In 2022, Los Angeles voters passed Measure ULA, also known as the “mansion tax.” It levies a 4% transfer tax on properties sold for more than $5 million and a 5.5% charge on property sales above $10 million.
The purpose of the measure was to fund affordable housing and homeless initiatives. Ironically, it’s accused of hurting organizations whose mission is to provide more affordable housing for the community.
The tax applies to single family homes as well as multifamily developments, and nonprofits don’t always get off the hook. In order to qualify for an exemption, a nonprofit must have a history of affordable housing development and it must be the buyer in the sale. When the nonprofit tries to sell property, it is not exempt.
From the Los Angeles Times:
In October, Los Angeles Jewish Health, a senior healthcare nonprofit, sold a senior living complex in Playa Vista for $81 million. It found a buyer in late 2020, but the sale process took so long that Measure ULA was proposed, passed and implemented before the deal closed.
As a result, the nonprofit, which provides care for 4,000 seniors, was blindsided with a $4.455-million tax under Measure ULA.
The organization intended to use a chunk of the proceeds to develop affordable housing, noting the plan in the escrow instructions of the $81-million sale. But now, that’s in jeopardy.
“It’s a shame because that’s money we would have used for affordable housing,” said CEO Dale Surowitz. “Now that plan is at risk.”
Surowitz is working with Councilmember Bob Blumenfield’s office to see what can be done.
This is just the latest criticism against L.A.’s mansion tax. The luxury housing market was battered after its passage, causing sales to plummet in cities like Beverly Hills and Malibu. Commercial property sales also took a hit.
“My clients are leaving L.A.,” real estate agent and “Selling Sunset” star Jason Oppenheim told the Times earlier this year. “We can’t keep pushing the wealthy out of our city.”
The tax has raised over $439 million so far. But that figure is significantly less than the $900 million per year that was projected.