Los Angeles is making a historic commitment to affordable housing, announcing a record $387 million in funding to support development and preservation projects across the city. The lion’s share of this significant financial injection comes from Measure ULA, the city’s “mansion tax” on high-value property sales, which has now generated over $784 million since its implementation. This latest funding round marks the largest single distribution from Measure ULA to date, significantly dwarfing the Los Angeles Housing Department’s typical annual allocations, which often range between $50 million and $75 million.
Measure ULA: The “Mansion Tax” Explained
Measure ULA, officially known as the Homelessness and Housing Solutions Tax, was approved by Los Angeles voters in November 2022 and took effect in April 2023. This measure imposes an additional real estate transfer tax on properties sold for over $5 million within the city limits. Specifically, a 4% tax applies to transactions between $5 million and $10 million, while properties valued at $10 million or more face a 5.5% tax. These rates are in addition to the existing city and county transfer taxes. The revenue generated by Measure ULA is earmarked for affordable housing production and preservation, as well as homelessness prevention initiatives. Initially, projections estimated annual revenue between $600 million and $1.1 billion, though actual collections have varied.
A Record Funding Surge
The $387 million allocation represents a substantial leap in the city’s efforts to combat the affordable housing crisis. Of this total, $316 million is derived from Measure ULA funds, with an additional $71 million contributed by state and federal programs. Housing Department General Manager Tiena Johnson Hall described the moment as “historic,” emphasizing that the funding will support not only new construction but also housing preservation and operating assistance. This significant financial commitment is part of a larger strategy, following previous ULA spending plans of $150 million last year and $425 million in July. The Housing Department plans to release new funding on a yearly basis moving forward, ensuring a continuous stream for affordable housing projects.
Shifting Funding Models and Impact
A key change accompanying this funding release is a revised allocation system. Instead of the previous per-unit model, projects can now receive funding as a percentage of their total development costs, covering anywhere from 30% to 100% of expenses. This flexible approach is intended to better address the high costs associated with developing affordable housing in Los Angeles. This record funding is expected to support approximately 450 affordable housing units across the city, underscoring the critical need for such initiatives.
Broader Context and Challenges
Measure ULA has been a significant source of funding for affordable housing, but its implementation has not been without controversy. Some critics, particularly within the real estate industry, argue that the “mansion tax” has cooled the luxury real estate market, reduced overall housing development, and potentially stifled construction. Studies have suggested a decline in apartment development and a reduction in potential affordable units annually due to the measure. Furthermore, the tax has faced legal challenges, though a judge dismissed a significant lawsuit in October 2023, upholding its constitutionality. Despite these debates, proponents maintain that Measure ULA is essential for addressing the city’s persistent housing and homelessness crises, especially as state and federal funding streams face cuts.
As the Los Angeles Housing Department opens applications for this substantial funding round, the city reaffirms its commitment to creating more accessible and affordable living options for its residents. The success of this record allocation will be a crucial indicator of Measure ULA’s ongoing role in shaping the current and future housing landscape of Los Angeles.
