A tight mayoral race won’t be the only thing drawing attention to Angeleno’s November 8 ballots. The ULA measure, dubbed “the mansion tax,” will also be put to a vote in the city of Los Angeles, amid opposition from Los Angeles. real estate sector. If passed, the measure will add a new tax on LA property sales north of $5 million to fund affordable housing and homelessness programs.
If the measure is successful, sales of properties in Los Angeles between $5 million and $10 million would be subject to an additional tax rate of 4%, while those worth $10 million or more would be taxed at a additional rate of 5.5%. To put the tax into context, for a home like the one Shonda Rhimes sold earlier this year in Hancock Park, there would be a $1.155 million tax on the $21 million sale; for Ashley Tisdale, who sold in the Hollywood Hills for $5.9 million, a tax of $236,000.
The ULA measure would raise between $600 million and $1.1 billion annually, the city’s chief legislative analyst estimates, to be spent on the city’s housing and homelessness crisis. .
“The current plan is a comprehensive approach to addressing the housing crisis and bringing down housing prices in Los Angeles,” said the comedian and The G-word creator Adam Conover, who has been a strong supporter of the measurement. “It finances the acquisition by the city of vacant buildings and their transformation into affordable housing. It finances keeping people in their homes by helping them with rent subsidies, and it also finances construction.
Conover continues, “Homelessness is the most obvious symptom of housing costs, but you can’t treat the disease just by treating a symptom. We need to bring in people who live on the streets, but if that’s all we do, we won’t address the real problem, which is that it’s too expensive to live in LA.
The proposal, however, has met with a lot of resistance from top Los Angeles real estate agents, as it comes at a time when the housing market has already slowed from its pandemic peak.
“Right now, we are facing multiple problems in real estate: a declining market, high interest rates and high inflation,” said Aaron Kirkman, agent for Compass. “The last thing we need is more taxes imposed on an industry that is already struggling.” Some, like Jason Oppenheim of the Oppenheim Band (also sell sunset fame) campaigned publicly against the measure, with Oppenheim writing in an email sent to friends and clients: “We are not philosophically against wealth taxes, but this initiative was not thought up by men of rational business, and it defies common sense and basic logic. ”
A common argument within the real estate community is the impact this could have on tenants and small business owners who rely on commercial properties.
“One of the biggest problems with this so-called solution is that no one is spared,” says agent Rochelle Maize. “Much of this tax will come from owners of commercial properties and apartment buildings, which means landlords will demand higher rents and retailers will have to raise the prices of basic necessities like food and essentials. clothes. This measure does not only pose a threat to high-end properties. This will have a negative impact on the entire real estate market as a whole and on all those directly involved.
A September report from UCLA’s Lewis Center for Regional Policy Studies, however, said “there is no evidence that the tax would impact rents for commercial or residential tenants.” In most cases, transfer duties are paid by the seller, who will have no legal way to pass on the costs to the tenants of a building he no longer owns. Additionally, this report cites several studies that show that rents are determined by the market, not by taxes and fees. »
The report also estimated that it would raise $923 million a year for producing affordable housing and preventing homelessness in the form of rent relief, income support and legal advice. for tenants, and “to have a positive impact on the city’s housing crisis, while having no effect on the average Angeleno.
Agents opposed to the ULA measure also believe that if passed, it will slow development and discourage people from buying all types of property (single-family homes, apartments, land, businesses) – and although the tax will not would apply only to the city of Los Angeles, would also affect neighboring areas.
“If Measure ULA passes, we will definitely see a spillover into other cities like West Hollywood, Santa Monica and even Beverly Hills,” says Compass agent Sally Forster Jones. “They can potentially implement a similar proposition, or potentially there can be an increase in demand and appeal from other cities such as Beverly Hills and Santa Monica, which will result in an advantage for those areas over to the city of Los Angeles.”
And while all officers recognize the importance of addressing the city’s housing crisis and its homeless population, many point to specific issues with the law that they believe will cause more harm than good. Douglas Elliman’s agent, Juliette Hohnen, said the $5 million mark was just too low, noting that “people who have more than $5 million now 10 years from now are the ones who bought for 2 millions of dollars. Really, what you’re doing is you’re stopping people from affording to own property in LA”
“If you were dealing with people who had $50 million, $20 million, or $30 million, fine, anyone who can afford a $20 million house is very, very wealthy,” she continues. “But in LA over $5 million – that’s rich but in LA it’s not, given how much everything costs.”
Hohnen also reveals that even the possibility of the measure is already being used as a real estate tactic, as another agent recently brought up the proposal in a deal with one of his celebrity clients, saying, “Once that happens, your client is going to pay another half a million dollars, so you should sell it now, so I thought that was interesting, a strategy to get people moving.
Others question Los Angeles’ record on homelessness issues in recent years and what will change with a sudden influx of $1 billion in cash. “The city needs to better understand how it is spending the billions already spent on solving the homelessness crisis,” said Compass officer Ari Afshar. Between Measure H and Project Roomkey, all Angelenos have been taxed for supporting the initiatives and yet there is nothing to show for it. Several agents also argued that the plan is not specific enough and does not specify exactly how the funds will be used.
Neither Karen Bass nor Rick Caruso endorsed the measure, but it was drafted by the ACLU SoCal and is supported by unions across the city. Conover says the ULA measure is often compared to the HHH measure — a $1.2 billion bond measure in 2017 for building substantial affordable housing, but which delivered only a fraction of the units promised; he notes that this measure has been overseen by politicians who control what is built and “have no incentive to allow this type of housing to be built”. This measure, however, “places it under the watchful eye of a citizens’ commission which is in fact led by housing experts”.
LA Family Housing, an organization that helps lift people out of homelessness and poverty, is among the experts supporting the measure, as President and CEO Stephanie Klasky-Gamer says: “Financial and physical resources make the difference. Generating $900 million a year to prevent people from falling into homelessness and allow us to increase production of desperately needed housing to address homelessness is a game changer.
Post-pandemic, the commitment to housing is more important than ever, adds Klasky-Gamer, as well as the fight to prevent people from becoming homeless: “Even though we have moved more people indoors than never before have more people fallen into homelessness than ever before, so it felt like we were never moving forward, we were just keeping pace because more and more people were falling into homelessness.
Conover also highlights the widespread effect of the current housing situation in Los Angeles, especially for those in Hollywood.
“Even people who aren’t on the streets pay half or two-thirds of their income in rent and that’s bad for everyone,” he says. “It’s bad for the economy of our city because then these people can’t go to the movies and support our entertainment industry. They can’t go out and buy drinks or food and support our restaurant industry. This is not good for anyone unless you are a wealthy person who owns an expensive house and the price of your home goes up massively and then you sell and move to a cheaper place then this could be good for you. But everyone, it doesn’t help at all.
“It’s only going to make everything better in the city if we can actually address this, and not just say, ‘Oh, here’s a little intervention, let’s build a little housing here, help with a little tenant program there’ , continues Conover. “No; we have to do everything we can.