Coalition Asks City Committee to Amend Mansion Tax

Industry trade groups looking to thwart a statewide ballot measure that could topple the city’s mansion tax, took their proposals to Los Angeles City Hall on Friday.

The Affordable LA: Mend It, Don’t End It coalition, which is led by California Community Foundation President and CEO Miguel Santana, sought to offer ways to fix Measure United to House L.A., rather than wipe out the two-tier tax on real estate property transactions approved by voters in 2022.

The group’s proposal builds on a late January attempt by 4th District Council Member and mayoral hopeful Nithya Raman to create ULA exemptions for what she called the tax’s “unintended consequences.” The last-minute proposal and bid to get it onto the June ballot was met with ire from some of her council peers and supporters, who said the ideas lacked a full discussion. The proposal was ultimately kicked to the Finance and Housing and Homelessness committees.

The Mend It, Don’t End It group not only recommends Raman’s 15-year exemption on new multifamily and commercial construction, but also proposes a ULA ceiling of 1 percent to 2 percent after that 15-year period for all non-single-family property transactions.

They’re additionally calling for improvements to rules around financing, expansion of how ULA funds could be used, more transparent reporting and relief for Palisades fire survivors and future natural disasters. The group also proposed the city create a bond against the tax’s revenue to further fuel construction projects.

ULA currently applies a 4 percent tax on transactions starting at $5.3 million and bumps up to 5.5 percent on deals of $10.6 million or more.

The coalition comprises several groups, including the Council of Infill Builders, Los Angeles Business Council, Housing Action Coalition, LA YIMBY, Los Angeles Area Chamber of Commerce and Western States Carpenters.

Solutions clash

The group’s emergence is timed with strides made this week on a ballot measure that’s viewed as a possible path to ULA’s full elimination: the Howard Jarvis Taxpayers Association-sponsored Local Taxpayer Protection Act, which secured enough signatures to climb onto the November ballot.

That means voters will decide if the state constitution should be changed to require two-thirds approval for all local tax increases and void levies such as Measure ULA, which passed with 58 percent voter approval.

“What this means is that voters in Shasta County and throughout the state of California will be making decisions about the fate of Los Angeles and what it will do,” Santana told the city’s ad hoc committee on Measure ULA on Friday.

The coalition’s presentation was the basis for discussion during the third meeting of the committee, which is chaired by 14th District Council Member Ysabel Jurado. It’s tasked with studying the tax’s impacts and handling all other matters related to ULA before the three-person committee sunsets on June 1.

Santana pitched the coalition’s recommendations as an alternative for the city and made clear the group is not asking for ULA’s dismantling.

“Right now, there’s a binary. Either you keep ULA or you destroy it,” Santana said. “To be clear, we do not support destroying ULA; we support ULA.”

One notable critique of the tax among both residential and commercial agents and brokers, which crept into Friday’s meeting may also be getting legs at city hall.

Last week, a proposal by 12th District Council Member John Lee, who also sits on the ad hoc committee, asked the city’s legislative analyst and administrative officer to include the steps necessary to create a carveout from the tax for unprofitable projects in their ULA study.

That’s a pain point for many property owners or developers who have grown wary of building within the city when having to factor in the possibility of an additional expense on projects that sell at a loss.

“That 5.5 percent tax sounds like a small amount but it’s a tax on the value that you’ve created. It’s not a tax on the costs that you’ve incurred,” Mott Smith, adjunct professor of real estate development at University of Southern California and chair of the Council of Infill Builders, said during Friday’s meeting. He went on to estimate that the tax could eat into a third or as much as half of a project’s profits.