Days after pausing a transfer-tax cut that critics said would have blown a $400 million hole in the city budget, Mayor Daniel Lurie and Supervisor Bilal Mahmood are advancing the revenue half of that bargain on its own: a November ballot measure to tax foreclosure sales of commercial buildings, pitched to raise about $200 million over three years.

The measure would repeal a 1984 exemption that lets sellers of foreclosed properties skip San Francisco's real estate transfer tax — a carve-out that backers say has cost the city billions in forgone revenue. Originally drafted to offset losses from the now-shelved BUILD Act, the Foreclosure Tax is now being pursued as a standalone revenue play as San Francisco stares down a deficit in the hundreds of millions. It is the latest move in a widening fight over how the city taxes high-value real estate, with a progressive counter-measure already taking shape.

Mayor Daniel Lurie and Supervisor Bilal Mahmood announced the measure Thursday, June 11, and introduced it at the Board of Supervisors earlier in the week. If it qualifies for the November ballot and passes, it would end a 42-year-old exemption that allows commercial properties sold through foreclosure to avoid the city's transfer tax — the levy imposed when real estate changes hands.

Sellers of foreclosed buildings currently pay nothing, even as ordinary commercial sales are taxed at 5.75 percent above $10 million and 6 percent above $25 million, Mission Local reported. SFist, citing the San Francisco Chronicle, described the proposed foreclosure levy as a transfer tax of 3 to 6 percent on covered commercial transactions. Single-family homes, condominiums and residential buildings with fewer than five units would be exempt — a line Mahmood said was deliberate.

"I did not want to penalize people foreclosing their homes in distress," Mahmood told Mission Local, framing the tax as aimed squarely at institutional players. "Corporate capital, hedge funds, corporate lenders — when they transact off of foreclosures, they should pay the same tax like every other seller in San Francisco," he said. "This ensures that those financial institutions actually give back to the community."

Lurie cast the change as housekeeping. In a statement, the mayor said the proposal would make the city's tax code "simpler and fairer," adding that "consistency and certainty are critical for welcoming investment as we drive downtown's recovery."

The Foreclosure Tax began life as the funding mechanism for the BUILD Act, the Lurie-Mahmood proposal to halve transfer taxes on property sales above $10 million. The pair tabled that measure earlier this week. Sold as a jobs-and-housing bill, the BUILD Act would have cost the city an estimated $400 million in coming years, according to the controller's office, and critics noted the tax break would have applied whether or not any housing got built. Mahmood said the pair wanted to lock in new revenue first.

"The need to prioritize revenue at this time came first," Mahmood told Mission Local. He maintained that a transfer-tax reduction remains "the right policy" to spur development, and said the BUILD Act could return "once the city's budget is in a better place."

The timing reflects a city short on options. Proposition D, a measure to tax companies with highly paid executives, failed earlier this month, closing off another revenue stream.

The measure arrives with unusual breadth of support. Supervisors Matt Dorsey, Myrna Melgar, Chyanne Chen, Shamann Walton and Alan Wong signed on as co-sponsors when it was introduced, and Mission Local reported it is expected to qualify for the November ballot.

But it will not run unopposed on the left. SFist, again citing the Chronicle, reported that former Supervisor Dean Preston is working with the Democratic Socialists of America on a rival measure — the Affordable Housing Guarantee Act — that would preserve the current transfer-tax rates and steer the money to affordable housing, a hedge against any revival of the BUILD Act's tax cut.

Key questions remain unanswered in the public record. No Board of Supervisors legislative file number or controller's fiscal analysis underpinning the $200 million estimate has surfaced, and the precise rate structure — whether the measure applies the city's existing brackets or a new 3-to-6 percent schedule — is described differently across outlets and will be settled only by the ordinance text. The Dissent has not independently reviewed the filed legislation.