LA Approves Tenant-Friendly Plan to Spend $150M From New Transfer Tax
So-called ‘mansion tax’ has failed to generate as much as supporters touted
By Greg Cornfield August 30, 2023 2:00 pm
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Los Angeles officials have approved a $150 million spending plan for the funds the city has generated via the new Measure ULA transfer tax.
Even though Measure ULA has so far generated only $55 million — which is 37 percent of $150 million, and a far cry from the $900 million annual returns estimated when the measure was introduced — the Los Angeles City Council on Tuesday voted to direct the money to six programs aimed at helping to prevent more people from becoming homeless. The programs include affordable housing development, emergency rental assistance and eviction defense.
The plan includes $56.9 million for an affordable housing development initiative called “Accelerator Plus.” The program will fund “shovel-ready” projects or complete construction with an additional loan of no more than $12 million to close a financing gap.
About $23 million will go toward eviction defense and prevention to fund legal services as well as education and tenant outreach for households at risk of eviction. Another $23 million will go toward income support for rent-burdened seniors.
Short-term emergency rental assistance — the first program to be implemented starting Sept. 19 — will use $18.4 million to give eligible households up to six months of owed back rent due to a one-time economic hardship.
More than $11.2 million will fund a Protections from Tenant Harassment program to educate tenants and landlords about their rights and obligations, and to enforce protections against tenant harassment. And more than $5.5 million will go to more tenant outreach and education.
Mayor Karen Bass’s office said the approval comes at a critical time when tenants across L.A. are facing eviction.
“In order to successfully confront this homelessness crisis, we have to ensure that we are doing all we can to prevent Angelenos from falling into homelessness in the first place,” Bass said in a statement.
Though it was called the “mansion tax” during the time leading up to a vote on the November 2022 ballot, Measure ULA affects all real estate asset sales over a certain threshold. Starting April 1, the city took an extra 4 percent on all transactions above $5 million, and a 5.5 percent charge on deals over $10 million.
Adding to interest rate hikes and falling property values, Measure ULA is believed to have seriously discouraged asset sales for all property types since going into effect. Sales volume for apartment buildings under the $5 million threshold was up a significant 40.5 percent in the second quarter of 2023 compared with the first, while sales for apartment buildings over $5 million plummeted by 75.2 percent, according to data from NAI Capital.
Measure ULA could still be overturned in a couple of ways. There’s an ongoing court case arguing the tax is unconstitutional. Additionally, a state ballot measure that Californians will vote on next year would require two-thirds voter approval for new local special tax hikes dating back to January 2022, thus negating Measure ULA.
Gregory Cornfield can be reached at gcornfield@commercialobserver.com.
