The city of Los Angeles Saturday will begin an additional tax on the property sales that exceed $5 million through Measure ULA, a ballot measure passed in November, which city officials have said will generate a revenue for affordable housing projects and support homeless prevention services.
The measure dictates the tax must be paid by the seller of the property.
The measure, also known as the “mansion tax,” will implement a 4% sales tax on properties exceeding $5 million and a 5.5% sales tax on properties exceeding $10 million, to be collected and earmarked for renter protections, including protections for low-income seniors at risk of homelessness and building affordable housing across the city to address the current shortage. City officials initially reported the measure expected to generate between $600 million and $1.1 billion annually, but that estimate was lowered to $672 million.
Several council members are hoping to use Measure ULA funding to expand renter protections, including developing a program that would establish a right to counsel for tenants. Measure ULA would allocate 10% of revenue generated from the tax to fund a counsel program for lower-income tenants threatened with eviction. According to the text of the ballot measure, a vast majority of the estimated 30,000 tenants who receive eviction notices each year in Los Angeles “do not have access to an attorney and do not know how to exercise their rights.”
Though the measure passed with 58% voter approval and has support from the City Council, the measure is currently facing litigation by the Howard Jarvis Taxpayers Association and the Apartment Association of Greater Los Angeles. The lawsuit seeks to prevent the city from implementing Measure ULA.
According to Daniel Yukelson, executive director of Apartment Association of Greater Los Angeles, property owners have been scrambling to unload their properties before the tax goes into effect.
“Quite frankly, it’s a big tax bill, 5.5%, and it’s really going to discourage development in the city of Los Angeles,” Yukelson said in an interview with City News Service. “Why invest in LA, when you just go across the borders and not have to pay that huge tax.”
Initially property owners will have to pay the tax, but eventually the repercussions of it will result in higher rents and higher costs of goods, he said.
“What people need to think about is that, what they like to call the ‘mansion tax,’ impacts all types of property — multifamily, office buildings, and not just mansions,” Yukelson said. “Mansions will probably be in the minority.”
This measure will affect how people invest in property, he added, noting that pension-fund workers will most likely move around their money away from real estate assets in their portfolio, and rebalance their money around such as in bonds or stocks.
“People invest in property with certain expected return, and if this is an additional cost, you’re going to have to bear that return,” Yukleson said. Eventually, it will trickle down and the burden will be in higher rents. For most people, they won’t be impacted initially, but when those units become available and rented at market rates, the market rates are invariably higher to be able to cover this.
While Yukelson expressed how some opponents felt about the measure, a rally held Friday afternoon by the United to House LA Coalition, a joint organization with more than 230 nonprofit neighborhood organizations, labor unions and homeless service providers, painted a whole different picture.
Durado Mazariegos, co-director of the Los Angeles Alliance of Community Empowerment, said Friday’s rally was a celebration.
“Everybody was really joyful, and also very aware of what’s at stake,” Mazariegos said. “In Los Angeles, people have been facing dual, wicked problems — the homelessness crisis and its intersection with the affordability housing crisis.”
Those issues were exacerbated by the coronavirus pandemic, he added. He and many others in the housing coalition see Measure ULA as an “opportunity to be able to uplift the needs and resources” that are in the city for Angelenos, and those historically marginalized groups.
“We won this measure by 58%, that’s a landslide. For these folks to go around and circumvent democracy, it’s a slap to the face,” Mazariegos said in regards to any efforts opposing the measure. “It’s a slap in the face for folks that really do want to create the solutions that we need.”