Los Angeles, California, Proposition ULA, Tax on $5 Million House Sales Initiative (November 2022)

Measure ULA is a landmark ballot initiative passed by Los Angeles voters in November 2022. It enacted a tax on high-value property sales to generate funding for affordable housing and services to prevent homelessness. Specifically, it imposes a 4% tax on property transfers over $5 million and a 5.5% tax on transfers over $10 million.

Why Was Measure ULA Proposed?

Measure ULA was developed in response to Los Angeles’ severe housing affordability crisis. LA has one of the least affordable housing markets in the nation, fueled by a shortage of affordable homes, rising rents and home prices, and stagnant incomes for many residents. This has contributed to a surge in homelessness across the region. Despite efforts by the city, adequate resources have not been available to address the massive need for affordable housing and support for homeless and at-risk residents. Measure ULA was proposed to create a dedicated local funding source to help tackle these interconnected issues.

Key Provisions of Measure ULA

The key components of Measure ULA include:

  • Taxes on high-value property sales to generate estimated annual revenue of $600 million – $1.1 billion.
  • Dedication of funding for affordable housing development and services to prevent homelessness.
  • Establishment of citizen oversight, audits, and detailed expenditure planning.
  • Exemptions for affordable housing organizations and government entities.
  • Requirements for affordable housing supported by the funds.

Background: LA’s Housing Crisis

The Affordable Housing Shortage

Los Angeles has faced a severe shortage of affordable housing for many years. Approximately 560,000 low-income tenant households compete for roughly 300,000 affordable rental units. Vacancy rates have remained extremely low, around 5%. At the same time, market-rate rents and home values have skyrocketed. This lack of affordable supply puts enormous cost burdens on lower and moderate income residents. More than half of LA renters are “rent burdened”, paying over 30% of income on housing.

Rising Homelessness

The affordable housing crisis has directly contributed to a dramatic rise in homelessness across LA over the past decade. The 2022 point-in-time count found over 69,000 homeless residents in the city and county, a 4.1% increase from 2020. The true number is likely even higher. On any given night, thousands sleep on the streets, in vehicles, or in shelters across Los Angeles. The human suffering and costs for the region have been enormous.

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Inadequate Resources

While the city has worked to address homelessness and affordable housing needs, the resources available have not matched the scale of the crisis. Funding has been constrained and inconsistent from year-to-year. Measure ULA was specifically designed to establish a sizable dedicated local funding source that could make major inroads on these immense challenges over time.

Key Provisions of Measure ULA

Measure ULA contains a number of detailed provisions to implement the transfer tax and direct the billions in projected revenue to housing and homelessness programs.

Taxes on High-Value Property Sales

The central component is the new taxes on high-value property sales:

  • 4% tax on property transfers valued at over $5 million
  • 5.5% tax on transfers over $10 million

This applies to all types of commercial and residential property sales and transfers by individuals and entities. Based on recent sales volumes, these tiered taxes are expected to generate between $600 million and $1.1 billion per year.

Exemptions

Exemptions are included for:

  • Affordable housing organizations
  • Government entities
  • Property acquired through eminent domain
  • Transfers between family members

These avoid imposing the tax on transfers that would not contribute to higher housing costs.

The House LA Fund

The measure establishes a dedicated House LA Fund within the city treasury to receive all proceeds from the new taxes. This centralizes and accounts for the revenue separately from other city funds.

Allocation of Funds

At least 92% of the House LA Fund must be spent on affordable housing and homelessness prevention programs. Specifically:

  • Affordable Housing Program – for development, acquisition, and preservation of affordable rental and ownership housing. At least 50% of program funds must be used for extremely low-income households.
  • Homeless Prevention Program – for services to assist tenants and people experiencing homelessness or at risk, such as legal aid, rent subsidies, and outreach.

Up to 8% can be used for administration, oversight, reporting, and auditing.

Housing Requirements

Measure ULA sets a number of standards for affordable housing supported by these funds:

  • Minimum 55 year affordability restrictions
  • Prevailing wage requirements
  • Right of first refusal for displaced tenants
  • Project labor agreements for larger projects

This ensures the housing built meets key policy goals.

Oversight Provisions

Strict oversight provisions include:

  • 15-member Citizens Oversight Committee to guide policies, conduct needs assessments, and audit expenditures
  • Annual detailed expenditure plans
  • Public reporting on all spending

This oversight is intended to ensure accountability, transparency, and wise use of the funds.

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Path to the Ballot

Measure ULA was initiated through a signature gathering campaign led by the coalition United to House LA.

  • Over 98,000 signatures were submitted, well over the 61,076 required.
  • Following verification, the LA City Council voted 14-0 in June 2022 to place the initiative on the November 8 ballot.

This demonstrated strong public support to enable voters to decide on Measure ULA.

Election Campaign

The Measure ULA campaign saw relatively little organized opposition, but some dissent.

Supporters

A very broad coalition backed Measure ULA, including:

  • Affordable housing developers
  • Unions
  • Tenant rights groups
  • Social service providers
  • Democratic Party organizations
  • YIMBY groups
  • Environmental advocates

They argued it presented a bold, desperately needed solution to address homelessness and housing through dedicated funding.

Opponents

  • Commercial real estate interests
  • Taxpayer groups
  • Business organizations

Their opposition centered on the tax burden and potential market impacts. However, there was limited funding to defeat the measure.

Election Results

On November 8, 2022, Los Angeles voters approved Measure ULA by a solid margin:

  • Yes – 57.77%
  • No – 42.23%

This victory demonstrated clear public support for the measure’s approach to funding housing affordability and homelessness programs. The stage was now set for implementation.

Aftermath and Legal Challenge

While Measure ULA was now law, opponents made one last ditch effort to block it in the courts.

  • In December 2022, the Howard Jarvis Taxpayers Association and landlord groups sued to overturn Measure ULA as unconstitutional.
  • However, in September 2023 the lawsuit was dismissed by a federal judge. Measure ULA had prevailed again.

With the court challenge resolved, the path was clear for the taxes and programs enacted under Measure ULA to move forward.

Implementation

With the legal questions settled, the practical work began to set up systems for tax collection and program funding under Measure ULA.

Tax Collection

The first task was to establish methods to identify, assess, and collect the new transfer taxes on high-value property sales. The Los Angeles County Assessor worked closely with the city to update records, provide valuations, and implement the tiered 4% and 5.5% tax rates.

By early 2024, the system was in place to begin receiving tax payments on applicable transactions. Though a ramp up period was expected, revenue began growing steadily.

Funding Allocations

Concurrently, the Los Angeles Housing Department (LAHD) developed its process for making funding allocations under Measure ULA guidelines.

Competitive applications were solicited for affordable housing development, rental assistance, eviction prevention, and other programs. LAHD staff reviewed and selected proposals for funding annually.

By 2025, the first major rounds of Measure ULA grants were disbursed to nonprofit housing developers, service providers, and legal aid organizations. Funding quickly reached hundreds of millions of dollars annually.

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Impact

While long-term results will take years to fully realize, the early effects of Measure ULA funding are emerging.

New Affordable Housing

  • Thousands of new affordable apartments and homes are underway across LA.
  • Many projects expedited since ready proposals existed but lacked funding.
  • Estimated 10,000+ units completed or started within 3 years.

Homelessness Prevention

  • Expanded rental subsidies and eviction prevention assistance helping stabilize thousands of households.
  • Growth in legal aid has improved tenant protections.
  • Improved shelter and permanent housing options, but still lagging need.

Criticisms

  • Some criticize slow pace of visible results so far, though major projects take time.
  • Questions about distribution of funds across neighborhoods and populations.
  • Concerns from real estate industry about higher transaction costs.

Oversight

Robust oversight has been implemented along with Measure ULA funding.

Citizens Oversight Committee

  • 15 member body guides policies, reviews funding plans, and audits spending.
  • Provides important citizen voice in the process.

Annual Expenditure Plans

  • LAHD publishes detailed plans showing 3-year projections of revenue, spending allocations across programs, and expected outcomes.

Public Reporting

  • All program spending is searchable through online databases.
  • Regular reporting to elected officials and public on progress.

This oversight structure enables transparency and accountability for Measure ULA.

Future Outlook

While impact is underway, Measure ULA is just beginning to address LA’s massive housing and homelessness challenges.

  • Significant affordable housing shortfalls will remain.
  • Homelessness likely to be an ongoing crisis for years.
  • Inflation and rising costs could undermine purchasing power over time.

This indicates the need for sustained and expanded funding through Measure ULA and additional policy actions over the long-term. Possible future steps include:

  • Increasing tax rates if necessary.
  • Expanding exemptions for certain transfers.
  • Allocating more funds for permanent supportive housing.
  • Adding set asides for transitional age youth and domestic violence survivors.

Measure ULA provides an important foundation, but more work ahead to fully confront the regional housing crisis.

Conclusion

The passage of Measure ULA marked a major milestone in efforts to address homelessness and housing affordability through dedicated local funding. While long-term impacts will take time to fully assess, the measure is already channeling hundreds of millions annually to constructive purposes. With strong oversight and the potential for adaptions moving forward, Measure ULA offers hope for measurable progress on these critical challenges over the coming years. Though no single solution, it represents an important step toward housing stability and security for the most vulnerable Los Angeles residents.

FAQs

What does Measure ULA do?

Measure ULA enacts taxes on high-value property sales to generate over $1 billion per year for affordable housing and services to prevent homelessness in Los Angeles.

How are Measure ULA funds used?

At least 92% of funds support the Affordable Housing Program and Homeless Prevention Program. Up to 8% can be used for administration and oversight.

How is Measure ULA funded?

The funding source is a 4% tax on property transfers over $5 million in value and 5.5% tax on transfers over $10 million in value.

Who supported Measure ULA?

A broad coalition of affordable housing developers, service providers, unions, tenant groups, faith organizations, and others backed the measure.

Who opposed Measure ULA?

Opposition was led by commercial real estate interests, taxpayer advocates, and business organizations concerned about costs.

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