The ULA Backdoor: City Hall's Quiet Pivot

JordynOkay, seven weeks. Seven weeks since City Hall quietly killed the ULA ballot fight, and nobody said anything about what happened after.

DavidBecause after happened where cameras don't go.

JordynThis is Listing Price. I'm Jordyn with David, and we're not re-running the pivot today.

DavidWe already covered that reversal back on August 20th's episode.

JordynRight. The shelving, the pilot ordinance instructions, settled business.

DavidWhat's not settled is what the ad hoc committee did with it since.

JordynSeven weeks. That's basically a geological era in comps.

DavidComps don't care about your calendar, Jordyn.

JordynWait, they actually moved?

DavidSomething got traded away behind closed doors, and it changes who's holding leverage in escrow right now.

JordynSellers have spent all year chasing every exemption they could find.

DavidEvery escrow's watching now.

JordynAnd the fight just relocated, ballot box to committee room.

DavidSo let's rewind to July 1st and pick up exactly where that pivot left off.

JordynOkay. So for anyone just tuning in on the recap, the plan on the table wasn't a blanket repeal. It was surgical.

DavidRight. It only touched new construction. Bisnow's reporting on this said the exemption would have applied to multifamily properties built within the last ten years.

JordynTen years. So if you built it, you'd get a break. If you're sitting on some '70s fourplex in Koreatown, tough luck.

DavidExactly the split. New supply gets rewarded. Existing owners get nothing.

JordynWhy ten years, though? Why not five? Why not twenty?

DavidThe reporting doesn't say what number they debated instead, just that ten years is the cutoff that made it into the actual proposal.

JordynSo we don't get the horse trading, just the outcome.

DavidJust the outcome. But logically, it tracks. Anything newer than ten years probably financed and broke ground under the tax already, so this would've been relief for the most recent wave specifically.

JordynAnd the vote itself, walk me through that again, because the margin was not close.

DavidPatch reported the vote council was thirteen to one.

JordynThirteen to one. That's not a fight. That's a rout.

DavidTraci Park was the lone no. Curren Price was absent.

JordynSo basically, the whole room agreed except one person.

DavidOne dissent, one absence. Everybody else fell in line behind pulling it.

JordynWhich tells you something. When you get near unanimous votes on real estate policy in this City, somebody already worked the phones beforehand.

DavidThat's the part people miss. Unanimous doesn't mean uncontroversial. It means negotiated.

JordynOkay, but zoom out for a second. Why is everybody even fighting over this in the first place?

DavidBecause it's not a new fight. The Real Deal wrote that reforming or repealing ULA has dominated conversation in the real estate industry for three years now.

JordynThree years of the same argument on loop?

DavidThe complaint's always the same shape too, that the transfer tax put a damper on luxury sales and froze multifamily development.

JordynFroze it how though? Like, developers just stopped pulling permits?

DavidThat's the claim from the industry side, yeah, that the tax hit made new projects pencil worse, so fewer got built.

JordynWhich is kind of ironic because the exemption they just shelved was supposed to fix that.

DavidRight. They had the tool in hand and set it down.

JordynSo walk me through the actual sequence. They kill the ballot version, and then they just shrug?

DavidNo. This is the part that's easy to miss if you only caught the headline. They didn't kill the idea. They killed the November vote.

JordynWhich is a very different thing.

DavidVery different. The ballot box wasn't the only door that closed on ULA reform this year.

JordynOh.

DavidSacramento shut one too, and that one is the door nobody in the industry saw coming.

JordynOkay, so get this. While everybody in LA was staring at the ballot measure, Sacramento was quietly closing its own door.

DavidThe Howard Jarvis Taxpayers Association had this whole statewide initiative that would have capped transfer taxes everywhere, ULA included.

JordynWait, capped at how?

DavidHard ceiling on local transfer tax rates statewide. It would have applied to LA whether the City liked it or not.

JordynAnd that's dead now?

DavidWithdrawn. Jarvis cut a deal with Governor Newsom and pulled it.

JordynThey just folded?

DavidTraded it for Proposition 43 instead, which raises the vote threshold future tax measures need to pass.

JordynOkay, but does 43 touch ULA at all?

DavidThat's the part people keep getting wrong. It doesn't repeal it, doesn't cap it, doesn't change the existing rate one bit.

JordynSo the one lever that could have forced LA's hand from the outside just isn't there anymore.

DavidGone, and Jarvis has spent 30 decades being the group that actually moves the needle on this stuff statewide.

JordynSo the cavalry rides in and then just rides right back out.

DavidPretty much.

JordynWhat does that actually mean for a seller sitting on a forty million dollar Bel Air listing right now?

DavidIt means nobody's coming to save them from Sacramento. There's no statewide fix landing in their lap.

JordynSo local or nothing.

DavidLocal or nothing. The city's own ordinance process is the only road left that can move the rate.

JordynWhich raises the stakes on whatever the housing department's actually drafting.

DavidMassively. Because if that pilot ordinance goes soft, there's no backup plan waiting in the wings.

JordynWhat's the actual mechanism that makes this the only path left? Like, legally, why can't voters just try again in a future election?

DavidThey still could technically. Nothing stops a new ballot measure down the line, but nobody's filing one right now. And until they do, the ordinance is the only train running.

JordynNo ballot measure, no state cap, no B plan.

DavidJust committee.

JordynWhich sounds boring until you remember committee is where deals actually get made or unmade.

DavidExactly. City Hall knows it's the only game in town, and that changes how hard anyone has to fight for a good outcome.

JordynBecause there's no pressure valve anymore. If they stall, sellers just eat it.

DavidRight. And that's not some hypothetical. That's the room we need to walk into now.

JordynBecause something happened in that room since we last talked about this on the show.

DavidSomething that didn't make headlines in July, but absolutely reshaped what's on the table.

JordynOkay, now you have to tell me.

DavidThe ad hoc committee. That's where this actually got decided, and that's where the real news since August twentieth lives.

JordynAll right, let's go sit in that room. Okay, so picture the room. It's not the ballot fight anymore. It's the ad hoc committee on Measure ULA, three council members, closed-door style horse trading.

DavidAnd this is the part nobody outside City Hall actually saw happen.

JordynRight. Because on the table was a real proposal. Council President Harris-Dawson and Lee wanted to send voters something with teeth. Cut the ULA rate down to two percent on the lower tier, three and a half percent on the upper.

DavidWait, that's way below where it sits now.

JordynWay below. That's the harsher version we keep hinting at.

DavidSo what happened to it?

JordynThe committee voted two to one to swap out for the narrower pilot program approach instead. Harada and Padilla voted for the swap. Lee voted no.

DavidLee voted against his own idea getting watered down.

JordynLee voted against watering down his own proposal. Yeah. He wanted the aggressive cut on the ballot, and he got outvoted by his own colleagues on the committee.

DavidThat's... Okay, that's actually kinda brutal. Two votes just quietly override the more voter-facing option.

JordynAnd nobody had to run a campaign, print a mailer, none of it. Two votes in a committee room did what a ballot measure would have needed a majority of the entire city to do.

DavidWhich is exactly why we keep calling this the backdoor.

JordynExactly.

DavidOkay, but here's what gets me. This didn't kill the push to lower ULA. It just changed who's steering it.

JordynRight. And that's not nothing. David, you've been saying for weeks the fight isn't dead, it just changed venues.

DavidIt's not dead. Patch actually got a quote on that directly. Council Member Yaroslavsky told them, Patch, the fight over ULA, quote, "Is not over."

JordynWhich coming from someone sitting on the council is basically confirming there's more coming.

DavidIt reads like someone who knows this pilot program isn't the finish line. It's a placeholder while they figure out what they can actually get through committee without spooking anyone into a ballot fight again.

JordynSo sellers who were tracking the November measure, that whole track is closed. But the rate cut conversation didn't go away, it just moved to people who don't have to win an election to change the number.

DavidThree people, essentially. Two votes.

JordynTwo votes decided this outcome instead of however many million registered voters would've weighed in come November.

DavidAnd to be clear, this was a committee vote, not the full council. It still needs to go back for formal approval.

JordynBut once a committee frames the choice this narrowly, does the full council ever actually reopen it?

DavidRarely. The real decision already happened in that room. The formality just catches up later.

JordynSo today's vote is basically the ballgame.

DavidAnd that's the trade nobody outside the building clocked. The aggressive version, two, three and a half percent, that's gone, off the table.

JordynGone. What replaced it is smaller, safer, and it's the thing the housing department has actually been told to build out.

DavidSo the harsher cut didn't survive the room.

JordynIt didn't. Something narrower did. Okay, so the recap's done. David, what's actually in this pilot?

DavidNumbers. Real ones. The Patch's report on the vote says the pilot could take the ULA rate down from five and a half percent to as low as one and a half percent for projects that qualify.

JordynWait, one and a half percent? That's not a trim, that's a different tax bracket.

DavidOn a fifteen million dollar Bel Air rebuild, that's the difference between paying eight hundred and twenty-five grand and paying two twenty-five.

JordynOkay, that'll get a developer's attention.

DavidThat's the idea. And there's a second piece riding along with it. Same Patch record. A separate income support pilot up to thirty thousand dollars per household, capped at a thousand households.

JordynRenters, buyers, who?

DavidThe reporting doesn't break down who draws from that pool, just the ceiling. A thousand households, thirty grand a piece, tops.

JordynSo two different levers. One's a builder discount, one's a household check.

DavidRight. And they're not the same fight, but they got shelved and piloted together.

JordynFine. So who actually gets the one and a half percent? Because I guarantee it's not everybody with a hammer and a permit.

DavidThis is the part nobody's covered yet. There's a council file, an actual staff report from the Ad Hoc Committee, and it spells out five conditions.

JordynFive. Lay them on me.

DavidOne, the project has to include covenant restricted units for lower income residents. Not market rate with a nice view, actual restricted units.

JordynSo you can't just slap a token unit on a spec mansion and call it a day.

DavidTwo, it has to be primarily residential. Mixed-use with a retail podium probably doesn't clear the bar.

JordynKilling a chunk of the Westside pipeline right there.

DavidThree, the building permit has to come after the program's effective date. No retroactive relief for anything already under construction.

JordynSo the guy who broke ground in March is out of luck.

DavidOut of luck. Four, prevailing wage on the labor. That's a real cost add for anyone trying to pencil the discount against their build budget.

JordynWhich eats into the savings you just told me about.

DavidSome of it, yeah. This isn't free money. It's traded for higher labor costs.

JordynAnd five?

DavidFive, the property has to sell within seven years of getting its certificate of occupancy. Miss that window, the discount doesn't apply.

JordynSo it's not a permanent exemption, it's a clock.

DavidA seven-year clock on a residential prevailing wage income restricted, freshly permitted project. That's a narrow lane.

JordynThat is not a loophole. That's a needle's eye. Walk me through who actually threads this. Is this a big developer play or something smaller?

DavidRealistically, it's the Mid-City multifamily builder. Somebody already doing income restricted work because they've got a pipeline of affordable financing anyway. A luxury spec builder isn't touching this. There's no covenant restricted unit in a hillside mansion.

JordynRight. So this was never built for the Bel Air rebuild crowd.

DavidNever. It's aimed at the kind of project the city actually wants more of. Apartment buildings with some affordable units baked in, built with union labor, sold within a reasonable window.

JordynSo if I'm a developer sitting on a project that already checks most of these boxes, this is basically free money handed to me for doing what I was already doing.

DavidPretty much if your timing lines up with the effective date. That's the part that stings for anyone who broke ground even a few months too early.

JordynSo it's designed to be small on purpose.

DavidDesigned to be small on purpose. A pilot, not a permanent policy shift. And that narrowness is exactly what decides who actually has leverage from here.

JordynOkay, so before we get to who wins this thing, David, how much of that ULA money has the city actually spent?

DavidThat's the uncomfortable part. Wikipedia's page on Measure ULA has the number as of April thirtieth, about a hundred and twenty million spent out of one point two billion collected.

JordynOh, wait, that's not even ten percent.

DavidIt's not, and that's the number every seller I talk to brings up when they're mad about the tax.

JordynBecause it's easy to be furious about paying a rate hike into a pot that's just sitting there.

DavidRight. And it feeds a bigger skepticism problem. There's a post going around cataloging every dedicated homelessness tax the city and county have stacked on top of each other.

JordynOh, I saw that one. It's like three separate measures all pitched the same way.

DavidMultiple layers, multiple ballots, and from a seller's chair, it just reads as another bucket, another six and a half percent, unclear where it lands.

JordynSo the spending lag isn't just an accounting footnote. It's why people don't trust the next carve-out either.

DavidExactly. Slow spending erodes the case for giving the program more exemptions.

JordynWhich brings us to the actual fight David and I are having off mic.

DavidLet's have it on mic then.

JordynFine. My take, hold out for the Pilot rate. If your project can plausibly clear those conditions, that discount is real money, and patience wins.

DavidI'll take the other side of that. Most Sellers I'm tracking don't have a prevailing wage residential project sitting fresh permitted with Seven years of runway. That's a small slice of the market.

JordynSure. But for the slice that qualifies-

DavidIt's a small slice.

JordynNo, hear me out. For a mid-sized multifamily deal, shaving four points off the transfer tax on an eight-figure sale is not nothing. That's real leverage to just sit on your hands for.

DavidIt's real leverage if you clear five conditions and a certificate of occupancy that hasn't even been issued yet. Most listings on my desk right now can't wait that long for a maybe.

JordynSo you're telling sellers to take the bird in hand.

DavidI'm telling sellers who don't fit that narrow profile to stop pricing their listing like relief is coming. It isn't. Not for them.

JordynAnd I'm telling the ones who do fit it, don't panic sell into this false numbers when a lower rate might be a phone call to the housing department away.

DavidTwo different sellers, two different plays. That's honestly the real split in this market right now.

JordynGive me one concrete example of who's actually in that qualifying slice right now.

DavidThink a mid-size affordable adjacent apartment developer in, say, Curren Town or Mid-City, already building income-restricted units, already using union labor because the financing requires it anyway. That's the profile this was built for.

JordynWhich is kind of the whole story, right? Sacramento's out, the ballot's dead, and what's left is a pilot program most people can't use and a spending record that makes people doubt the ones they can.

DavidSo heading to default, that's where this sits, a narrow legal lane for a few and everyone else pricing around a tax that isn't going anywhere.

JordynThat's the shape of it. Let's see how it actually lands.

DavidMy take, sellers who don't fit those five conditions should stop waiting on Sacramento or City Hall and just list.

JordynAnd mine, buyers with cash and patience should watch that pilot ordinance like a hawk because whoever qualifies first gets the discount before the crowd figures out the paperwork.

DavidTwo totally different plays.

JordynSame building, different clocks.

DavidAnd either way, nobody's getting a free pass, just different timelines to work with.

JordynDifferent timelines, same eventual tax bill for anybody outside that narrow lane.

DavidFair.

JordynAll right. That's this week's Listing Price. New episodes drop every Tuesday.

DavidFollow the show wherever you listen.

JordynAnd if you've got a deal, a listing, or a wild escrow story from your block-

DavidSend it in. We want it. Bel Air, the Palisades, the Bird Streets, wherever. We're reading everything.

JordynSee you next week.

DavidGo close something.