First you see a measure to kill L.A.’s controversial mansion tax heading toward the November ballot. Then poof: you don’t.
The proposed ballot measure to eliminate Measure ULA and similar real estate transfer taxes across the state was pulled in a last-minute deal in Sacramento in favor of another measure to raise the voter threshold for certain local taxes, LAist and CalMatters reported.
The 11th-hour switch came after a week of backroom haggling by Gov. Gavin Newsom’s office, state legislative leaders, housing advocates, unions and business interests sank the measure.
The Howard Jarvis Taxpayers Association, sponsor of the proposition, agreed to shelve it before Thursday’s deadline because state lawmakers swiftly passed language for a substitute measure.
The new proposition would ask California voters to raise the threshold to two-thirds for passing special taxes, up from the simple majority courts have ruled is sufficient to pass many special taxes, such as Measure ULA.
But where the taxpayers association saw victory, real estate developers and investors who footed the bill for the Howard Jarvis initiative saw defeat.
Imperiled was any immediate pressure on state lawmakers to reduce tax rates levied on the sale of high-value properties by Measure ULA and similar transfer taxes in other cities.
The deal cut in Sacramento leaves existing transfer taxes untouched, Mott Smith, board member of the Council of Infill Builders, told LAist.
“The Howard Jarvis Taxpayers Association got its major objectives fulfilled,” said Smith, also an adjunct professor of real estate at USC who has co-authored research concluding Measure ULA has depressed development in the city.
“The industry supporters that got them there really got absolutely nothing,” he added. “It is an absolute Game of Thrones twist at the end of this process. Nobody thought this was going to happen.”
Measure ULA, approved by Los Angeles voters in 2022, places a 4 percent tax on real estate sales of $5 million or more and a 5.5 percent on those above $10.6 million. It’s raised more than $1.2 billion for affordable housing, renter assistance and eviction defense.
The measure, commonly known as the “mansion tax,” has been widely criticized for stifling real estate sales and stymying the development of needed multifamily housing. Since its implementation, the tax has faced intense scrutiny from economists, developers, and anti-tax advocates on pro-housing groups.
Even with the Howard Jarvis measure now off the ballot, L.A. voters could still be asked to decide on other “mansion tax” reforms in November. Another proposed state bill, AB 736, would cap local property transfer taxes, such as Los Angeles’ Measure ULA, at 1.5 percent.
The L.A. City Council is considering placing two local measures on the November ballot.
The first would cancel the tax on new apartment buildings within the first 10 years of their construction. The second would exempt Palisades Fire victims who end up selling their properties. To qualify for the ballot, both would have to be approved by the City Council.
The failure to address transfer taxes in Sacramento only reinforces the need for Los Angeles to act, Leo Daube, a spokesman for Councilwoman Katy Yaroslavsky, who introduced the proposed change, told CalMatters.
“If Sacramento is not going to do it,” he said, “then Los Angeles should.”
—Dana Bartholomew
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