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Real Estate Industry Spends Big To Crush LA “Mansion Tax”

Oct 28, 2022 Aditi Ramaswami
Corporate real estate interests, like Douglas Emmett, have come out in full force to try and defeat a ballot measure to hike taxes on multimillion-dollar property sales.
The fight over the LA Mansion Tax
A demonstrator's mask reads "Stop Evictions Save Lives" during a protest in the Echo Park section of Los Angeles March 25, 2021. (AP Photo/Marcio Jose Sanchez)

In the coming weeks, Los Angelenos will vote on a ballot measure to hike taxes on the sale of multimillion dollar properties, with the expected near-billion dollars in annual revenue going towards addressing the housing crisis in the second-largest city in America. The initiative has been strongly opposed by real estate interests — from huge corporate landlords to realtor lobbying groups and pro-business groups — who have so far poured more than $5 million into efforts to defeat the measure.

Measure ULA, which would increase real estate transfer taxes on properties in the city of Los Angeles valued at $5 million or more, would only apply to an estimated four percent of real estate transactions annually. The goal of the opposition, therefore, is all the more apparent: protecting the city’s uppermost echelons of society, including the business interests that helped create the housing crisis for working class and low-income residents.

The fate of the tax initiative could have long-term repercussions across California and beyond on how communities address the plight of people being driven to homelessness — a challenge that the COVID-19 pandemic has exacerbated. If it passes, Measure ULA would pave the way for a bold new approach that involves one of the largest and potentially most impactful “mansion taxes” of its kind, one that’s been designed to have a major citizen-led impact on affordable housing. If it fails, it will demonstrate the power of big business to continue dominating the housing market, making LA an even less affordable place to call home and driving further displacement.

The proposal is part of a larger trend across California, with similar but less ambitious initiatives having passed in the last two years in San Francisco, San Jose, Culver City, and Santa Monica. Similarly to Los Angeles, Santa Monica’s ballot this year includes two ballot measures — DT and GS — that would together increase the city’s transfer-tax rate.

LA has one of the worst housing crises in the country, the burden of which is borne most acutely by Black and Brown residents. At the beginning of the pandemic, loss of income placed 365,000 renter households in LA county at risk of displacement and homelessness. On average, nearly five people experiencing homelessness die in the county every day.

“The gentrification of our neighborhoods is really stark, and people are being squeezed financially because of the lack of affordability,” said Christina Livingston, executive director of the Alliance of Californians for Community Empowerment (ACCE), one of the groups that helped develop Measure ULA. “Meanwhile, the development that’s going up is market-rate development and luxury development with the notion that more affordable housing will trickle down. The folks who actually need the housing, they’re not going to be able to live in the cities where the housing is being created in order to benefit from ‘trickle down,’ even if that actually happened.”

Measure ULA, which was brought forward by a broad-based coalition of tenant organizers, community-based groups, labor unions, affordable housing developers, and others, aims to improve the situation. The measure would increase the city’s existing real estate transfer taxes — which are levied when a property is sold and is paid by the seller — on properties sold for $5 million to $10 million by 4 percent, and on properties sold for $10 million or more by 5.5 percent, supplementing the current transfer-tax rate of 0.45 percent.

The one-time tax could generate $923 million in tax revenue annually, which would be used to provide a permanent funding stream for new affordable housing units, rent relief and legal counsel for tenants facing eviction, and a menu of additional tactics to tackle LA’s housing and homelessness crisis. Importantly, Measure ULA would also create a citizen oversight committee to ensure the revenue generated from the tax increase goes toward the housing programs outlined in the initiative.

“Who is going to be most impacted by this is large real estate corporations that are making massive profits off sales,” said Laura Raymond, organizer and spokesperson for the Yes on ULA campaign and director of the Alliance for Community Transit-Los Angeles (ACT-LA), a coalition of 42 organizations working towards transit and housing justice. “It’s the wealthiest entities in Los Angeles, and that’s why we are using this strategy to raise the revenue to attack the housing crisis, because that is exactly who can pay and who has benefited from our out-of-control housing market.”

Real Estate Industry Cash

The anti-ULA campaign, dubbed “Angelenos Against Higher Property Taxes,” has consistently claimed that Measure ULA would raise rents. To that point, ACCE’s Livingston responds, “Basically, they are arguing that any additional fee they have to incur would then have to be passed on to the tenant as opposed to being taken out of their crazy profits that they have been making hand over fist, even in the midst of a pandemic.”

Opponents have also argued that it will constitute the largest property tax increase in LA history. In reality, the measure is not a property tax, which is annually assessed. Instead, Measure ULA’s transfer tax would only be assessed one time, when a property is sold.

A look at the interests funding the “no” campaign suggests the real motives behind the opposition.

Real estate corporations, realtors, and housing manufacturers — including businesses and groups not based in LA — have outspent Measure ULA’s proponents by more than $4 million, funneling $5.5 million into Angelenos Against Higher Property Taxes so far.

When asked about the spending against the measure, Raymond of ACT-LA told The Lever, “It’s not a surprise. We know the real estate industry wants to maintain the status quo and they have very deep pockets and so they are putting a lot of resources into trying to confuse voters.”

Livingston agrees. “This is just a very common experience for us, and it’s not surprising because housing as a commodity is really lucrative and they tend to really ignore basic needs of people in pursuit of those profits,” she said. “And anything that would make it less profitable for them they will put a lot of money into defeating, because they stand to make a lot more money.”

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The No on ULA campaign describes itself as a “coalition of Los Angeles homeowners, renters, taxpayers, and small businesses.” The contact listed on the campaign’s emails is Republican political consultant Matt Klink, a partner at California Strategies. The consulting firm’s website touts “California Strategies’ real estate and land use experience” as “substantial.” Klink was previously the director of public affairs at multinational tobacco giant Philip Morris (now known as Altria). In 2019, he fought to defeat Measure EE, a parcel tax that would have raised an estimated $500 million annually for the Los Angeles Unified School District.

The California Business Roundtable Issues PAC, a shell committee of sorts for real estate giants to obscure their political donations, has contributed the greatest amount of funding to the opposition. So far, the group has dumped $2.2 million into killing Measure ULA.

In 2020, the California Business Roundtable PAC was a top donor of the campaigns to defeat both Proposition 15, which would have required commercial and industrial properties to be taxed based on their market value, as well as Proposition 21, a rent control ballot measure. Both proposals failed.

Douglas Emmett Inc., an LA-based corporate real estate investor worth roughly $3 billion, has donated heavily to the California Business Roundtable PAC. The company has drawn headlines for failing to install sprinklers and other fire safety measures at its Barrington Plaza apartment complex, resulting in two fires breaking out at the complex over a nine-year span — one of which killed a tenant. This election cycle, Emmett has contributed hundreds of thousands of dollars to the campaign of City Council District 11 candidate Traci Park, who would have a say in whether Barrington Plaza’s safety equipment has to be updated, since the complex is based in her district.

Douglas Emmett Inc and the Mansion Tax
Douglas Emmett, Inc. has donated heavily to the California Business Roundtable PAC, working against the "mansion tax."

Douglas Emmett, Inc. is also cosponsoring the No on Measures DT & GS committee to defeat Santa Monica’s efforts to further hike its transfer-tax rate on multimillion-dollar properties.

Another top donor to the California Business Roundtable PAC is Geoffrey Palmer, a massive downtown LA luxury housing developer and mega donor to former President Donald Trump. According to California Not for $ale, a campaign led by major state-based housing justice organizations, “When Trump flew to Los Angeles in 2019 and callously accused unhoused people of tarnishing the ‘prestige’ of American cities by sleeping on the ‘best highways, our best streets, our best entrances to buildings,’ he was there for a re-election fundraiser at Geoff Palmer’s Beverly Hills mansion.”

At the height of the COVID pandemic in 2021, Palmer sued the city of Los Angeles over its eviction moratorium, alleging that 12 of the buildings that he manages in LA had lost more than $20 million in rental income from the moratorium. He has a considerable track record of fighting affordable housing in LA, including having previously sued the city to avoid including such units in his developments.

The Blackstone Group, the world’s largest private equity firm and corporate residential landlord, has also contributed significantly to the California Business Roundtable PAC this election season, to the tune of more than $7 million. In 2018, Blackstone poured millions of dollars into opposing Proposition 10, a San Francisco rent control measure. As The Guardian reported at the time, “Unlike typical corporate political donations, the Blackstone contributions didn’t come from the firm’s executives or corporate treasury. Instead, they came from pools of capital from investors, which include dozens of state and local pension systems, and public university endowments.”

This year, Blackstone is similarly bankrolling the California Business Roundtable PAC with cash from its investment funds.

In 2019, the United Nations’ housing advisor accused Blackstone and “its subsidiaries of undertaking ‘aggressive evictions’ to protect its rental income streams, shrinking the pool of affordable housing in some areas, and effectively pushing low and middle-income tenants from their homes.”

The ACCE housing and transit group is one of several organizations in California that has its sights set on holding Blackstone accountable for its role in the global housing crisis.

“Where the organizing has really been focused around Blackstone is their role in buying up affordable housing and then poorly maintaining those properties, jacking up the rent on those properties, pushing people out into homelessness because of the way they behave as a giant corporate Wall Street landlord,” said Livingston. “That’s largely where ACCE has focused its work. But because Blackstone is just a giant player, I'm sure they've got reach in all kinds of ways that we’re not even exploring yet.”

Self-storage giant Public Storage, which is headquartered in Glendale, California, has so far contributed $395,000 to the No on ULA campaign. The massive real estate investment trust (REIT) owns a significant amount of valuable real estate across the country, including in LA, where as of this summer they had 212 facilities — the highest number of Public Storage facilities of any U.S. city. Given the company’s potential tax burden if it were to sell its LA facilities, it’s not surprising that it's throwing money into the opposition’s campaign coffers.

Westfield Properties, a subsidiary of an international conglomerate based in France, is the second highest donor to the opposition campaign. The corporation has plans to sell its two malls, Century City and Topanga, and exit the LA market, and would therefore be directly impacted by the transfer-tax rate increase proposed in Measure ULA.

According to Livingston, Measure ULA is being fought with the typical formula opponents of affordable housing measures have long deployed in California. “Whatever it is that we raise, they can pretty easily raise three times as much because they’ve got these big corporate builders and landlords and whatever,” she said, “and they put it mostly into messaging early, loud, often in ethnic papers and radio stations, to low information voters — and that’s their playbook.”

A Tenant’s Struggle For Housing Justice

Such real estate corporations have made their millions by creating unlivable conditions for many of LA’s working-class residents. Zerita Jones, community organizer and tenant member of ACCE, is one such resident.

Jones is a longtime tenant of Chesapeake Apartments, a complex in South LA owned by corporate landlord Pama Properties, which is run by real estate billionaire Mike Nijjar. According to the Los Angeles Times earlier this year, LA county public health officials “found 205 violations at Chesapeake Apartments since 2017, an average of more than three per month and the most of any residential property in LA County during that time.” Per an LAist investigation, “Businesses connected to Nijjar account for at least $1.3 billion in real estate” and “4,300 eviction lockouts in Los Angeles and San Bernardino counties between 2010 and 2018.”

Jones has experienced these issues firsthand, and after long-term exposure to mold in her apartment, she now lives with asthma and lung damage. She has also been evicted from the apartment complex before, and believes corporate landlords file such notices on tenants in LA every 18 to 24 months, to recycle them out for higher rents.

“One of the things that happened is they [Pama Properties] attempted to put a nuisance abatement lawsuit in 2017 on the property,” Jones told The Lever. “They were calling all of us ‘cocaine salespeople’ and ‘gangsters.’ That was the premise, and they were trying to massively evict all of us… If you smoked a cigarette outside and dumped it in the yard you could be evicted with no judicial process.”

She added: “We found out the owners were using the nuisance abatement lawsuit as a smokescreen and lying to some of the tenants, and they were forcing them to move, and all they were doing was re-renting at a higher, market rate. So we got together. I formed a tenant association in like five days and we fought back.”

Of Measure ULA, Jones said advocates are doing everything they can to refute the opposition’s “asinine” claims about what the measure proposes.

To counter corporate interests’ narrative, Jones and her colleagues at ACCE have been working to engage voters. According to Livingston, when organizers highlight the profits the real estate industry is making and demystify the policies and programs being proposed in the measure, it “pretty quickly moves people.”

Jones agrees that moving voters to pass Measure ULA is vital.

“This is like Robin Hood, the aspect where [Sheriff of Nottingham] was taking so much money from the people that they had nothing left to live and be in the town, so they hightailed it to the forest,” she said. “What happens when you’re sitting on all the gold? What happens when you own all the property when the people are so desolate they are in tents? Society and community runs when things are working.”

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