Your guide to L.A.’s ‘mansion tax’ proposal to build more housing, Ordinance ULA

On a crowded November ballot, one Los Angeles measure is getting special attention in a city suffering a severe housing and homelessness crisis.

“United to House L.A.,” the “mansion tax,” would impose a one-time 4% tax on property sales above $5 million that would rise to 5.5% on transactions above $10 million. A $5-million sale would generate a $200,000 tax bill.

A simple majority of votes cast in Tuesday’s election is required for passage.

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The so-called documentary transfer tax would generate an estimated $600 million to $1.1 billion a year, according to a city analysis, and the proceeds would fund affordable housing construction, rental subsidies and tenant defense, among other things.

Roughly a quarter of the tax’s proceeds would go toward alternate modes of construction and the purchase of existing buildings. About 30% of the revenue would provide short-term emergency assistance for tenants, subsidies for rent-burdened seniors or disabled people; and funding to provide legal aid for tenants.

Unlike past housing bond measures, there will be a paid inspector general with a staff who will audit the progress of how the money is spent. About 8% of the revenue would be set aside for this purpose.

Social justice groups are heartened that about 30% of the proceeds go to funding emergency rent subsidies, direct payments to seniors and disabled people who are at risk of becoming homeless, and tenants’ right to counsel.

In 2019, if this tax had been applied, nearly half the proceeds would have come from the sale of commercial properties, and 27% would have come from the sale of multifamily residences, such as apartments, according to an analysis by consultant Mike Kahoe, who authored a paper on the measure for the Center for Jobs & Economy and the California Business Roundtable.

If the ballot measure were already in force, sales of these two types of real estate would have raised about $690 million, while sales of expensive single-family homes would have raised just over $200 million.

Backers: They argue this new tax is essential because city officials expect funds available for affordable housing construction to plummet in the coming years. The measure has received endorsements from a slew of unions and social justice groups. They note Los Angeles is dealing with a major housing and homelessness crisis and that more money is needed to build more units.

Critics: They say the tax could drive up rents and make Los Angeles a harder place to do business, which could cause firms to flee the city. Some also take issue with how the proposal is being pitched to voters as a “mansion tax,” even though most of its proceeds would come from sales of apartments and commercial property.

Neither mayoral candidate has come out in favor of it.

Initiative Ordinance ULA has also won backing from labor unions, which say it would help their members find decent places to live, as well as secure jobs on the projects that receive funds from it.

A Rand Corp. study showed the labor provisions in an earlier affordable housing bond added 14.5% to construction costs. But supporters of the new tax proposal say this is the consequence of paying people well, and that it could lead to as many as 43,000 new construction jobs and 26,000 new affordable housing units being constructed in the next decade.

Opponents say the tax could drive up rents and make Los Angeles a harder place to do business, causing firms to flee the city.

They invoke Proposition HHH, the city’s much-criticized $1.2-billion homeless housing bond program approved by voters in 2016, which has been beset by cost overruns and delays. As of August, about 6,300 units of housing funded by the bond were under construction.

The Times’ editorial page publishes endorsements based on candidate interviews and independent reporting. The editorial board operates independently of the newsroom — reporters covering these races have no say in the endorsements.

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