A proposal to create a housing fund by taxing the sale of luxury homes heads to county supes.

Monterey County Supervisor Kate Daniels sees the bumper-to-bumper rush hour traffic on Highway 68 and her thoughts go to housing. The daily backup represents thousands of workers who can’t afford to live on the Monterey Peninsula and other areas of the district she represents.

“As someone who grew up in this area, I grew up in a time when people could live where they work and that has become so much more difficult to attain today in District 5,” she says. Her teachers all lived where they worked; her neighbors were electricians, contractors and health care workers. “These were all family friends. And this entire workforce does not live here anymore.”

The housing market in recent years has focused on either single-family homes priced beyond the means of middle class workers or subsidized affordable housing, creating what’s been dubbed the “missing middle.” To address the challenge, Daniels wants county leaders to consider a transfer tax in unincorporated Monterey County on the sale of luxury homes over $10 million.

The revenue generated by such a tax would go into a local housing fund to encourage the construction of missing middle, or moderate-level housing. It would not be enough to build homes, Daniels says, but could be used as developer incentives, help for first-time homebuyers, or rental assistance, among other possibilities.

Daniels asked county staff last month to conduct a feasibility study, looking at other cities in California that have implemented transfer taxes. Voters in San Francisco, San Jose, Oakland and Santa Cruz have approved them, varying in terms of which homes are eligible and where the revenue goes. San Francisco’s revenue goes into the general fund, while Santa Cruz’s transfer tax revenue is slated to go toward affordable housing.

In San Jose, the tax is applicable to most home sales, which Daniels believes is too low of a threshold, possibly slowing home sales and creating a situation that is punitive to sellers of lower-priced homes. By focusing on sales of $10 million or more – and there are many in her district along the coast, in Carmel Valley and Big Sur – she believes a transfer tax would not impact sales.

“We’re seeing homes that perhaps were $400,000 or $500,000 that are now in the tens of millions,” she says. “When you live in an area with those home values, there is a domino effect.”

The tax will likely face pushback. Adam Pinterits, government and community affairs director for the Monterey County Association of Realtors, says that while MCAR appreciates Daniels’ efforts to advance the conversation on housing, the county “needs more affordable-by-design homeownership opportunities, not policies that unintentionally reduce them.”

Pinterits points to a 2025 study by Tufts University that concluded that every 1-percent increase in transfer tax corresponded to an 8-percent drop in sales.

“We simply can’t tax our way to affordability,” Pinterits says.

Daniels’ proposal is scheduled for discussion by the Board of Supervisors on Tuesday, March 17.

A feasibility study to be prepared by county staff is underway.