Will L.A. Voters Approve ‘Soak-the-Rich’ Ballot Measure to Raise Taxes on Mansion Sales? — The Wrap

Will L.A. Voters Approve ‘Soak-the-Rich’ Ballot Measure to Raise Taxes on Mansion Sales? — The Wrap

  • Tina Daunt
  • 11/3/22

Los Angeles residents head to the polls on Tuesday to consider a so-called “mansion tax” intended to make the wealthy help fund homelessness programs by placing an increased tax on deed transfers for home sales over $5 million.

Advocates for the “United to House L.A.” measure say the new tax would generate $600 million to $1.1 billion per year, which would be spent on creating affordable housing and tenant aid to prevent homelessness. ACLU staff attorney Kath Rogers has called the measure a “once-in-a-generation chance to end housing insecurity in Los Angeles.”

More than 200 community-based organizations in LA have endorsed and strongly supported the measure – from housing justice organizations, homeless services providers, labor groups and unions, environmental justice groups, teachers, and community health groups, Rogers said.

“Our city is facing a housing crisis,” Rogers told The Wrap. “Most senior renters are struggling to pay their rent each month, and seniors are the fastest growing population of unhoused residents. Our recent point-in-time numbers show that the number of unhoused residents has continued to rise – with over 42,000 people forced to live on the street in L.A. city alone. We need bold housing first solutions that are proven to work.”

But opponents argue that the measure would slow the sales of high-priced homes and create a ripple effect throughout the local economy.

“It’s a very drastic measure, and we need to go back to the drawing board and come up with something better to help solve our very sad problem of homelessness,” Michael Nourmand, president of Nourmand and Assoc. Realtors of Beverly Hills, told The Wrap.

If approved, the measure would lead to a 4% increase in the city’s transfer tax on property valued at more than $5 million, and a 5.5% increase for property sales and transfers above $10 million. (The current deed transfer tax is 0.45% for property sales in all communities in the Los Angeles city limits, regardless of the sale price.) Sales to nonprofit organizations with assets under $1 billion would be exempt from the new tax.

The two candidates for L.A. mayor, billionaire developer Rick Caruso and U.S. Rep. Karen Bass, have been silent on the proposition, which won the endorsement of the L.A. Times editorial board. Both have touted their own own strategies for addressing homelessness in L.A. — which has increased dramatically in recent years. Caruso’s plan would cost about $900 million, while the Bass plan would cost about $300 million.

The California Business Properties Association Issues PAC, the California Business Roundtable, the L.A. County Business Federation, and the California Association of Realtors are among the business groups opposing the measure.

Real estate agents like Nourmand worry that the extra tax could inhibit some buyers and sellers.

“If the seller can’t get enough money for a property, do they just not sell?” Nourmand said, suggesting a trickle-down effect would hurt realtors, escrow companies, contractors and subcontractors.

A significant drop in home sales could also depress property tax revenues, since a sale typically raises the assessed value of a property for tax purposes.

“That’s a tax windfall for the city, which helps fund our school system,” Nourmand said.

But researchers at the UCLA Lewis Center for Regional Policy Studies found that Measure ULA would affect only 4% of L.A. home sales and “no evidence that the tax would impact rents for commercial or residential tenants.” The study also estimated that the new tax would raise $923 million annually for affordable housing and homeless prevention in the form of rent relief and income support.

Nourmand does see the instant appeal to the voter of a “soak-the-rich” proposition to solve the homeless problem, and acknowledges that he’s “a bit nervous” that the proposition could pass. “Calling it a ‘mansion tax’ was very clever,” he said. “It just sounds like a tax on rich people, so who cares? A lot of the voters won’t think that it affects them.”

Proponents of the measure say that well-funded opponents take a different view.

“A small group of wealthy special interests oppose this vital measure and are spending millions of dollars to mislead and confuse voters,” Rogers wrote on the ACLU website. “Mega-sized landlords and professional home-flippers are opposed to this measure because it will cut into their profits. They do not represent L.A. City residents and voters.”

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