Researchers say LA’s ‘mansion tax’ hurts new housing. Voters could get a chance to tweak it

Los Angeles voters could soon get another chance to weigh in on Measure ULA, better known as the city’s “mansion tax.”

First approved by voters in November 2022, the measure has taxed real estate selling for more than $5 million. It funds tenant protection programs and affordable housing construction.

But economists have found that because the tax also applies to apartments — not just mansions — housing developers are pulling back on building in the city compared to other parts of L.A. County. One UCLA study concluded the city would have more low-income units on balance if the tax did not apply to new apartments.

Now, there’s a new effort brewing at City Hall to change how the “mansion tax” works.

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City Councilmember Nithya Raman, chair of the council’s Housing and Homelessness Committee, introduced a motion Friday to place a new measure on the June ballot. The ballot measure would ask voters to exempt recently constructed apartment buildings from the tax, among other changes.

“We've seen some real pressures on the market as a result of ULA,” Raman told LAist. “It was sold to voters and talked about as a mansion tax. I don't think it was intended to slow the construction of new apartments in a city with an acknowledged and widespread housing crisis.”

Supporters of the tax say it’s working as intended. They dispute claims that ULA is responsible for slower housing growth in the city.

No council votes have yet been taken.

Local reform effort follows failed state bill

Supporters say the tax has funded eviction defense and rent relief programs. It has also produced the city’s largest-ever pot of money for low-income housing development, though less than 200 apartments have been completed and leased so far.

Joe Donlin, director of the group United to House L.A., called the latest reform effort “irresponsible.”

The proposed tax exemption for apartments built within the last 15 years would be “a tax break for developers and billionaires,” Donlin said.

“That would be giving money away from ULA programs that are protecting renters, that are keeping people from falling into homelessness, and building affordable housing,” he said.

Raman’s motion would also cancel the tax on homeowners affected by the Palisades Fire. Another change would restructure certain financing terms in order to attract traditional lenders to participate in ULA-funded affordable housing projects.

Many of the changes are similar to those proposed by state lawmakers in a bill that failed to advance at the tail end of last year’s legislative session in Sacramento.

Dueling effort at repeal is underway 

But those who support reform say without some changes, the tax could soon be thrown out entirely. The Howard Jarvis Taxpayers Association is collecting signatures for a separate ballot measure that would overturn not just Measure ULA, but similar taxes across the state.

Mott Smith, a reform proponent and the co-author of a UCLA study that found the tax had sharply reduced high-end real estate sales, said this is shaping up to be a tough political fight.

“I commend Councilmember Raman for doing her best to turn Measure ULA into something that might actually work before it goes away,” Smith said.

Some L.A. council members have already signaled opposition to the push for reform.

Alejandra Alarcon, a spokesperson for Councilmember Ysabel Jurado, said in a statement to LAist that Jurado opposes the motion as written.

“Voters overwhelmingly supported ULA to help build and sustain diverse communities,” the statement read. “Any changes to the measure should be made with community advocates at the table, not without them.”

What’s next?

The new City Council effort has a long way to go before any changes are made to the tax.

If a majority of the council approves it for the June ballot, a majority of local voters would need to sign off on changing a measure that received nearly 58% support from voters back in November 2022.