Monterey County Board of Supervisors approve money for consultants to study possible tax measures.

The Monterey County Board of Supervisors voted 5-0 on Tuesday, April 14 in favor of sending $83,500 on consultants to gauge voter interest in two possible tax measures: one that would impose transfer taxes on the sale of luxury homes, the other to increase the transient occupancy tax from 10.5 percent to 12 percent.

Most of the board's conversation surrounded a possible transfer tax measure, brought forward by Supervisor Kate Daniels in March. Daniels urged the supervisors to support the idea of taxing homes sold for $10 million and above and using those funds to support housing for middle class workers.

Daniels emphasized that the lack of housing is structural, supporting the construction of high-priced homes for a growing number of people who have wealth through investment, assets and equity, leaving workers who depend on paychecks priced out of the market.

"Our housing shortage is not a zoning problem, it's not a permitting problem, it's not a problem we will solve by streamlining approvals or debating density," she said. "Those conversations have a place but they have distracted us from a more fundamental truth. We have two housing markets on the Monterey Peninsula and they are not competing on equal terms."

Daniels disagreed with those who worry that a transfer tax would slow home sales. She doubted such a tax would stop wealthy buyers from coming to the highly desirable Peninsula, referencing Brad Pitt's purchase of the D.L. James house in Carmel Highlands, a purchase he made in 2022 for $40 million.

To do nothing, she said, would be to lose teachers, health care workers, caregivers, tradespeople, hospitality workers and artists.

"A place where only wealth can live is not a sustainable community, it's a destination," she said, adding that a destination without the workers to support it "will eventually hollow out."

While some supervisors were open to the idea of a transfer tax on the sale of $5 million and up, Daniels said the $10 million number was strategic. Such a tax measure would require a two-thirds vote, and she believed voters would support a tax on higher priced homes as an investment in housing for the community.

According to a staff report, a 5-percent tax on the sale of luxury homes could bring in $17.5 million annually for homes priced $5 million and above. For $10 million homes it could bring in $8.7 million.

The housing fund would be used for such things as developer incentives, help for first-time homebuyers and rental assistance, among other possibilities.

Supervisors Chris Lopez and Luis Alejo said they were open to a possible transfer tax, but expressed concerns about the success at the polls. They supported paying consultants to survey likely voters to see whether they would be supportive. 

The consultants will also be looking at how voters view a possible TOT tax, which is paid by hotel guests. According to the staff report, each 1-percent increase in TOT is approximately $3.8 million in revenue. The suggestion was to raise the tax from 10.5 percent to 12 percent, in line with what most cities in Monterey County charge.

That additional income would go toward the county's general fund, which is currently projected to be in deficit numbers in the coming years. For the 2026-2027 fiscal year, the projected deficit is $118.8 million, rising to $162 million in 2029-2030. Those numbers will be lower if the county does not fill vacant positions.