RESPONSE TO JACK HUMPHREVILLE - Jack Humphreville is a conservative commentator well-known for his opposition to even progressive taxes.
So, it comes as no surprise that he’s against Measure ULA, which is a tax on sales of super-expensive properties to provide funding to help seniors and other vulnerable renters avoid eviction and to build sufficient affordable housing to address the 40,000 homeless people on our streets and in our shelters.
In a column for CityWatch, Humphreville calls Measure ULA a “free lunch.” He's wrong. Measure ULA is a fair, and effective way, to get LA’s wealthiest people -- who have prospered from the real estate boom -- to help address what, according to polls, most Angelenos consider the city’s most pressing problem.
Measure ULA will raise an estimated $900 million a year to reduce homelessness, create more affordable housing, and protect low-income renters (particularly seniors) from losing their homes. Over the next 10 years, that funding would assist in the creation of over 26,000 affordable units, serving over 69,000 lower income Angelenos and creating over 43,000 construction jobs.
Each year, Measure ULA funds will also provide about 5,100 households with emergency rental assistance, income support for nearly 13,000 households with seniors or disabled persons, and 23,000 households with legal counsel and eviction defense. The funds would also provide outreach and education to 135,000 tenants on their legal rights and responsibilities as renters.
Overall, this represents a scale of investment in housing production and tenant stability that Los Angeles has never seen.
That’s why an unusually broad coalition – including the United Way, faith groups, providers of services to the homeless, labor unions, community and tenants’ rights organizations, and affordable housing developers – is supporting Measure ULA. So is the Los Angeles Times, which observed in an editorial that it will create “a robust and steady stream of funding to create and preserve affordable housing through a tax on high-dollar real estate transfers. This new revenue is essential if Los Angeles ever hopes to turn the homelessness crisis around.”
Measure ULA is not a property tax, which is paid annually by all property owners. Measure ULA is a one-time transfer tax that only applies to the sale of properties over $5 million, including office buildings, large apartment complexes, and single-family mansions and condos.
The Measure ULA tax would apply to only about 4% of all properties sold each year. For example, there are approximately 601,705 single-family homes and condominiums in Los Angeles. In the past year, only 28,378 of those properties were sold. Of those, only 727 sold for $5 million or more, representing 2.6% of all single-family and condo sales. In other words, only a tiny handful of homeowners would pay the tax.
In the past year, there were 4,502 sales of multi-family (apartment) buildings. Just 271 of these transactions were valued over $5 million, of which 96 were sold for over $10 million, or 6% and 2.1% of the total apartment buildings sold, respectively. Based on sales data from the past year, 75% of the revenue raised by Measure ULA from these apartment buildings would come from buildings sold for over $10 million. Almost all of the sellers of these apartment buildings were large real estate companies, not “mom and pop” landlords.
Consider the case of the US Bank Tower in downtown LA. In 2013, OUE Ltd., a Singapore-based real estate company, purchased the building for $367 million. Seven years later, OUE sold the 1.4-million-square-foot office building for $430 million to Silverstein Properties, a New York-based developer which manages over 40 million square feet of commercial, residential, retail, and hotel space across the United States. In just seven years, the US Bank Tower appreciated by $63 million. If the Measure ULA plan had been in place in 2020, this transaction would have generated $23 million for affordable housing investment and renter support in Los Angeles.
Or consider the 500,000 square foot office tower at 5900 Wilshire Boulevard on LA’s Miracle Mile. In 2005, developer Wayne Ratkovich acquired the building for $105 million. In 2020, Ratkovich and his partners sold the building for $303.4 million to Rockpoint Group, a Boston-based real estate company. In just 15 years, the property nearly tripled in value, increasing by almost $200 million. If the Measure ULA plan were in effect in 2020, the sale would have generated $16 million in transfer taxes, a small fraction of the appreciation value alone. Those funds would have helped address the city’s housing and homelessness crisis.
Humphreville claims that real estate developers won’t construct new buildings if voters approve Measure ULA. If that were the case, the Building and Construction Trades Council – whose union members including the women and men who build residential, commercial, and industrial buildings – would not be strong supporters of Measure ULA. In fact, as a recent report found, “In Los Angeles’ market, annual income from commercial properties as well as profit made from a property’s sale price will far outstrip the percentage taken by the Measure ULA transfer tax. However, the tax will have a more significant impact on those with a short-term investment horizon who routinely ‘flip’ properties – a practice which inflates housing prices and can cause evictions. If a side effect of this tax plan is to discourage flipping and speculation, that is a bonus.”
Contrary to Humphreville’s claims, Measure ULA will not lead landlords to raise rents. The new transaction fees will be paid by the seller, not the buyer. The Measure ULA tax increase will not suddenly make buyers willing to pay more for the same properties based on the existing rental incomes. Landlords – particularly large corporate absentee landlords -- already set rents at the highest price they can without losing tenants in market-rate apartments. If landlords chose to raise rents above market rate, they would be faced with vacant apartments.
Moreover, 60% (650,000) of LA’s rental housing is covered by the city’s rent stabilization law. Landlords can only raise rents annually by a fixed percentage based on the Consumer Price Index, typically 3%.
Humphreville also claims that Measure ULA is anti-business. Wrong again. LA’s high cost of housing is a serious problem for the city’s many retail businesses. If LA families are spending half of more of their income on housing, they have little left over to spend in the local retail businesses. In addition, as high housing costs push lower-paid workers out of the city’s core – and even out of the city altogether -- Los Angeles’ businesses struggle to recruit and retain employees. This problem has reached a serious tipping point, with many people – mostly those with modest incomes -- leaving the area altogether. According to a report by the Federal Reserve Bank of Chicago, San Francisco and Los Angeles ranked first and second, respectively, in terms of people leaving those areas. A healthy business climate requires cities to have housing that is affordable to people at all income levels.
Lastly, Measure ULA includes oversight provisions to guide the use of its funds. A Citizen Oversight Committee will monitor and audit the program in order to guarantee transparency and efficiency around the administration of the program. Committee members will be appointed by the Mayor and approved by City Council. The ballot measure requires that appointees have experience in one of the following: affordable housing development, management, and finance; labor; community development; transit-oriented development; tenant organizing or legal advocacy; or lived experience in lower income households or with homelessness. Every three years, the committee will contract a third-party evaluator to conduct a needs assessment “with respect to homelessness, housing affordability, tenant protections, and the housing needs of vulnerable populations” in the city.
Measure ULA will help provide housing for many of Angelenos, including many working people and children, who lack a stable roof over their heads. It will also prevent many at-risk low-income renters from falling into homelessness
LA’s rents are among the highest in the country. In Los Angeles, 27% of renters pay more than half of their incomes just to keep a roof over their heads. Among families with incomes below $35,450, 69% pay over half their incomes for housing. Elderly renters have been particularly hard hit by LA’s skyrocketing rents.
Measure ULA is a well-crafted, progressive, fair, and efficient approach to addressing the city’s most serious problem. It will be on the November 8 ballot, but voters can vote earlier by mail if they so choose. If you really want to deal with LA’s housing crisis, vote “yes” on Measure ULA.
(Peter Dreier is a professor and founding chair in the Department of Urban & Environmental Policy at Occidental College. He is an expert on housing policy and is coauthor of The Next Los Angeles: The Struggle for a Livable City (University of California Press).)