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A tight mayoral race will not be the only thing getting attention on Angeleno ballots on Nov. 8. Measure ULA, dubbed “the mansion tax,” will also be up for a vote in the city of Los Angeles, amid opposition from Los Angeles’ real estate industry. If passed, the measure would add a new tax on L.A. property sales north of $5 million to fund affordable housing and homelessness programs.
If the measure succeeds, property sales in Los Angeles between $5 and $10 million would be subject to an additional 4 percent tax rate, while those worth $10 million or more would be taxed at an additional rate of 5.5 percent. To put the tax in context, for a house like the one Shonda Rhimes sold earlier this year in Hancock Park, there would be a $1.155 million tax on the $21 million sale; for Ashley Tisdale, who sold in the Hollywood Hills for $5.9 million, a $236,000 tax.
Measure ULA would raise between $600 million to $1.1 billion per year, according to estimates from the city’s chief legislative analyst, to be put towards the city’s housing and homeless crisis.
“The actual plan is an all-of-the-above approach to addressing the housing crisis and lowering housing prices in L.A.,” says comedian and The G Word creator Adam Conover, who has been a vocal supporter of the measure. “It finances the city acquiring vacant buildings and turning them into affordable housing. It finances keeping people in their homes by helping them with rent subsidies, and it finances building as well.”
Conover continues, “Homelessness is the most obvious symptom of housing costs, but you can’t address the disease just by addressing a symptom. We need to get people inside who are living on the street but if that’s all we do, we won’t be addressing the real problem, which is that it’s too expensive to live in L.A.”
The proposal has been met with much resistance from L.A.’s top real estate agents, though, as it comes at a time when the housing market has already slowed from its pandemic peak.
“Right now we’re dealing with multiple issues in real estate: a declining market, high-interest rates and high inflation,” says Compass agent Aaron Kirkman. “The last thing we need is more imposed taxes in an industry that’s already struggling.” Some, like the Oppenheim Group’s Jason Oppenheim (also of Selling Sunset fame) have campaigned publicly against the measure, with Oppenheim writing in an email blast to friends and clients, “We are not philosophically against wealth taxes, but this initiative was not thought out by rational businesspeople, and it defies common sense and basic logic.”
One common argument among the real estate community is the impact it could have on renters and small business owners that rely on commercial properties.
“One of the biggest issues with this so-called solution is that no one goes unaffected,” says agent Rochelle Maize. “A large part of this tax will come from owners of commercial properties and apartment buildings, which means landlords will demand higher rents and retailers will have to increase prices for essentials like food and clothing. This measure doesn’t only present a threat to high-end properties. It will negatively impact the entire real estate market at large and all of those directly involved.”
A September report from UCLA’s Lewis Center for Regional Policy Studies, however, said “there is no evidence that the tax would impact rents for commercial or residential tenants. In most cases, transfer taxes are paid by the seller, who will have no legal avenues to pass on costs to tenants in a building which they no longer own. Additionally, this report cites multiple studies which show that rents are determined by the market, not taxes and fees.”
The report also estimated it would raise $923 million annually for affordable housing production and homelessness prevention in the form of rent relief, income support, and legal counsel for tenants, and “have a positive impact on the city’s housing crisis, while having no effect on the average Angeleno.”
Agents opposed to Measure ULA also estimate that if passed, it will slow development and discourage people from buying all types of property (single-family homes, apartments, land, commercial) — and though the tax would only apply to the city of Los Angeles, would affect the neighboring areas as well.
“If Measure ULA passes, we will certainly see a spillover into other cities like West Hollywood, Santa Monica and even Beverly Hills,” says Compass agent Sally Forster Jones. “They may potentially implement a similar proposal, or potentially there may be an increase in demand and desirability of the other cities such as Beverly Hills and Santa Monica, resulting in a benefit to those areas over the city of Los Angeles.”
And while all of the agents acknowledge the importance of addressing the city’s housing crisis and its unhoused population, many point to specific issues with the law that they say would cause more harm than good. Douglas Elliman agent Juliette Hohnen says that the $5 million bar is simply too low, noting “the people over $5 million now in 10 years are the people who bought for $2 million. Really what you’re doing is you’re just making it impossible for people to afford to own property in L.A.”
“If you were dealing with the people who were $50 million or $20 million or $30 million, fine, anyone that can afford a $20 million house is very, very rich,” she continues. “But in Los Angeles, over $5 million — it’s rich but in Los Angeles it’s not, given how much everything costs.”
Hohnen also reveals that even the possibility of the measure is already being used as a real estate tactic, as another agent recently brought up the proposal in a deal with one of her celebrity clients, saying, “‘Once this happens, your client is going to be paying another half a million dollars, so you should sell it now.’ So I thought that was interesting, a strategy to get people to move.”
Others question Los Angeles’ record on homeless issues in recent years, and what will change with a sudden billion-dollar influx of cash. Says Compass agent Ari Afshar, “the city needs to get a better handle on how it’s spending the billions already dedicated to solving the homeless crisis. Between Measure H and Project Roomkey, all Angelenos have been taxed to support the initiatives and yet there’s nothing to show for.” Several agents have also argued the plan is not specific enough and doesn’t mandate exactly how the funds will be used.
Neither Karen Bass nor Rick Caruso have endorsed the measure, but it was drafted by ACLU SoCal and is supported by labor unions across the city. Conover says that Measure ULA is often compared to Measure HHH — a 2017 $1.2 billion bond measure for the construction of substantial affordable housing but that resulted in only a fraction of the promised units; he notes that that measure was overseen by politicians who control what is built and “don’t have incentive to allow that kind of housing to be built.” This measure though, “puts it under the oversight of a citizens commission that’s like actually led by housing experts.”
L.A. Family Housing, an organization that helps transition people out of homelessness and poverty, are among those experts who support the measure, as president and CEO Stephanie Klasky-Gamer says, “Financial, physical resources make a difference. To generate $900 million a year to put towards preventing people from falling into homelessness, and allowing us to increase production of the housing desperately needed to address homelessness, this is a game changer.”
Post-pandemic, the commitment to housing is more important than ever, Klasky-Gamer adds, as well as the fight to prevent people from becoming homeless: “Even though we’ve moved more people inside than ever before, more people fell into homelessness than ever before. So it felt like we were not ever getting ahead, we were just kind of keeping up because more people kept falling into homelessness.”
Conover also highlights the widespread effect of L.A.’s current housing situation, particularly for those in Hollywood.
“Even people who are not out on the street are paying half or two thirds of their income on rent and that is bad for everybody,” he says. “That’s bad for our city’s economy, because then those people can’t go out to the movies and support our entertainment industry. They can’t go out and buy drinks or food and support our restaurant industry. It’s not good for anybody, except for if you’re a rich person who owns an expensive house and your housing prices go up massively, and then you sell and you move to somewhere cheaper, then it might be good for you. But everybody else, it doesn’t help at all.”
“It’ll only make everything in the city better if we can actually tackle this problem, and not do it just by saying, ‘Oh, here’s one little intervention, let’s build a little bit of housing over here, let’s help out with a little tenant program over there,'” continues Conover. “No; we need to do everything possible.”
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