A broad coalition of Los Angeles business leaders, labor groups, housing advocates and nonprofits is urging city officials to overhaul Measure ULA rather than repeal it, warning that without swift reforms the voter-approved tax could collapse under mounting political and legal pressure.

Known as “Affordable LA: Mend It, Don’t End It,” the coalition made its case before the City Council’s Ad Hoc Committee on Measure ULA last week, arguing that the real estate transfer tax – originally pitched as a way to fund affordable housing and homelessness programs – is instead constraining housing production, slowing real estate activity and draining public revenues.

“ULA was sold as a mansion tax,” said Sarah Dusseault, co-founder of the LA4LA and a longtime housing and homelessness advocate. “What it has become, in practice, is a tax on housing and jobs.”

L.A. voters approved Measure ULA in 2022 with 57% of the vote. The tax places a 4% levy on property sales between $5 million and $10 million and 5.5% on transactions above that. The money raised is to be spent on affordable housing and rental assistance.

The stakes have been heightened by a statewide ballot initiative backed by the Howard Jarvis Taxpayers Association that would require a two-thirds vote for local taxes. If approved in November, the measure could effectively end ULA and eliminate a major funding stream for city housing programs, said Miguel A. Santana, president and CEO of the California Community Foundation

“If it passes, ULA will most likely end and every dollar for affordable housing and homeless services goes with it,” Santana said.

CCF strongly supported Measure ULA’s passage in 2022 and is now leading efforts to reform it by engaging with local and state leaders. Santana implored the three councilmembers on the ad hoc committee to take steps to amend and fix the current tax law.

“You have this opportunity to provide voters here in Los Angeles a third option, and that option allows Angelenos to take control of their own destiny by proposing a ballot measure here in LA that allows us to respond to the unintended consequences” of the original tax measure, he said.

Dusseault told councilmembers that since Measure ULA took effect multifamily housing production has dropped 32%, property transactions over $5 million have fallen 67% and rents have risen 12%. She estimated $488 million in local tax revenue has been lost since 2022.

Santana also warned of long-term fiscal damage: Because reduced transactions slow property tax growth, he estimated the city will lose approximately $643 million in property tax revenue over the next decade — with schools, the county and the state losing nearly $3 billion more collectively.

An unintended consequence of Measure ULA is it “has created a deflation of your most important, most stable source of revenue, which is property tax,” Santana said.

The coalition argued the tax is hurting the very tenants it was designed to help. With roughly 80% of low-income renters living in privately financed housing, reduced development ripples through the broader rental market, pushing rents higher. Coalition members pointed to UCLA research that found cities that expanded housing supply such as Austin and Denver saw rents decline compared to Los Angeles, where limited new inventory has pushed rents up.

The centerpiece of the coalition’s reform proposal is a 15-year ULA exemption for new construction paired with a long-term tax rate cap on non-single-family properties, a one-two punch aimed at jumpstarting new construction while stabilizing the existing housing stock.

The reforms also include streamlined financing rules, expanded eligibility for who can receive funds, governance reforms to give the council more flexibility in deploying money, targeted relief for wildfire-affected properties and bonding authority that would allow the city to front-load housing production.

On the bonding issue, Santana argued the city is leaving enormous capacity on the table. If ULA’s revenue stream were restructured properly, as much as $1.5 billion of bond capacity could be initiated that would allow for 6,000 units of affordable housing and more jobs to our workforce, he said.

Mott Smith, a real estate developer, presented transaction data showing city and county sales volumes moving in lockstep before ULA took effect — then diverging sharply when the tax became law.

“The moment Measure ULA came into effect, those two lines started to diverge, because people stopped selling as much as they were before,” Smith said.

Smith is a board member of the California Infill Builders Association and co-authored a study of the tax measure that found it reduced high-end real estate transactions in the city. He argued the tax structure punishes even failed investments.

“I could buy a building, I could lose everything, I could go bankrupt, and then when I sell it at a loss, I still have to pay the ULA tax,” he said. “Investors look at that situation in Los Angeles and say, ‘No way, I can’t do that.’”

Beyond suppressing real estate transactions, coalition members said there is a massive backlog of approved housing that isn’t getting built. More than 42,000 units have been proposed under the city’s Executive Directive 1 fast-track program, but more than 36,000 of those approved units have yet to break ground. Coalition members argue that ULA-related financial constraints are a significant reason why.

Meanwhile, money already collected under the measure is sitting largely unspent. Dusseault told the committee that $589 million remains idle and that only 9% of this year’s housing funds have actually been committed.

“Pages and pages of strict regulatory constraints” and a narrow pool of eligible recipients are to blame, she said. “The housing and homeless crisis does not wait for the right regulatory box. Give the council more authority to move money, and it will move.”

The committee meeting on April 24 at city hall began with public comments as some defended Measure ULA and said it has raised more than $1 billion in taxes dedicated to affordable housing development and rental assistance. But many who spoke were in favor of reforming the tax measure.

Zachary Pitts, the Los Angeles director of YIMBY Action, said his organization represents people who believe deeply in addressing the housing crisis, which is why ULA can’t be left as is.

“No piece of legislation, no ballot measure, is unimpeachable,” he told the committee. “We shouldn’t be treating ULA as precious. It needs change.”

Leslie Moody, representing the coalition, tied the tax directly to the development freeze she says she’s witnessing on the ground. Property owners, she said, are holding onto property rather than selling.

“You can’t solve the housing crisis without building more housing,” she said. “What I’m seeing is housing development stall in LA, and this is a function of Measure ULA’s unintended consequences.”

– Ben Poston