LA City Council committee sidelines ballot measure to cut ‘mansion tax’ rate

A City Council committee voted Friday to shelve a proposed ballot measure aimed at cutting L.A.'s “mansion tax” nearly in half.

The ad hoc committee on Measure ULA voted 2-1 to set aside a proposal by Councilmembers John Lee and Marqueece Harris-Dawson that would have asked voters in November to reduce the ULA transfer tax rate for multifamily and mixed-use properties to somewhere between 2% and 3.5%, down from the current rate of up to 5.5%.

However, the ballot measure proposal was also referred to the City Council’s rules, elections, and intergovernmental relations committee, which could still choose to move it forward.

Instead, the ad hoc committee advanced a narrower pilot program that would reduce the property transfer tax only for newly built affordable housing projects.

The pilot program won't need voter approval in the form of a ballot measure. Committee Chair Ysabel Jurado, who introduced the substitute language, said she believes the city should avoid a ULA ballot measure because it’s still too early to evaluate the measure’s long-term effects.

“ I'm against going to the ballot, but I'm for making fixes that make this better,” Jurado said.

Voters will see a separate proposal on their ballots by the Howard Jarvis Taxpayers Association to effectively repeal Measure ULA.

If the L.A. City Council does not approve reforming the measure, the only decision on the ballot in November may be whether to keep the mansion tax in its current form or end it.

About the mansion tax

L.A. voters approved Measure ULA in 2022 to fund affordable housing and homelessness prevention. The measure taxes real estate sales over about $5 million. Since taking effect in April 2023, ULA has raised just over $1.1 billion from 1,633 real estate transactions, according to the city’s housing department.

The city projects it will generate about $500 million in the coming fiscal year — about half of what proponents initially promised. It has funded about 800 new affordable units and helped stabilize thousands of renters facing eviction, according to the housing department.

But critics say the tax has suppressed housing development. Several studies link the tax to a slowdown in apartment construction in Los Angeles, but ULA supporters say high interest rates and broader economic conditions are to blame.

The City Council's ad hoc committee on Measure ULA was formed earlier this year to study how the measure is working and develop potential reforms. That work took on more urgency inside L.A. city hall after the Howard Jarvis Taxpayers Association qualified a statewide ballot measure for November that would effectively repeal Measure ULA entirely.

Joe Donlin, director of the United to House LA coalition, which campaigned for the original measure, said the City Council committee made the right call by rejecting broader exemptions.

“By not taking up the extreme calls for broad, 15-year waivers that could cost the program about a third of its revenue, the committee acknowledged that ULA is working,” Donlin said in a statement.

A separate group of housing developers, union workers and advocacy groups calling itself the “Mend It, Don’t End It” coalition has been urging city hall to make changes to ULA. On Friday, the group said it supports the measure, but believes targeted reforms are still needed.

“Independent research shows that Measure ULA has slowed housing production in Los Angeles at a time when we need more housing, not less,” said Melanie Mendoza, a coalition spokesperson.

What the data show

The debate over ULA's impact played out in the committee room Friday morning. The city's chief legislative analyst reviewed seven independent studies on ULA’s impact. Three of those studies concluded ULA had suppressed housing production and reduced property tax revenues, while four found no meaningful negative impact.

Before ULA took effect, Los Angeles collected about $22 million a month in transfer tax. After that, it dropped to about $13 million. But city legislative analyst Henry Flatt told the committee a similar decline happened in cities without the tax, including Glendale, Long Beach, Pasadena and Santa Clarita.

“We are not currently convinced that Measure ULA has had an extremely negative impact on general fund revenues,” Flatt told the committee.

The county assessor's office read the same period differently. Scott Thornberry, an assistant assessor with L.A. County, told the committee that commercial and industrial property sales are falling in the city but not elsewhere in the county.

“We are seeing, we believe, a trend line of impact to property tax revenue growth in the city of L.A. specifically," Thornberry said.

What the committee did

Instead of the ballot measure, the committee voted to develop a five-year pilot program cutting the ULA tax to 1.5% for newly constructed affordable housing projects that meet specific requirements.

Lee, whose ballot measure was replaced with language advancing the pilot program, said he hadn't seen the substitute prior to Friday’s meeting and voted against it.

“This was just placed in front of me,” he said. Lee objected to a provision in the substitute recommendations calling for $30 million in new spending on homelessness support.

“Without knowing where this money's coming from, I'm going to have to vote no,” he said.

Lee told LAist he supports stronger oversight and technical improvements to Measure ULA, but believes a ballot measure is the right approach.

“Voters deserve the opportunity to consider targeted changes that would preserve the intent of the measure while addressing its unintended impacts on housing production and real estate activity in Los Angeles,” the councilmember said, in a statement.

Friday's meeting was the committee's final scheduled hearing. The committee, which is set to dissolve June 1, also voted to advance a narrower nonprofit tax refund limited to organizations that can prove all sale proceeds went directly to affordable housing.

The committee continued a separate motion on fire exemptions for Palisades fire victims, which will be heard by another council committee. A motion to loosen eligibility rules for the ULA Citizens Oversight Committee was noted and filed.

Councilmember Imelda Padilla, who introduced several of the committee's motions, said the process had been guided by a commitment to protect the measure.

"My goal has always been to listen carefully, bring people into the conversation, and protect ULA while honoring the voters' intent," she said at Friday’s meeting.

In her closing remarks, Jurado reflected on the three-member committee’s past work.

“We released $14 million in rental assistance to the most vulnerable Angelenos and $300 million for affordable housing,” she said. “We did in six or seven meetings what others couldn't do in five years.”

The ad hoc committee's recommendations now move to the full City Council.

Harris-Dawson and Lee’s ballot measure motion will be considered by the City Council’s rules committee at a later date, officials said.