In about-face, LA council votes to pursue a ballot measure for ‘mansion tax’ reforms

After months of debate and false starts, the Los Angeles City Council voted Wednesday in favor of developing a potential November ballot measure that would ask voters to rein in the city’s controversial “mansion tax.”

Ahead of the 9-5 vote to proceed with proposed tax breaks for new apartment buildings, Council President Marqueece Harris-Dawson said he has seen affordable housing construction decline in his district after the policy — called Measure ULA — took effect in 2023.

“I can tell you with certainty ULA has not helped,” Harris-Dawson said. “Housing starts are as low in my district as they’ve been the entire time I’ve been in office.”

Harris-Dawson said neighboring cities, such as Inglewood and Gardena, where new apartment buildings are not subject to L.A.’s tax, have not seen similar declines.

While a majority of the council voted to proceed with a possible ballot measure, Councilmembers Ysabel Jurado, Imelda Padilla, Monica Rodriguez, Eunisses Hernandez and Hugo Soto-Martinez voted against the proposal.

Reform advocates cheered the vote, but said more work is needed. Miguel Santana, president of the California Community Foundation, has pushed for changes with the “Mend It, Don’t End It” coalition, a group of affordable housing developers, labor organizations and business leaders.

“Today the City Council took another important step towards reforming Measure ULA in a way that will allow us to start building housing again while saving a critical funding source that we desperately need," Santana said in a written statement.

‘Mansion tax’ nuts and bolts

Measure ULA taxes the sale of real estate worth $5.3 million or more. That includes large, luxury single-family homes, which is why the measure is often called the city’s “mansion tax.”

However, the tax also applies to apartment buildings and other commercial real estate. Economists have said that’s causing a slow-down in new multi-family construction at a time when L.A. needs more housing supply to keep up with demand and prevent rents from spiking.

During Wednesday’s meeting, Councilmembers Tim McOsker and Katy Yaroslavsky put forward a motion asking the City Attorney to draft a ballot measure that would ask voters to cancel the tax on sales of multifamily and residential mixed-use buildings within the first 10 years of their construction.

That reform proposal is somewhat similar to earlier failed attempts at changing the tax, including from Councilmember (and now mayoral candidate) Nithya Raman and a separate effort from state legislators.

What happens next? 

The council’s proposed measure is still far from officially qualifying for the November ballot. Sending final language to the ballot will require another council vote, and the council could potentially decide later this summer to pull the measure.

If it does appear on the ballot, a majority of L.A. voters would need to approve the changes before new apartment buildings would be exempt. Close to 58% of the city’s voters supported Measure ULA when it first came up for a vote in November 2022.

In a separate vote Wednesday, the council moved forward with another potential ballot measure that would ask voters to exempt Pacific Palisades homeowners from the tax if they sell their properties after the January 2025 Palisades Fire.

To complicate matters further, voters are likely to encounter yet another measure on the November ballot related to the city’s “mansion tax.”

The Howard Jarvis Taxpayers Association has qualified a measure that would repeal L.A.’s tax, and similar taxes across the state, while simultaneously raising the voter-approval threshold for new taxes.

How we got here

Though reforms are tentative at this point, the council’s decision to pursue a ballot measure is an about-face from a committee’s earlier decision to keep changes off the November ballot.

Jurado, the chair of that committee, repeated her argument that it’s too soon to conclude the tax has caused apartment developers to retreat from L.A.

“When we focus just on housing production alone, we’re missing the mark about what this measure was actually intended to do, which is to keep Angelenos housed,” Jurado said during Wednesday’s meeting.

What has tax revenue funded so far? 

Measure ULA has raised $1.2 billion over the last three years, far less than the $1.1 billion in annual funding supporters said the tax could raise. That funding has gone toward affordable housing construction and tenant aid programs, such as rent relief and eviction defense.

However, the city has encountered trouble spending the money on its intended purposes.

City Attorney Hydee Feldstein Soto has refused to sign contracts approved by the city council and the mayor in April for $177 million in tenant aid. And the measure’s strict rules on how tax revenue can be spent to support affordable housing projects have required city leaders to pursue changes to funding restrictions.

Tax supporters expressed disappointment with the council vote. Joe Donlin, executive director of the United to House L.A. Coalition, said a local ballot measure aimed at carving out certain types of real estate could help fuel the argument for full repeal being made by tax opponents.

"Such a move plays into the hands of the Howard Jarvis Taxpayer Association and its allies in the real estate lobby," Donlin said in an written statement.

He went on to say tax breaks would lead to less revenue meant to keep city residents housed.

"If this ballot measure were to pass, it could mean tens of millions of dollars per year cut from programs that build affordable housing and combat homelessness," Donlin said.