Measure ULA Approved by City of Los Angeles Voters; Legal Challenge Filed

Measure ULA was approved by voters in the November 2022 election by nearly 58%, creating a new tax on certain property transfers in the city of Los Angeles. The tax applies to both residential and commercial real property sales valued over $5 million and will apply a tax rate of 4% to properties sold for $5 million or more but less than $10 million, and a 5.5%rate to properties sold for $10 million or more. 

The tax is set to take effect on April 1, 2023 and will apply to property transfers on or after that date. The tax is an additional transfer tax and does not replace nor modify the existing LA County and LA City transfer taxes.

A legal challenge, led by the Howard Jarvis Taxpayers Association and the Apartment Association of Greater Los Angeles, argues that the new tax violates the California Constitution. 

The lawsuit hinges on the new tax’s stated allocation: While some transfer taxes have been permitted in California charter cities, the complaint states “transfer taxes that are ‘special taxes,’ however, are prohibited for all local governments.” It goes on to argue that Measure ULA is actually a special tax because the revenue it would generate is “specifically dedicated to housing and homeless services.” 

The 65-page complaint asks for “a declaration of the invalidity of Measure ULA, according to the state constitution, statutes, and Los Angeles City Charter.” The suit may impact the tax’s effective date; in a similar situation in San Francisco several years ago, the proceeds from a tax seeking to remedy homelessness were collected but placed in an escrow account while the issue was litigated. There may also be an initiative on the November 2024 ballot – the Taxpayer Protection Act – that seeks to restore the original intent of Proposition 13 and would force cities like Los Angeles that passed these measures to re-vote.