Does LA need a ‘mansion tax’ makeover? City Council delays decision on sending it back to voters

The Los Angeles City Council decided Tuesday to delay voting on proposed reforms to the city’s embattled “mansion tax.”

The tax has staunch defenders, but a number of economic studies have found that it’s slowing housing development at a time when L.A. is grappling with a severe housing shortage.

Instead of sending Measure ULA back to voters with proposed changes, the council decided to refer the idea to their Housing and Homelessness Committee for further debate.

Councilmember Nithya Raman, chair of the committee, introduced a motion last week that sought to put a reform measure on the June ballot. Her proposal would have asked voters to cancel the tax on apartment buildings constructed within the last 15 years, exempt Palisades Fire victims from the tax and change financing terms in city-funded affordable housing projects.

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“Voters were sold a mansion tax,” Raman said during Tuesday’s council meeting. “Ignoring the very real impacts on apartment construction — apartments that people want and need and want to move into — doesn’t protect Measure ULA. It weakens it.”

How the ‘mansion tax’ works

Measure ULA was approved by nearly 58% of L.A. voters in 2022. It levies a 4% tax on real estate sales over $5.3 million and a 5.5% tax on properties selling for more than $10.6 million.

The city uses tax revenue to fund tenant aid programs, such as eviction defense and rent relief. And it subsidizes the construction of affordable housing, though most of the funds raised for that purpose have not yet been spent.

Supporters rallied outside City Hall before the Tuesday vote, urging City Council members not to send Measure ULA back to the voters with proposed changes.

“We believe it's working,” said Carla De Paz, a steering committee member of the United to House L.A. coalition. “Every day we hear the stories of the tenants who are staying housed, who are not being evicted, who are getting the services they need.”

De Paz said putting Measure ULA back on the ballot would detract from efforts to better the city’s implementation of affordable housing and tenant aid programs.

“The harm is that we're spending a lot of time trying to amend something that doesn't need fixing,” she said.

Reform would reduce revenues by around 8%

Housing policy researchers contend that the measure does need fixing. They point to a number of studies showing that because the “mansion tax” also applies to new apartment complexes selling for more than $5.3 million, housing development has slowed in the city relative to other parts of L.A. County.

One UCLA and RAND study found that L.A. would likely have more affordable housing units — like those bundled in with many market-rate projects — if the tax did not apply to new apartments. That study also estimated that canceling the tax during the first 15 years of an apartment building’s life would reduce total revenues by 8% because most sales happen in older properties.

Scott Epstein, policy director with Abundant Housing L.A., said he supports keeping ULA in place, but with the proposed reforms.

Epstein said he wants the city to “continue to provide the important revenue that we need for tenant protection, homeless prevention and affordable housing production, while not dissuading needed multi-family housing production from the private sector.”

What happens now? 

Because the L.A. City Council decided not to take action Tuesday, the proposed reform measure will not be ready for the June ballot. If the council approves sending it to voters later on, it could go head-to-head with a separate ballot initiative currently gathering signatures for a November measure to repeal not just Measure ULA, but all such taxes across the state.

Before failing to convince her colleagues to vote on the reform measure Tuesday, Raman said the other ballot initiative, plus the possibility of intervention of state lawmakers, should inspire city leaders to act fast.

“We can head off donors and supporters and promoters of other efforts if we do it the right way and if we do it locally,” she said. “Fixing unintended consequences is how we keep this policy aligned with what voters expected and what the city needs.”

The proposed changes are proving hard to advance for reformers. State lawmakers pursued similar tweaks in a bill that failed to move forward at the end of last year’s legislative session in Sacramento.