As a commercial real estate professional in Los Angeles, it can be hard to keep up with the ever-evolving landscape of local tax policies. Measure ULA has been garnering much attention from the industry recently, and for a good reason — it could have serious implications for the future of commercial real estate in LA.
What does this new policy mean for existing businesses, potential investors and real estate developers?
The “mansion tax”
In November 2022, Los Angeles voters approved Measure ULA, a new transfer tax on all property sales over $5 million in the city. The measure is commonly known as the “Mansion Tax” and would impose a 4% tax on the sale or transfer of properties with a value of more than $5 million. Properties valued at more than $10 million would have an additional 5.5% tax on their sale or transfer. Lawmakers expect to raise between $600 million to $1.5 billion annually.
However, this has sparked some blowback from commercial real estate owners concerned about its impact on their businesses. For commercial real estate owners, Measure ULA could mean an increase in taxes that could affect their bottom line.
Additionally, any funded projects of 40 units or more must be bound by a project labor agreement requiring nearly 100% union labor which could add additional costs to construction projects. Furthermore, they argue that the measure is illegal because it is a real estate transfer tax for a particular purpose, meaning the money can be used only for that purpose and not for other city services.
While Measure ULA has been designed to help reduce homelessness and provide housing solutions in Los Angeles, it may also impact commercial real estate owners. It is vital for those affected by this measure to understand how it will affect them so they can make informed decisions about their businesses going forward.