Why Los Angeles’ mansion tax debate is likely to go statewide

By Ben Christopher | CalMatters

Los Angeles will be keeping its controversial “mansion tax” just the way it is, thank you very much.

Last Tuesday, L.A.’s city council rejected an 11th-hour proposal to place a rewrite of the city’s 4-year-old tax on high value real estate sales onto the June 2026 local ballot.

The decision, made after a heated session brimming with arcane procedural objections and spirited public comment from tenant activists and union members, effectively quashes the hopes of real estate developers, commercial landlords and a growing caucus of housing construction advocates and Democratic state elected officials who see the highest-in-the-state transfer fee as both an investment killer and an urgent political liability — both in Los Angeles and across California.

A sizable majority of the city’s voters approved the tax, known as Measure ULA, in 2022. It places a 4% tax on property sales between $5 million and $10 million and a 5.5% tax on transactions above that. So far, the tax has raised more than $1 billion in revenue dedicated for affordable housing development and support for cash-strapped renters.

Any changes to the tax would require sign off from the electorate, which today’s vote ensures won’t come anytime soon. It also kicks a broader multibillion dollar debate over fees on property sales to state lawmakers.

Hanging over the debate is the specter of a proposed statewide proposition that would sharply cap municipal transfer taxes, while also restricting other local taxes. That campaign is being organized by the Howard Jarvis Taxpayers Association, which campaigns for lower taxes, and is racing to gather signatures ahead of a late February deadline. If it qualifies, it would appear on the November 2026 ballot.

A growing caucus of Democrats and their political allies argue that local opposition to ULA has juiced political support for that more far-reaching anti-tax prop, one they see as a fiscal disaster.

Should a statewide anti-tax proposition qualify, many believe that lawmakers will be forced to offer up concessions, in the form of broader statewide restriction on transfer taxes, to convince the backers of the Howard Jarvis measure to remove it from the ballot. That might include the Howard Jarvis Taxpayers Association itself, or perhaps The California Business Roundtable, a major business coalition that has ponied up most of the funding for the campaign so far.

Such grand bargains between state legislators and ballot measure backers are relatively common fare in the California capitol in the months leading up to an election.

Councilmember Nithya Raman, author of the motion, alluded to that possible outcome as she implored her colleagues to put the local measure on the ballot.

“There are real threats to ULA from statewide ballot initiatives that threaten to take away transfer taxes entirely across California, from planned legislative action in Sacramento and from local ballot initiatives, all of which are likely to make far deeper cuts to ULA’s revenues,” she said.

Raman also noted that the measure, which she backed in 2022, has resulted in economically and politically disastrous “unintended consequences.”

“Voters were sold a ‘mansion tax’ and ignoring the very real impacts on apartment construction — apartments that people want and need and want to move into — doesn’t protect Measure ULA, it weakens it,” she said.

Because the transfer tax doesn’t distinguish between what types of developments are subject to the tax, it has also fallen upon large apartment, mixed-used and commercial projects along with actual mansions. In the years since, apartment sales have declined significantly within the city compared to surrounding municipalities that do not have the tax.

The tax’s defenders counter that claims of a Los Angeles real estate market implosion are overblown. Building permits, citywide, increased by 60% between the fall of 2024 and the fall of 2025, according to data analyzed by United to House LA, a coalition of unions, affordable housing developers and private development skeptics.

Jesse Zwick, regional director of the Housing Action Coalition, a pro-development advocacy group that backed the measure, and a Santa Monica councilmember, called that claim “disingenuous,” noting that 2024 represents an historic lowpoint for permits.

“Even a dead cat bounces,” he said. “If you look at L.A. vis-à-vis other cities in L.A. county, we are still deeply in deficit.”

Raman’s proposed ballot tweak would have exempted new apartments, condos, commercial and mixed-used projects from the transfer tax for the first 15 years after construction in effort to reduce the financial penalty on new development. State housing regulators have tasked the city with planning for an additional 456,643 new units through 2029 to make up for a chronic deficit.

The measure would have also exempted households affected by natural disasters, such as the Palisades and Eaton fires, and reduced some of the restrictions on how revenue generated by the tax can be used for affordable housing developments.

Defenders of the current tax decried the proposal, which was introduced on Friday, as rushed and poorly considered.

“This motion represents tens of millions, if not over a hundred million dollars, in cuts to ULA revenue for homelessness prevention programs and affordable housing solutions,” said Joe Donlin, director of United to House LA. Researchers at UCLA and the Rand Institute estimate that roughly 13% of the revenue generated in the tax’s first year and a half came from the types of new developments that would have been carved out by Raman’s proposal.

He also dismissed the idea that the city should preemptively rewrite its transfer tax to head off the Howard Jarvis-backed initiative. “There have been many boogymen trotted out to try to scare the public into giving tax breaks for developers,” he said.

Technically, the L.A. council did not kill the measure outright, but referred it to further debate in committee. But with the June primary ballot deadline rapidly approaching, the delay likely nixes the possibility of the city amending its own tax before a possible statewide measure goes before voters.

“It seems unlikely there will be more action on this issue locally this year,” said Zwick. Between the broader effort to severely cap transfer taxes by anti-tax advocates and the current policy’s supporters, he called Raman’s proposed fix “the best political compromise” that could be achieved this year “absent increased leverage through the statewide tax measures.”

If the statewide tax measure does ultimately become law, it would cost cities between $2 billion and $3 billion each year, according to an analysis commissioned by the League of California Cities, a lobbying group.

If and when it qualifies, that may trigger a fresh round of negotiations over state transfer tax policy, said Mott Smith, a commercial developer and board member of the California Infill Builders Association.

“Right now the argument for transfer tax reform is that Measure ULA isn’t working as promised — which, by the way, is a very good argument,” he said. “But once the Howard Jarvis initiative qualifies, and it looks like it probably will, it becomes a conversation about how we preserve $3 billion of local revenue across the state.”

Asked about the signature gathering effort, Jon Coupal, president of the Howard Jarvis Taxpayers Association, merely said that he was “cautiously optimistic.” As for a broader deal, should the measure qualify, he insisted that he was solely focused on his own measure for now.