LA City Council approves $150M in ‘mansion tax’ allocations

Mansion Olga Mu%CC%88ller Unsplash

Funds will go to short-term emergency rental assistance, eviction defense, tenant outreach and education, direct cash assistance for low-income seniors and individuals with disabilities, tenant protections and affordable housing development, according to reports.

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The Los Angeles City Council approved, in a 10-0 vote on Tuesday, a $150 million spending plan for the proceeds from Measure ULA, also known as the “mansion tax,” The L.A. Times reported.

In a move that marks the first time the funds will be specifically allocated for use since the tax was passed in November, the council designated six different programs for funding: Short-term emergency rental assistance, eviction defense, tenant outreach and education, direct cash assistance for low-income seniors and individuals with disabilities, tenant protections and affordable housing production.

Councilmember Nithya Raman called the program “transformative” for the city, noting that it will be the “largest source of revenue, that’s going to be consistent, that this city has access to for these uses ever.”

The first program to be put into effect will be an emergency rental assistance program, rolling out on Sept. 19.

The $150 million in funding will be allocated as follows:

  • $18.4 million for the short-term emergency rental assistance program that will allow low-income tenant households to apply for up to six months of owed back rent because of a one-time economic hardship.
  • $23 million for the eviction defense/prevention program to continue and to expand the Stay Housed L.A. program, which provides tenant households at risk of eviction with legal support and “know your rights” education.
  • $5.5 million for a Tenant Outreach and Education program and campaign to provide various broad and targeted tenant education outreach services.
  • $11.2 million for a Protections from Tenant Harassment program, whose funds will go to infrastructure, technology and community outreach to educate tenants and landlords about rights and obligations.
  • $23 million to provide rental subsidies and move-in assistance to low-income seniors and individuals with disabilities who are experiencing or are at risk of homelessness.
  • $56.8 million for the development of affordable multifamily housing through an initiative called “Accelerator Plus,” which will fund affordable housing projects that are ready to start up quickly or complete construction with an additional loan of no more than $12 million to close a funding gap.

The ULA tax went into effect on April 1 and places a 4 percent tax on all residential and commercial real estate transactions in the city priced above $5 million and a 5.5 percent tax on all transactions over $10 million.

Thus far, the tax has raised about $55 million. Funds can only be spent as they come in from real estate sales, according to city officials, so the $150 million allocated on Tuesday cannot be spent until the tax generates that amount.

Advocates of Measure ULA and other community activists expressed their support for the funding on Tuesday prior to the city council’s vote, asserting that the funds were urgently needed.

“We really need you all to pass the ULA plan today,” said Chad Williams, an L.A. organizer for the Alliance of Californians for Community Empowerment. “That money belongs to the community.”

Early advocates of Measure ULA projected the tax would raise about $900 million per year; however, that estimate was downgraded to $672 million by March.

Both those estimates, however, did not anticipate the rush luxury homesellers made to offload their homes in order to avoid paying the tax prior to it going into effect.

Some advertised “Measure ULA specials” and other perks so that buyers would be persuaded to purchase homes before April 1. Following that date, the number of transactions above $5 million swiftly declined, with sellers unwilling to concede to paying the tax and hiring finance and tax specialists to help them find loopholes.

In response to those severely curtailed transactions above $5 million, Mayor Karen Bass only included $150 million in revenue from Measure ULA in her first-ever budget proposal, which amounted to $13.1 billion.

Although it was passed back in November, the future of the mansion tax is not necessarily sealed. Measure ULA is currently facing a legal challenge that the tax is unconstitutional. It also faces a potential threat from a ballot measure that will be put to voters in 2024 called the Taxpayer Protection and Government Accountability Act.

The act would require two-thirds voter approval for new local special tax hikes dating back to January 2022, which would include the ULA Tax since it only received a 57 percent approval.

If Measure ULA gets overturned, the city will have to pay back all funds that have been raised by the tax.

L.A. real estate professionals have decried the measure and its “mansion tax” moniker, arguing that the tax impacts more than just mansion owners with the city’s housing prices being what they are. It also negatively impacts developers, who are working to remedy the city’s serious housing crisis.

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