Assessor-Recorder Joaquín Torres Shares Data on Foreclosure Exemption Claims

San Francisco, CA – Today, Assessor Joaquín Torres released the below data illustrating a significant increase in the value of claims for reductions of real property transfer tax under the so-called “foreclosure exemption.”

Since 2023, the data shows that the vast majority of these claims have been made for high-value income-producing and investment-oriented properties changing ownership via deeds-in-lieu-of-foreclosure or trustee’s deeds. In the last three fiscal years, income-producing and investment-oriented property transactions that would have generated more than $450 million in taxes have been claimed as exempt, far exceeding the approximately $50 million in claims for like transactions during the preceding 15 years combined.  

The grouping described here as “income-producing and investment-oriented properties” consists of non-single-family and non-timeshare properties, including commercial, multifamily, office, mixed-use, vacant land, and similar property types. This includes vacant land held for future development or appreciation, as well as owner-user commercial property used in income-producing business activities.

"As administrator of the transfer tax, my Office is positioned to identify and report on emerging trends. The data released today shows a significant change in the behavior of this longstanding exemption," said Assessor-Recorder Joaquín Torres. "Exemptions are policy choices, and when the facts change, these choices may warrant a second look. My goal is always to ensure San Franciscans and their elected policymakers have the information they need to steer San Francisco's tax policy."

Background & New Trends
San Francisco real property has been subject to local transfer tax since 1968. State and local laws governing transfer taxes in California and San Francisco have long provided an exemption from transfer tax for certain foreclosure transfers.  Prior to 2023, data indicates that the vast majority of transactions claiming the exemption involved single-family residential properties and properties valued at less than $10 million, often involving a bank or lending institution as grantee.  

From FY2007-08 to FY2022-23, of the over 4,000 claims for the foreclosure exemption, approximately: 

• 4-5% were for properties valued above $10 million, meaning roughly 96% involved comparatively modest-value real estate. 
• 65% appear to have involved a bank or lending institution taking title, the conventional foreclosure pattern, in which transfer tax is paid later when the lender sells the property. 
• Just over 80% were for single-family residential properties.
• 700 properties were income-producing or investment-oriented properties. Of these, approximately 67% were multifamily and 4% office. In terms of value, approximately 40% were multifamily and 10% office.

The breakdown for the three peak foreclosure years during the Great Recession followed the same general pattern as the data for FY2007-08 to FY2022-23.Beginning in 2023, the Office of the Assessor-Recorder observed a notable shift in the volume, values, and characteristics of transactions claiming the foreclosure exemption. These transactions increasingly involved high-value income-producing and investment-oriented properties transferring between conventional real property investors.  

From FY2023-24 to FY2025-2026, of the over 600 claims for the foreclosure exemption, approximately:

• 56% were for properties valued above $10 million, up from the roughly 4% in the prior period. 
• 10% appear to have involved a bank or lending institution, down from 65%.
• 23% were for single-family residential properties, down from over 80%.
• Nearly half the claims are income-producing and investment-oriented properties. Of these, approximately 59% were multi-family and 13% office. In terms of value, 44.5% were multifamily and 30% office.

Historically, foreclosures have followed the path of 1) lender foreclosing on borrower (subject to transfer tax exemption), 2) lender selling property, and 3) transfer tax then being paid.  But in recent years, observers of the market have seen a significant new path emerge wherein 1) real property investors acquire distressed debt from lenders, 2) foreclose on property, and 3) assume ownership of the property claiming exemption from transfer tax under the foreclosure exemption. 

The trends identified in this data have been shared among policyholders and stakeholders. A proposed November 2026 ballot measure would allow voters to consider whether changes should be made to the treatment of certain foreclosure-related transfer tax exemptions and currently proposes to keep the exemption intact going forward for qualified residential properties generally defined as single-family and other residential properties with fewer than five residential units.