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More SF property owners are disputing the value of their buildings. Here’s what that means

Twitter headquarters on Market Street in San Francisco, Calif., on Wednesday, May 1, 2019. (Photo by Scott Strazzante/San Francisco Chronicle via Getty Images)

A slew of major companies, including Capital One, grocery store chain Trader Joe’s and Twitter Inc., are seeking to reduce the value of their San Francisco properties in line with uncertainty in the city’s real estate market.

And citywide, thousands more property owners are sending in applications to San Francisco’s Assessment Appeal Board looking to lower the assessed value of their properties—and by extension the property tax they owe.

While it’s not uncommon for some building owners to appeal their assessment every year, the board has seen a definite uptick during the pandemic: it received 2,399 new applications during fiscal year 2020 to 2021, more than 69% more than the year prior. In the current fiscal year, the board has received 2,412 applications so far. 

Here’s what you need to know about how reassessments work, and what they could mean for the city’s tenuous fiscal picture.

Why Would Owners Ask for Reassessments?

A property’s assessed value is directly linked to the property tax paid on the real estate and—with open questions around the demand for office space in San Francisco—some companies and individuals are aiming to lower their tax bills by asking for reassessments. 

Because of higher-than-expected numbers of remote workers, commercial office spaces are seeing higher vacancies, retail outlets are seeing fewer customers and hotels have fewer guests—all of which is leading some property owners to argue that their buildings are worth less now. Take the former home of San Francisco’s Disney store as one example: the vacant building at 39 Stockton St. sold for $11 million in February 2022, a 60% drop from the $27.5 million paid to acquire the property back in 2017.

Prop. 13, a 1978 law that caps property taxes at 1% of a property’s value, generally limits the annual increase of a property’s assessed value to 2% unless it trades hands at a different price. A new property value can also be assessed through an appeal to the appeals board, an independent panel that rules on the valuation of properties in San Francisco. 

What’s the Reassessment Process? 

After receiving an appeal application, the Assessor's office then can request additional information from the applicant, and if it’s received, the property goes to what’s known as a valuation hearing. At that hearing, the assessor’s office will present an appraisal report and walk the board through their reasoning behind the value it’s been assigned. 

What’s the Success Rate for These Appeals?

The vast majority of the applications to the appeals board are known as Prop. 8 appeals, which involve a one-year, one-time reduction that needs to be renewed annually. In fiscal year 2019 to 2020, 86 applicants had their property’s assessed value lowered by the board. That number dropped to 30 the following year. In the current fiscal year, 45 applicants had been successful as of Dec. 31. 

The board must make a final determination within two years of the appeal’s filing date, and the bulk are turned down for reasons ranging from a board denial, an invalid application or a withdrawal decision by the applicant. 

What’s the Potential Impact of Reassessments?

Property taxes are the single largest source of local tax revenue for San Francisco. In fiscal 2020 to 2021, the city earned $2.34 billion from property taxes, more than triple its $722.6 million in revenue from business taxes. Reassessments cut the amount of tax revenue received per property by requiring the city to issue a partial refund to the owner. 

The San Francisco Controller’s office estimated some $8.9 billion of property value at risk through assessment appeals filed in 2021, with projected average reductions of 11.3% for single-family residential, 17.5% for apartments, 11.3% for office; 18.6% for hotels and 36.1% for retail. 

The city expects to refund $85 million to property owners whose buildings have been reduced in value over the next two fiscal years, according to budget analysts. That’s an increase from the $47.9 million paid out during the preceding two-year, pre-pandemic period. 

Uncertainty around San Francisco real estate values have another potential risk: Gaps between asking prices for large real estate developments, and the price buyers are willing to pay, is leading to fewer properties trading hands and a decline in projected transfer tax and lower-than-expected property tax revenue, according to the Controller. That could be compounded if the remote working trend persists permanently or grows.

What’s the Optimistic Take? 

Despite the uncertainty, property taxes are still expected to rise in the coming years. That’s because the anticipated 2% increases for the overall property roll outweigh any reductions in assessed values. 

Ted Egan, the city’s chief economist, said that the long-term effect of the pandemic on property values is yet to be determined. But he added that because of Prop. 13, assessed values in San Francisco are somewhat artificially depressed from their fair market value. That gives the city’s finances a bit of breathing room. For a potential model, he turned to the last major economic downturn: During the Great Recession, even as the city’s real estate markets fell into turmoil, property tax revenue continued to rise. That makes San Francisco, with its famously expensive real estate, unusual compared to the rest of California. 

“Our cushion from Prop. 13 cushion was so powerful that San Francisco never had any one-year decline in property tax revenue during the Great Recession, which was unlike the experience in the entire rest of the state,” Egan said.

Kevin Truong can be reached at