LA Weighs ULA Carve‑Out For New Multifamily As Statewide Transfer Tax Limits Collapse

The Los Angeles City Council will decide whether to include a measure on the November ballot carving out an exemption for its divisive transfer tax less than a week after horse-trading at the California capital killed a state-level initiative to limit levies of the same type.

The body will take up the matter at its July 1 hearing. The ballot measure would allow voters to decide whether to allow an exemption for multifamily properties built in the last 10 years from the city’s Measure ULA tax.

Measure ULA, which adds a 4% tax to property purchases from $5.3M to $10.6M and 5.5% to trades larger than $10.6M, has been the target of ire from the commercial real estate community in Los Angeles. Many in CRE argue that the tax has stifled both institutional investment in the city and housing production, despite the fact that the tax’s proceeds go in part to housing programs.

Housing advocates and a report from the city’s legislative analyst have pushed back on concerns about the dampening effect of ULA. The coalition that worked to get Measure ULA is against the city’s proposed ballot measure, calling it “a financial and strategic mistake” in a statement

If approved, the exemption for newer multifamily properties is seen as a key step in reforming the measure. The exemption for housing “will allow us to start building housing again while saving a critical funding source that we desperately need,” California Community Foundation CEO and President Miguel Santana said in a statement last week. 

Meanwhile, ULA continues to generate funds for affordable housing and homelessness prevention. The plan for spending $544M in Measure ULA funds for the coming fiscal year was approved Friday by the city council. 

Bayspring Real Estate Partners partner Andrew Parker sits in an interesting intersection as an experienced developer who is also on the board of the affordable housing developer Abode Communities.

Parker hears from investors — from institutional to family offices — that they don't want to invest in Los Angeles, and ULA is among the reasons for that. But he also has a front-row seat to the affordable developer's plight and has seen how badly needed additional, reliable revenue streams such as ULA are for this sector.

Parker was noncommittal about whether any of the fixes proposed for ULA would be the best path forward, but he did say that while exempting new housing was a good start, it wasn't enough.

"It doesn't necessarily solve the problem," Parker said. "There's so much collaboration that needs to be done in order to really address all of this."

The vote places focus back on local-level responses to Measure ULA after statehouse efforts to stymie the tax fell apart last week.

In an eleventh-hour deal in Sacramento that even involved the office of Gov. Gavin Newsom, the Howard Jarvis Taxpayers Association agreed to pull a ballot proposal that would cap transfer taxes at less than 1% and invalidate Measure ULA, CalMatters reported. 

In its place, voters will now weigh a constitutional amendment that preserves existing taxes but could require a two‑thirds vote for any new ones, reshaping how cities across California fund housing and homelessness programs.

The move also throws into uncertainty other efforts to rein in transfer taxes, including Assembly Member Buffy Wicks’ proposal to cap commercial transfer taxes statewide. Wicks’ plan, AB 736, would have capped the percentage that transfer taxes can take from commercial transactions at 3%, while effectively limiting most, including ULA, to 1.5%.

The status of the bill is unclear, a representative from Wicks’ office told Bisnow on Monday, but some supporters didn’t see a legislative path forward for it. 

Housing development advocacy group California YIMBY, which had thrown its support behind AB 736, conceded defeat on that avenue last week but left the door open for future attempts to rein in transfer taxes statewide. 

"We will be coming back to this," California YIMBY Director of Communications Matthew Lewis said. "We do think that setting transfer taxes at a level that kills housing production is bad, and we will be working to correct that, probably not this legislative session but certainly in a future one."