San Diego Real Estate Alert: What You Need to Know About Proposed “Mansion Taxes”

Dear Clients and Santaluz Neighbors,

As we move into early 2026, two significant tax proposals are moving through the local legislative process. For owners holding investment property or high-value residential assets, understanding these measures and the math behind the measures is essential for long-term planning.

The City’s “Vacation Home Tax” (Targeting June 2026)

The most immediate concern is the City of San Diego’s “Vacation Home Operation Tax.” If approved by the City Council this March, voters will decide in June whether to impose a flat $5,000 annual tax per BEDROOM on all non-primary residences.

This includes vacation rentals and second homes. While primary residences and long-term rentals (12+ months) are exempt, this measure represents a massive potential holding cost for coastal property owners and investors.

The County’s “Transfer Tax” Proposal (Targeting November 2026)

Simultaneously, the County is exploring graduated Documentary Transfer Tax. Unlike the annual City tax, this would be a one-time fee paid at the time of sale for high-value properties.

While the County recently paused its lobbying efforts due to public concern and industry pressure, they continue to research a potential ballot measure for November.

1. The Financial Impact: A Tale of Two Taxes

To illustrate how these proposals differ from current law, we have analyzed two common scenarios based on the current draft language.

Scenario A: The 4-Bedroom Vacation Home (City Proposal)

The Bottom Line: For a typical coastal 4-bedroom home used as a second home or short-term rental, this represents a $20,000 annual carrying cost that does not exist today.

This is in addition to existing property taxes and Short-Term Residential Occupancy (STRO) licensing fees.

Scenario B: A $5 Million Property Sale (County Proposal)

The Bottom Line: Critics and county officials have discussed raising the Documentary Transfer Tax from its nominal rate of $1.10 per thousand of sales price to as much as 6.11% of the sales price for luxury tiers.

On a $5M sale, the one-time tax would skyrocket from $5,500 to over $300,000, drastically altering the net proceeds for the seller.

2. Lessons from Los Angeles: The “ULA” Mansion Tax Effect

To understand the potential future of San Diego’s high-end market, we look at Los Angeles, which implemented its “Measure ULA” mansion tax in 2023.

Sales Volume Collapse: In the first year of the tax, transactions for homes priced above $5 million fell by nearly 70%.

The “Bunching” Effect: There has been a massive spike in homes listing for $4,999,000.

Impact on Development: A 2025 UCLA study found that the tax contributed to a 60% drop in multifamily building permits.

Revenue Reality: The tax has consistently underperformed initial city projections.

Success to Date: Thanks to recent public and Realtor industry pressure, the County has paused its formal lobbying for a Documentary Transfer Tax increase. However, the City’s Vacation Home Tax remains a serious threat for the June ballot.

3. Your Voice Matters: Take Action and Contact Your Local Representatives

If you live in 92127 (Santaluz), you are represented by the following officials. They are currently weighing these proposals and need to hear from property owners regarding the potential impact on the local economy and housing market.

City of San Diego (Vacation Home Tax)
Councilmember Marni von Wilpert (District 5)
Email: marnivonwilpert@sandiego.gov
Phone: (619) 236-6655

County of San Diego (Transfer Tax)
Supervisor Terra Lawson-Remer (District 3)
Email: terra.lawson-remer@sdcounty.ca.gov
Phone: (619) 531-5533

Note: If you are in the 92127 zip code but located in the unincorporated area (such as parts of 4S Ranch), your County Supervisor is Joel Anderson (District 2) at joel.anderson@sdcounty.ca.gov or (619) 531-5522.

Next Steps for Our Clients and Neighbors: Help Protect Your Property Value

The City Council is expected to hold a deciding vote on March 2nd or 3rd. If you own a second home or are considering a high-value transaction, the time to review your “exit strategy” is now.

If you would like to understand more about how either of these potential tax measures might affect your specific property and/or to be added to our “alert list” for additional information as it becomes available, please contact us by phone, text, or email.

Phone or Text: (619) 417-5564
Email: gloria@gshepardhomes.com | cory@cshepardhomes.com