Los Angeles officials are weighing changes to the city’s “mansion tax,” but housing advocates who opposed the policy say the proposed fixes barely scratch the surface of what’s wrong.
The city’s Housing Department released a report last week recommending the City Council approve four amendments to Measure ULA, the voter-approved tax on real estate sales of $5.3 million or more. The department described the changes as “narrowly focused,” mostly targeting the financing rules and regulations that govern affordable housing projects the tax funds. Officials want the Council to sign off by early fall so loans for new affordable housing projects can close before the end of the year.
Since it took effect, Measure ULA has raised more than $1 billion for tenant aid and affordable housing construction. Supporters said before the 2022 vote that it could produce 26,000 homes in its first decade. So far, about 800 homes have been built with tax funds.
Not exactly a roaring start.
Mott Smith, an adjunct professor of real estate at USC and a tax critic, said the Housing Department’s proposed reforms could fix some overly restrictive spending rules. But they don’t touch the tax’s broader effect on housing development across the city, he said.
“This is really a form of admission that ULA is not working as designed,” Smith told city officials. “It’s frankly about time that the city admits this because we’re never going to fix it if they can’t admit there’s a problem.”
The report’s recommendations were reviewed and endorsed by the citizen oversight committee that monitors Measure ULA’s outcomes. Joe Donlin, director of the United to House L.A. coalition, said supporters back the proposed changes.
“ULA was written with flexibility to make these exact kinds of amendments,” Donlin said. “We always knew that there would need to be adjustments along the way, and we continue to support efforts to optimize Measure ULA in any way possible.”
The four recommended changes would exempt projects built by affordable housing developers from paying the tax, ensure that terms for other public funding sources don’t conflict with Measure ULA funding terms, allow foreclosed projects to be sold to other developers, and let building owners raise rents if they lose rental subsidies. According to the Housing Department report, affordable housing lenders told the city that current Measure ULA requirements can discourage them from funding projects.
The city began taking applications for $387 million in housing development and preservation funds last year. Still, the lender concerns signal a real structural problem, not just a paperwork issue.
Azeen Khanmalek, executive director of Abundant Housing L.A., said the proposed changes would help unlock Measure ULA funding but wouldn’t do enough to reverse the broader slowdown in apartment development that critics blame on the tax.
The California housing shortage has been building for decades, and Los Angeles is among the cities where the gap between supply and demand hits hardest. A tax that discourages market-rate development, even while funding affordable units, creates a tradeoff that some researchers say costs the region more homes than the tax actually produces.
Smith’s critique cuts to that exact tension. Measure ULA taxes sellers, which sounds tidy, but in practice it can make large residential deals pencil out worse, slowing the kind of private development the city also desperately needs. Whether affordable housing gains offset those losses isn’t something the Housing Department report appears to answer directly.
Supporters of the measure point to thousands of homes they say are entering the development pipeline. That’s a harder number to pin down than homes already built, and critics have pushed back on it as optimistic.
The City Council hasn’t acted on the recommendations yet. The Housing Department is pushing for a decision in the coming months so funding deals don’t stall. Los Angeles is still digging out from a housing and homelessness crisis that predates the measure by years, and any delay in getting money out the door has real consequences for people waiting on affordable units.
Reporting by LAist first flagged the department’s report and the range of reactions from both supporters and critics of the tax.
The debate over Measure ULA won’t be settled by these four amendments. But the city’s willingness to acknowledge problems with the policy, even if its proposed solutions feel modest to critics, is at least a sign that Los Angeles is paying attention to what the data on housing production is actually showing.