L.A. Considers Reforming ‘Mansion Tax’ Ahead of June Ballot

A Los Angeles City Council motion to reform the city’ “mansion tax” was moved to committee on Tuesday, setting up the latest attempt to address complaints that the added levy disincentivizes affordable housing development.

Council Member Nithya Raman’s motion would add a 15-year exemption to the city’s Measure ULA transfer tax for new or substantially renovated mixed-use, commercial, and multifamily projects. The motion also seeks to add a three-year exemption for any taxpayer who would face “undue hardship” from the tax in the wake of a natural disaster, retroactively including the 2025 L.A. Wildfires, as well as other technical changes. The former provision would cut between 9 and 13 percent of ULA revenue collections, according to Raman.

Measure ULA, enacted in April 2023, adds a 4 percent transfer levy on property transactions between $5.3 million and $10.6 million, and a 5.5 percent levy on deals of $10.6 million or more. The revenue collected by ULA — which surpassed $1 billion earlier this month — targets affordable housing and homelessness prevention programs.

Yet that revenue has also come at the expense of commercial real estate sales activity, which in the years since ULA was enacted have dropped by as much as 50 percent, according to a UCLA study last year.

Raman, who had endorsed ULA ahead of its 2022 ballot referendum, told the City Council on Tuesday that the revenue has helped stabilize thousands of tenants and supported the construction of 200 homes so far, with more to come. Yet reforms were still needed to preserve the original intentions of the tax, she said.

“Those outcomes matter, and they show us why this funding source is so important to preserve for our city,” Raman said. “But there are real threats to ULA, from statewide ballot initiatives that threaten to take away transfer taxes entirely across California, from planned legislative action in Sacramento, and from local ballot initiatives, all of which are likely to make far deeper cuts to ULA’s revenues. I strongly believe that acting locally, and acting responsibly, is how we protect these voter approved policies.

“But I want to be clear that my efforts today are not just a defensive measure, this is also an effort to address what I believe are unintended consequences of the design of Measure ULA, which was sold to voters as a ‘mansion tax,’” Raman added. “In reality, it put a transfer tax on all properties over $5 million, including apartments. And we have to be honest about what has happened as a result.”

Rather than voting to add the motion to the city’s June ballot, the City Council on Tuesday moved it to its Housing and Homeless Committee for further discussion.

Council Member Monica Rodriguez admonished Raman on Tuesday for ignoring a similar motion that Rodriguez had introduced nearly a year ago, but said that the reform deserved more formal consideration and public input before being added to the ballot.

It was not immediately clear when the committee will consider the motion.

Nick Trombola can be reached at ntrombola@commercialobserver.com.