Los Angeles Mansion Tax Potentially Changing With New Bill

California legislators are looking to stop some of the bleeding brought on by Measure ULA, or the so-called “mansion tax” in the City of Los Angeles.

On Tuesday, lawmakers released a bill that seeks to cut tax rates for some newly built multifamily and commercial properties, LAist reported. Luxury homes would still be subject to the full tax levy under the new proposal, save for those rebuilt after a natural disaster in the previous five years.

The move is purportedly being done in response to criticism that Measure ULA pushes away developers when increased housing production is desperately needed in the city. Since April 2023, the voter-approved Measure ULA has imposed a 4 percent tax on property sales above $5 million and 5.5 percent on transactions totaling more than $10 million.

In the more than two years since then, Measure ULA is estimated to have collected $830 million in revenue to fund rent relief, eviction defense and affordable housing programs. However, only a small fraction of the funds have been spent actually building multifamily affordable housing as of May, according to the city’s most recent budget report cited by LAist. The tax’s application to any sale of any property at more than $5 million–regardless of profit margins–has also been cited as a damper on development in the City of Los Angeles specifically.

In the new bill, co-authored by state Sen. Lena Gonzalez and Assembly member Tina McKinnor, some commercial properties built within the last 15 years would have their ULA tax lowered to 1.5 percent. It would also relax some financing restrictions in Measure ULA, such as the requirement that financially distressed apartment buildings that received city funding could only be sold to certain buyers, such as nonprofit organizations and community land trusts.

The signs appear to confirm a drop-off in development as a result of Measure ULA. Economic reports cited by LAist claim the tax has caused a sharp decline in housing development activity across the city, with one University of California, Los Angeles study estimating the city would have more affordable housing units if the tax did not apply to new apartment buildings.

The new bill will need to be approved by tomorrow in order to make any changes to Measure ULA before the end of the legislative session. In the meantime, the Los Angeles Housing Department is gearing up to distribute a record $387 million largely raised via the mansion tax to build affordable multifamily residences.

— Chris Malone Méndez