LA City Council to Vote on ULA ballot bid

Less than a week after a statewide ballot measure which would have eliminated Measure ULA was slashed, the Los Angeles City Council might be taking its own electoral path to making changes to the so-called mansion tax.

On Wednesday, the council will vote on whether to adopt a ballot measure for the Nov. 3 election that would, among other amendments, eliminate the transfer tax for new multifamily construction. And based on the council’s previous 9-5 vote instructing city staff to move forward with drafting this measure on June 17, it appears likely the ballot will make its way to voters come November.

Measure ULA, which was approved by Los Angeles city voters in 2022, places a 4 percent tax on real estate sales of $5.3 million or more and a 5.5 percent on those above $10.6 million. The transfer tax has raised more than $1.2 billion so far, the majority of which has come from commercial transactions despite the nickname of the mansion tax.

The real estate industry has been critical of the tax since its inception, arguing ULA stifles development and slows deal flow throughout the city. It seemed as though a statewide ballot measure from the Howard Jarvis Taxpayers Association, which was set to go before voters in November, was going to be the industry’s saving grace before it was pulled last week. The measure would have changed the threshold for passing transfer taxes to two-thirds, up from a simple majority, and would be applied retroactively, meaning ULA would be out because it garnered just shy of 58 percent of voter support.

After talks with state legislators and other stakeholders, the taxpayers association agreed to shelve after the state offered up a substitute that still called for the election threshold to be increased but would not apply to laws that have already passed.

Now, after months and months of discussion which seemingly led to little action, Los Angeles City Council members appear to be ready to reverse course and accept that the status quo isn’t working.

Under the City Council’s proposed ballot measure — which is on the agenda for an up-or-down vote on Wednesday — transactions involving new housing developments with five or more units, including mixed-use projects, will be free from ULA for 10 years after securing certificates of occupancy. That would apply to new builds on undeveloped land as well as conversion projects.

The exemption would pertain to projects that receive permits after the legislation is passed. Looped into the measure are also several bureaucratic process amendments for the tax, including the qualifications for ULA oversight committee members and disbursement percentages for ULA-funded services.

The council will also vote on a separate ballot measure to give owners of residential properties impacted by the 2025 Palisades fire a one-time, five-year exemption from the Measure ULA tax.

Another piece of statewide legislation could impact the future of ULA, too. Assemblymember Buffy Wicks introduced AB 736 last week which would cap transfer taxes to 1.5 percent — a significant drop from ULA’s current 4 to 5.5 percent.

Despite potential reform in the future, some in the industry — including Avison Young’s Christopher Bonbright — won’t be satisfied until there’s a complete repeal of ULA.

“It needs to be repealed. Period,” Bonbright said in a May interview with The Real Deal. “…It’s a lose-lose. You destroy the market on one hand, and then on the other hand, you’re giving money to the [city] which has proven that they’re just not good at [funding] the housing that they’re trying to create.”