Los Angeles Transfer Tax Hike Goes to Voters

Scott Donald, Vice President and Managing Consultant 949.556.9001 | scottdonald@mfpoer.com

Los Angeles voters will be asked in November to approve higher transfer taxes on high-end commercial and residential sales with the proceeds going to help create affordable housing and prevent homelessness. The ballot measure, dubbed “House LA,” proposes an added 4% tax on the sale or transfer of properties valued between $5 and $10 million, and a 5.5% tax on the transfer of properties worth more than $10 million.

Not a New Idea

The Los Angeles vote comes on the heels of a similar measure in San Francisco. Proposition I was approved in November 2020. It increased the transfer tax rate on sales and leases of 35 years or more of real estate to 5.5% on transactions of $10 million to $25 million. For transactions more than $25 million, the tax went to 6%. The average revenue generated from Proposition I has been $196 million a year.

While not a transfer tax, Los Angeles voters approved Proposition HHH in 2016. Proposition HHH was a $1.2 billion bond package to provide as much as 10,000 housing units for the unsheltered. About $1 billion of that money has been committed to projects, according to a report by the Los Angeles mayor’s office.

If the upcoming ballot measure is approved, the group Unite to House LA estimates it will raise $800 million that could create 26,000 housing units for 69,000 people, as well as help prevent 475,000 renters from becoming homeless each year.

Pushback

The transfer tax hike is opposed by business groups and others. Officials are expecting a well-funded campaign against it.

Jon Coupal, of the Howard Jarvis Taxpayers Association, told the Los Angeles Daily News that his group will join the opposition. He argued that California has some of the highest taxes in the country, “so there’s no need for this tax,” which he said would likely encourage companies to leave California.

Another Plan Delayed

The Los Angeles City Council also voted to put another initiative on the ballot for March 2024 to help the homeless. The Responsible Hotel Ordinance would force local hotel owners to provide a count of vacancies, submit the list to the city housing department by 2:00 p.m. each day, and accept fair market rate vouchers to fill the rooms with homeless people.

The initiative comes as Project Roomkey winds down. The federally funded California program paid hotel owners to put homeless people up to help prevent the spread of COVID-19. Project Roomkey, unlike the Responsible Hotel Ordinance, was voluntary for hotel owners.