Armed with revenue taken from a newly passed “mansion tax” the Los Angeles Housing Department (LAHD), on September 5, released a record-setting $387 million in funding to help offset the cost of construction of new affordable housing projects for developers. The announcement was made as the city hastens zoning reforms while loosening building restrictions in order to meet the dire demand for affordable housing and work toward delivering the 456,000 new units mandated to be built by state law before the end of 2029.
The “mansion tax”, or Measure ULA, works by imposing an additional 4 percent transfer tax on all property sales equalling $5.3 million (and 5.5 percent for those in excess of $10.6 million) or more in total value. Funds are to be allocated to other programs such as rental assistance, legal aid for landlord-tenant cases, eviction prevention, and alleviating homelessness. To date, the measure has brought in over $800 million. Of the $387 released by the LAHD, $316 million of the first allotment will come directly from the ULA, while the remaining $71 million has been taken from existing state and federal sources.
L.A. is not alone in pursuing the indirect redistribution of wealth taken from high-value properties in order to address an affordability crisis that has been especially cruel to seniors, younger renters, disabled Americans, and other groups. Rhode Island and Santa Fe, New Mexico, stand as test cases thus far, after passing their own tax measures recently. Its planned implementation in Los Angeles should turn into a bellwether for long-awaited progress on confounding America’s social housing crisis; signaling a strategic embrace that, in turn, encourages advocates—in Connecticut, Massachusetts, and Chicago—who are attempting to follow suit through their own respective legislation in the coming years.
At a time when construction costs are driving down opportunities for new business, the ULA funds are a potential windfall for firms specializing in multifamily housing projects in the crowded market owing to a more bottom-line friendly distribution structure.
“Building publicly funded affordable housing in Los Angeles is an incredibly complex process made possible by mission-driven developers that typically piece together financing through a number of sources,” Jason King, an associate at Lorcan O’Herlihy Architects (LOHA) and key project leader on several recent local affordable housing projects, told AN. “It often takes a few years to assemble funding for a single project. [This] new funding source will provide developers with an opportunity to utilize a single funding source for the development of an affordable housing project, helping every Angeleno find a home.”
Previously, much smaller amounts of funds were tied to the number of newly constructed affordable units, now the offsetting funds will directly cover a blanket percentage of the overall cost of each development—including for preservation projects and the adaptive reuse of non-residential structures.
However, in the face of the ULA’s many in-state proponents, a joint study from RAND and the UCLA Lewis Center suggested the need for a closer consideration, as Los Angeles’s mansion tax enactment may have inadvertently undermined the production of new housing. Those factors could produce a downturn in the luxury rentals and renovations market, considering it applies broadly to all property types and not just to single-family dwellings. Measure ULA funds will continue to be distributed annually, with appropriations—issued as low-interest loans and grants—set by City Councilmembers each preceding spring.
Applications for the first Notice of Funding Availability (NOFA) round will close on October 20 and are available to nonprofit and for-profit developers alike, as well as “community land trusts, limited equity housing co-ops, public entities and other organizations” (think: religious organizations and the Skid Row Housing Trust).
Redistributing funds from the mansion tax adds to a list of other remedies being pursued by Bass’s administration since 2023. To date, this includes leaning in calls for building code reforms expected that will make the European single-stair model of apartment construction more feasible (in step with other states and cities nationally), passing amendments to exempt affordable developments over 50 units from the discretionary Site Plan Review process, and other significant upgrades to codify new land use regulations into the existing Housing Element for 2021–2029. And even if funding applications available, California legislators are still seeking to “overhaul” Measure ULA with a proposed bill geared at maintaining the measure’s longevity and reducing rates on commercial properties.
Josh Niland is a writer and editor with work published in Artnet, Architectural Digest, Artforum, Hyperallergic, WHITEHOT magazine, and the Boston Phoenix. He holds a degree in philosophy from Boston University and worked previously as the featured staff writer at Archinect.
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