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Los Angeles Delays Spending Most of the Funds Raised by “Mansion Tax” Until Legal Challenges Are Resolved

Apartment Association of Greater LA and Howard Jarvis Taxpayers Association Sue

Los Angeles will delay spending most of the money collected from a voter-approved “mansion tax” until the legal challenges against the initiative are resolved, according to Mayor Karen Bass’s 2023-24 budget plans. The city intends to allocate just $150 million of the funds raised by Proposition ULA, a ballot initiative that took effect this month, to fund the construction of more affordable housing as reported by MSN.com. This decision will prevent the city from taking a loss if a lawsuit succeeds in reversing the tax, according to budget documents released this week. 

The city anticipates it would qualify for $150 million in federal reimbursements to make up the amount. A lawsuit filed by the Howard Jarvis Taxpayers Association and the Apartment Association of Greater Los Angeles against Proposition ULA is challenging the tax, claiming it violates California’s constitution. The levy imposes an added 4% on the sale of properties valued over $5 million and 5.5% for those sold for $10 million or more, paid by the seller. City officials predict that the tax will bring in $672 million in the fiscal year starting in July, which is at the lower end of initial projections that ranged as high as $1.1 billion.

A shortage of approximately 500,000 affordable housing units is currently affecting Los Angeles County, which is worsening the region’s homelessness crisis. Within the past ten years, the number of homeless people in the area has increased by over 75% to nearly 70,000, leading to the presence of makeshift shelters on sidewalks, tent encampments, and camper vans across the county.

Los Angeles County is currently facing a shortage of approximately 500,000 affordable housing units, which is worsening the region’s homelessness crisis. The homeless population has grown by more than 75% over the past decade to almost 70,000, with individuals sleeping in tents, on sidewalks, and in camper vans across the county.

Opposition from the real estate industry to Proposition ULA has emerged, as they claim that the tax may exacerbate affordability issues by increasing rents for both commercial and residential tenants. They have also raised concerns about the timing of the tax, as higher interest rates have already had a cooling effect on the housing market. The Howard Jarvis Taxpayers Association and the Apartment Association of Greater Los Angeles have filed a lawsuit against Proposition ULA, stating that the tax violates California’s constitution, as reported by the Los Angeles Times.

Residents have previously supported tax revenue measures to address homelessness, an issue consistently ranked as a top concern in polls. In 2016, LA city taxpayers approved Measure HHH, a $1.2 billion bond measure to fund over 12,000 housing units for the homeless. However, less than half of the units have been completed, according to the Los Angeles Housing Department. The program drew public ire last year when the city controller reported cost overruns, with some units costing $840,000 each.

Stephanie Klasky-Gamer, president of LA Family Housing said, as quoted by MSN.com, “While it’s disappointing, we appreciate the city’s caution. Ideally, the city would borrow against its reserves so that they can spend more aligned to the projected dollars raised via ULA.”

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