Measure to kill LA’s ‘mansion tax’ won’t be on November ballot after all

It’s official: California voters will not be asked to overturn the Los Angeles “mansion tax.”

A measure to eliminate Measure ULA — and similar taxes across the state — was headed for the November ballot. But a last-minute deal in Sacramento convinced the initiative’s sponsor to pull it just before the deadline to remove qualified statewide measures from the finalized ballot.

The Howard Jarvis Taxpayers Association agreed to shelve its measure on Thursday because state lawmakers swiftly passed language for a substitute measure. It will ask California voters to raise the threshold for passing new special taxes to two-thirds, up from the simple majority courts have ruled is sufficient to pass many special taxes, such as Measure ULA.

Jon Coupal, the taxpayers association’s president, celebrated the deal in a statement.

“It’s a tremendous turnaround,” he said. “The Legislature voted to make it harder to raise taxes by advancing a constitutional amendment, ACA 22, to close a loophole that had allowed some special taxes to pass with less than the two-thirds vote required by Proposition 13.”

Winners and losers

The founding of the Howard Jarvis Taxpayers Association dates to the 1978 passage of Proposition 13, which ushered in an era often called the “taxpayers’ revolt.” Proposition 13 created statewide limits on property taxes that remain in place today.

But where the taxpayers association sees victory in this week’s Sacramento deal, another powerful group sees defeat. Real estate developers and investors bankrolled the Howard Jarvis initiative in the hope of pressuring state lawmakers to reduce tax rates levied on the sale of high-value properties by Measure ULA and similar “transfer” taxes in other cities.

But the deal cut in Sacramento this week leaves existing transfer taxes untouched, said Mott Smith, board member of the Council of Infill Builders.

“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.”

‘Mansion tax’ reform stalls… again

Smith and other economists, housing advocates and developers have pushed for new limits on Measure ULA. Nearly 58% of city voters approved it in 2022 following a campaign that described the policy as a “mansion tax.” Previous attempts at the local and state levels to roll back the tax, or stop it from applying to new apartment buildings, have all failed.

The latest attempt at reform briefly coalesced around legislation unveiled earlier this week.

Assembly Bill 736 would have allowed Measure ULA to continue taxing the sale of mansions — defined as single-family homes selling for more than $5.4 million — at current rates, which can be as high as 5.5%. But it would have capped tax rates at 1.5% for non-mansions, such as apartment buildings, retail centers and other types of commercial and industrial properties.

Pro-development housing advocates with the group California YIMBY — as in “yes in my backyard” — argued the bill would have helped “fix the problems with poorly-designed transfer taxes” and “preserve the ability of local governments to expand housing supply.”

The bill, co-authored by Bay Area Assemblymember Buffy Wicks, now faces an uncertain future.

“Politics is often about navigating imperfect choices,” Wicks said in a statement. Getting the Howard Jarvis measure off the November ballot means local revenue raised by Measure ULA and other transfer taxes is no longer at risk of being eliminated, she said.

“At the end of the day, protecting those resources for our local communities is the responsible path forward,” Wicks said.

Why this fight still might not be over

Measure ULA supporters celebrated the death of the Howard Jarvis measure, saying its removal safeguards funding for L.A. affordable housing development and tenant aid programs.

“The best programs we have to build affordable housing and prevent homelessness through ULA were at risk, and — at least for now — they're not,” said Joe Donlin, director of the United to House L.A. coalition. He estimated that AB 736 could have cut tax revenue by up to 50%.

Measure ULA has raised $1.2 billion since taking effect in April 2023. Tens of millions of dollars have already been delivered to tenants in the form of rent relief, legal defense in eviction court and other assistance programs. Other funding has helped subsidize the development of nearly 800 income-restricted housing units.

But the city has run into roadblocks on spending much of the money for its intended purpose. New tenant aid contracts remain held up by outgoing L.A. City Attorney Hydee Feldstein Soto, who has refused for more than a year to approve long-term funding for the city’s lead eviction defense contractor.

The City Council is also still mulling changes to get more housing built by loosening strict limits that make Measure ULA dollars hard to pair with other sources of affordable housing funding.

Even with the Howard Jarvis measure now off the ballot, L.A. voters could still be asked to make decisions on other “mansion tax” reforms in November.

The L.A. City Council is considering placing two local measures on the November ballot. One would cancel the tax on new apartment buildings within the first 10 years of their construction. The other would exempt Palisades Fire victims who end up selling their properties.

Both of those reforms need further debate and approval from the City Council before they would be confirmed for the November ballot.

As for the deal Howard Jarvis hatched with state lawmakers, it remains possible that the taxpayer group could achieve none of its goals. If a majority of California voters reject the new measure to make special taxes harder to pass, future tax hikes along the lines of Measure ULA would still be allowed to take effect with a simple majority vote.