmood/Facebook