CEO Corner: We're Taxing Housing Instead of Building It

City Councilmember Nithya Raman introduced a motion on Friday to put substantive changes to Measure ULA – the mansion tax – on the June 2026 ballot. The council is scheduled to vote on the measure this Tuesday. The motion would exempt new and recently rehabilitated multifamily, commercial and mixed-use projects from the high-end real-estate transfer tax for up to 15 years after they receive a certificate of occupancy and create relief for homeowners affected by the Palisades Fire. 

We are in the midst of one attention grabbing crisis du jour after another at all levels of society, and I have low expectations of being pleasantly surprised that this mansion tax crisis will be solved this week by a council that has shown a willingness to follow advocates and union leaders marching their own constituencies and obedient city leaders off a cliff.  Yet, and still, I implore the City Council to consider exemptions to the mansion tax for any and all downtown transactions that are necessary to build more housing! 

In fall of 2022, it was easy to foresee that Measure ULA could poison the well of opportunity for downtown recovery coming out of the pandemic. And even if we have climbed out of the hole blindly, without sufficient public aid, and amidst adverse conditions, we shouldn’t need Alex Honnold to tell us the climb would have been easier without this added levy to our ascent.  

Imperfect policy, which is what Measure ULA was when it passed in 2022, shouldn’t forever be unchangeable as if divine law. Especially when it contradicts the basic law of supply and demand. Taxing a critical element of development - the real estate transaction - should have been seen as folly and fool’s gold the moment it was conceived. But alas, it seems we’re at the find out part of the equation. 

In communities where development is constricted (like New York City) - regulation of existing supply is necessary to ensure sufficient product at all entry points exist to meet demand. In Los Angeles, our current supply is overly constrained by our aggressive and restrictive over regulation. It’s not just that ULA is wrong, but that our policy objective was wrong from the start; we solved for X to the Z power when could have solved through simple addition.  Elected officials - whether it be in Sacramento or at City Council - need to remove as many obstacles to new housing construction and conversion as possible. Local policy needs to start with the objective of how we accelerate development, not tax it to fund outcomes that are a result of not having enough of it. 

DTLA is eager for multifamily of all heights and scale. We have access to employment and carbon friendly public transit. And we have organized coalitions of business and residential interests willing to support projects with open arms. We have empty lots and real estate inventory that could be put to solving the housing crisis. City Council should invite real estate developers into the room and ask them how we build more housing than we’ve ever built, faster than we’ve ever built it. 

But that’s not what we do. Instead, we tax, regulate, and process them into higher costs for residents. And that’s if a project makes it through years of obstacles. 

Instead, politicos delay action until they hear from community advocates – and what they hear whether intentional or not, often isn’t authentic community feedback – it’s professional agenda-based advocacy. And it typically excludes market rate housing developers because their profit motive is a reality most local officials lack the pragmatism to confront as a necessity to solving the affordability problem at its root. Thus, we overregulate to address the symptom; rinse, wash, repeat – it’s the housing crisis doom loop. 

City Council has an opportunity to recognize that the Palisades should be exempted from the mansion tax. And so too should downtown. Our disaster is different, but just as obvious. But the clearest impetus, is that no other neighborhood is as equipped to rapidly densify and make a meaningful dent in housing affordability as Downtown.  

Measure ULA has produced 800 housing units. From 2013 - 2022, the decade preceding the mansion tax, over 19k housing units were built in downtown. The Downtown Community Plan (DTLA 2040) is projected to allow for 100,000 new housing units. But housing production has stalled out post implementation of the mansion tax. 

City Council continues to show a willingness to follow the same advocates on housing, when the necessity is that they themselves begin to chart a different direction – as Councilmember Raman has proposed. Afterall, leaders (definitionally), do not have to obediently follow!  

I assure you, there are no new apartments being built over that cliff.

Nolan A. Marshall III