Nonprofit Home Builders Hit by LA’s “Mansion Tax”

L.A.’s mansion tax, meant to take from the rich to pay for housing for the poor, has taken its toll on nonprofit homebuilders with millions in unexpected fees, curbing the development of affordable homes.

In the last year, two nonprofits coughed up a combined $6.1 million in mansion tax fees, denting their ability to provide affordable housing, the Los Angeles Times reported.

The voter-approved Measure ULA real estate transfer tax, launched in April last year, charges a 4 percent fee on all residential and commercial property sales above $5.1 million and a 5.5 percent fee on sales above $10.3 million.

It was meant to generate up to $1.1 billion a year for affordable housing and homelessness prevention initiatives. As of Oct. 31, it took in $439 million.

Bob Beitcher, head of the Woodland Hills-based Motion Picture & Television Fund, was delighted when voters approved Measure ULA, thinking Los Angeles benefits when millionaires and billionaires pay their fair share.

But when the charity sold off $30 million worth of land, it was forced to pay $1.65 million in “mansion tax” money.

Since the fund’s mission seemed to match with ULA’s mission of helping solve L.A.’s housing crisis, Beitcher assumed the sale would be eligible for an exemption.

“Why us? We never thought we’d be paying this tax,” Beitcher told the Times. “When you hear mansion tax, you think millionaires and billionaires. We’re not selling a mansion, we’re a nonprofit.”

For more than a century, the Motion Picture & Television Fund has supported people in the movie and TV industries with housing, financial assistance and healthcare. It houses 250 people on its 40-acre campus, subsidizing living costs for 70 of them.

To help backfill costs, the nonprofit sold 19 acres in December to the California Commercial Investment Group for $30 million to build a 300-unit luxury senior living complex.

But since it sold the property to a luxury developer, it didn’t qualify for a tax exemption.

Under Measure ULA, exemptions can be granted for nonprofits with a history of affordable housing development, but only if the nonprofit is the buyer in the transaction. If the nonprofit is the seller — even if it’s an organization that works with the goals of Measure ULA — it’s on the hook for the tax, according to the Times.

In October, Los Angeles Jewish Health, a senior healthcare nonprofit based in Reseda, sold a senior living complex in Playa Vista for $81 million. It found a buyer in late 2020, but the sale took so long that Measure ULA was proposed, passed and enacted before the deal closed.

As a result, the nonprofit, which provides care for 4,000 seniors, was suckerpunched by a $4.455 million tax under Measure ULA.

The organization intended to use a chunk of the proceeds to develop affordable housing, noting the plan in the escrow instructions of the $81 million sale. But now, that’s in jeopardy.

“It’s a shame because that’s money we would have used for affordable housing,” said CEO Dale Surowitz. “Now that plan is at risk.”

Surowitz said he has worked with City Councilman Bob Blumenfield to claw the $4.455 million back, either through an exemption or by having it reinvested in the nonprofit.

But he said there aren’t clear means for that to happen.

“I don’t think they planned for this,” Surowitz told the Times. “I can’t imagine them wanting a nonprofit involved with caring for people who don’t have financial resources to pay the tax, because that was the intention of ULA.”

— Dana Bartholomew