LA ‘mansion tax’ survives legal challenge

LOS ANGELES (CN) — The California Courts of Appeals affirmed a lower court’s decision on Monday in favor of a “mansion tax” in Los Angeles aimed at funding public housing and reducing homelessness across the city.

The California Courts of Appeal upheld voter-approved measure United to House Los Angeles, or Measure ULA, and rejected the Howard Jarvis Taxpayers Association’s argument that it violates both the state’s constitution and the city’s charter. 

Measure ULA, passed in November 2022, puts a 4% tax on the sale of homes over $5 million and a 5.5% tax on the sale of homes over $10 million or more. That money is used to create a sustainable funding stream to help build affordable housing and prevent homelessness in the city.

In its opinion, the court recognized the California Constitution provides voters the power to enact property transfer taxes, such as Measure ULA, affirming Los Angeles County Superior Court Judge Barbara Scheper’s decision to dismiss the Howard Jarvis Taxpayers Association challenge to the measure.

“The main issue in this case is whether the people revoked this power when they adopted section 450(a) of the Los Angeles City Charter,” Court of Appeal Associate Justice Armen Tamzarian wrote in his opinion. “We hold that the people did not do so.”

Section 450(a) of the city’s charter provides that any ordinance the Los Angeles City Council can adopt can also be adopted via voter initiative. However, the Howard Jarvis Taxpayers Association, which sued the city over Measure ULA, argued voters could not enact such ordinances because the City Council was barred from doing so under Proposition 13 in the state constitution. 

“In the published portion of this opinion, we conclude the passage of Measure ULA pursuant to a majority vote of the city’s electorate was a valid exercise of the people’s initiative power,” Tamzarian wrote. “While [Proposition 13] restricts a local government’s ability to impose a special transaction tax, it does not limit the ability of voters to do so via initiative.”

San Luis Obispo County Superior Court Judge Craig Van Rooyen and California Court of Appeal Associate Justice Audra Mori concurred with Tamzarian.

But the ruling drew criticism from the Howard Jarvis Taxpayers Association, which warned it erodes limits on city power.  

“Today’s decision opens the door to city politicians bypassing constitutional limits on government power by camouflaging their own proposals as grassroots initiatives,” Howard Jarvis Taxpayers Association legal affairs director Timothy Bittle wrote in a statement to Courthouse News. “HJTA is considering a petition for review to the California Supreme Court.”

The decision of the California Courts of Appeal mischaracterized the association’s argument, Bittle wrote. 

“The decision that the Court of Appeal issued today in HJTA v. City of Los Angeles reads as though it was already written before the court heard oral argument,” he wrote. “Although at the hearing I repeatedly corrected the court’s attempts to portray us as arguing that Los Angeles Charter section 450 ‘revoked’ or ‘repealed’ the local initiative power, today’s decision nonetheless accuses us of making that argument, and never even explains or addresses our actual argument.”

Bittle said the city’s charter prevents the City Council from hijacking citizen power to circumvent its own constitutional boundaries, but that Angelenos could vote to suspend section 450 and then vote to enact an ordinance the council cannot.

The opponents of the measure argued the measure doesn’t do what it promised and that Los Angeles voters would never have approved it in its current form. They say the measure was misrepresented at the ballot box. 

Additionally, many of the so-called “mansions” in Los Angeles include apartments, multifamily housing and commercial property, the Howard Jarvis Taxpayers Association argues. The association was also joined by the Apartment Association of Greater Los Angeles, Newcastle Courtyards LLC and Jonathan Benabou. 

As of Dec. 10, Measure ULA purports to have raised more than $991 million as a result of nearly 1,400 real estate transactions since April 1, 2023, according to the Los Angeles Housing Department. The majority of those transactions (60%) have been single-family residences, followed by commercial property (24%), primarily in affluent neighborhoods of the city.

“Measure ULA is building housing, protecting renters, creating jobs, and it continues to be the law of the land,” attorney Greg Bonett, senior policy counsel for Public Counsel's Community Development Project and an attorney on the case, said. “Special interests tried to undo the voters’ will in court, and they failed.”

United to House LA director Joe Donlin said the measure has funded the construction of 795 affordable homes, created 10,000 union jobs, and kept 10,000 vulnerable renters housed. 

“Millionaires, billionaires and real estate special interests all want to see Measure ULA fail,” Donlin wrote in a statement. “But they keep running up against the undeniable facts that Measure ULA is legal and Measure ULA is working.”