The ULA Backstab: November Escape Hatch Closed

JordynOkay, welcome back to Listing Price. I'm Jordyn, and this week Sacramento handed L.A. luxury sellers a brand new problem, gift-wrapped with a bow.

DavidAnd the bow is on fire, literally. The Palisades is ground zero.

JordynSo let's open with this. A rebuild lot adjacent to Castellammare and Pacific Palisades closed at $8.2 million this week.

DavidWow.

Jordyn$328,000 straight to the city on day one.

DavidJust the ULA tax. Walk in, write a check for $328,000 before you've poured a foundation.

JordynAnd the exemption that would have zeroed that out, AB 736's wildfire carve-out? Gone. Sacramento pulled the whole thing.

DavidPoof. The Real Deal had this a few days ago. The ballot measure that was supposed to kill ULA, the Local Taxpayer Protection Act, got yanked June 26th in a last-minute deal brokered by Newsom's office.

JordynA Game of Thrones twist is literally how the real deal described it. Now you see the kill shot.

DavidNow you don't.

JordynExactly. And so today we're tracking exactly who gets hurt. Three seller groups: luxury listers who priced assuming a ballot win, commercial and multifamily owners who lost AB 736's one point five per cent lifeline, and then-

DavidWildfire rebuild sellers who lost the one exemption written specifically for them, and no realistic reform path before twenty twenty seven at the earliest.

JordynSo we'll look at what Sacramento actually traded away, who's sitting on overpriced inventory right now, And what David and I actually disagree on, because we do:

DavidWe do; especially above ten million in Bel Air.

JordynOh, we are getting into that-first segment is up, the Palisades deal that put three hundred and twenty eight thousand dollars on the table the moment escrow closed. Okay, so picture this: Castellammare adjacent lot in Pacific Palisades, 90272. Canyon views, new pool pad poured, and on both sides, neighbor lots still charred from the January fire. That property just closed this week at $8.2 million.

David$8.2 million. And the first thing I want to know is,

Jordynwhat's the ULA bill?

DavidExactly. So Measure ULA hits 4% on sales above $5. Five point three million; four per cent of eight point two million is three hundred and twenty eight thousand dollars, due at closing,

JordynWow!

Davidno extensions.

JordynThree hundred twenty eight thousand dollars on a post fire rebuild lot with charred neighbors-that's the number sitting on the closing statement right now.

DavidAnd here's what makes this week painful for that seller: The Real Deal reported that AB 736, Assemblymember Buffy Wicks's. C bill included a wildfire exemption, first sale of a disaster rebuilt property within five years, zero local transfer tax, zero.

JordynZero; so under AB 736 that three hundred twenty eight thousand dollars disappears entirely.

DavidBut AB 736 is dead; the Sacramento deal that Westside Today covered killed it; the ballot measure that was supposed to pressure Sacramento into reform, pulled; and AB 736 got swept off the table with it.

JordynPlot twist: the bill that would have saved Palisades fire sellers a third of a million dollars vanished in a back room deal that had nothing to do with them.

DavidFollow the money, or in this case, follow the negotiating chips. The Howard Jarvis folks got a constitutional amendment promise, the governor's office got the ballot threat removed, transfer taxes weren't even part of the final handshake.

JordynMeanwhile, Zillow shows roughly 257 luxury listings in the Palisades right now, median list around $4.34 million, averaging 76 days on market. And this $8.2 million close is running way above that median.

Speaker 3MEDIAN.

DavidAgainst a slow market; which tells me the buyer paid a premium for a rebuild ready situation, and is now also absorbing that ULA bill because the seller priced it in.

JordynOr didn't. Real talk, some of these Palisades sellers still had their pricing baked around November relief that no longer exists. So who actually swung the ax on that wildfire exemption? So who actually orchestrated this? Follow the money on the Local Taxpayer Protection Act. Who funded it and what did they think they were buying?

DavidOK, so housing developers, mostly commercial and multifamily, and they were buying a November ballot measure that would have wiped Measure ULA off the map. The Real Deal reported that some of those same backers turned around midweek and pledged $10 million to oppose their own initiative, trying to force Jon Coupal's hand.

JordynWait-they funded the thing, then tried to kill it themselves?

DavidYeah, yeah, yeah. Because Coupal wouldn't take AB 736, the one point five per cent cap that Assemblywoman Buffy Wicks put on the table, as a substitute. He said it didn't touch the sales tax issue. So they tried to create enough pressure to force a deal.

JordynAnd did it work?

DavidDepends on how you define "work." On the morning of June twenty sixth, the deadline, Coupal announced he was keeping the measure on the ballot. Then—poof! by end of day, it was gone.

JordynPlot twist!

DavidNewsom's office spent a week in back room negotiations with HJTA, housing advocates, unions, legislative leaders. The replacement deal? A constitutional amendment on the November ballot requiring a two thirds super majority for future special taxes. HJTA gets their core objective: Measure ULA completely untouched.

JordynSo, HJTA walks away fine. What about the developers who bankrolled the whole thing?

DavidMott Smith, the USC adjunct professor who's tracked this closely, put it pretty bluntly. The developers got quote, absolutely nothing.

JordynAbsolutely nothing. You spent millions on an initiative, then $10 million trying to torpedo your own initiative, and you end up exactly where you started.

Davidwith ULA fully intact and AB 736 effectively shelved.

JordynOkay, real talk. Should sellers have been pricing around this thing in the first place because a ballot measure as a net sheet strategy is risky doesn't quite cover it?

DavidI mean, I get the logic. The initiative was on the ballot, it had real funding, it had momentum. If you're listing above $5.4 million, you're looking at 4% off the top. You do the math.

JordynYou do the math, but you don't build your pricing strategy around Sacramento backroom deals. that could evaporate by Thursday afternoon.

DavidNow that's fair. CalMatters and LAist reporting both made it clear that Coupal himself said he was surprised by what Newsom put on the table. Nobody had that ending priced in.

Speaker 3Jean Coupal announced he was staying on the ballot that same morning.

DavidRight. And by end of day, it was settled. The real deal called it a Game of Thrones twist.

Speaker 3Which, and I want to be clear, is not editorializing. That's just what happened.

DavidThat's just what happened. And now the question is: What does absolutely nothing actually cost, in dollars, per seller, per property type?

Speaker 3Which-funny you should say that-is exactly the math we're about to do. So the brackets are locked, 4% and 5.5%. Let's talk about who's actually holding the bag.

DavidThree groups, and the math is ugly for all of them.

Speaker 3Okay, group one, sellers who priced above $5.3 million expecting a November repeal and built that into their net sheet. A $7 million sale in Brentwood, 4% is $280,000 at closing.

DavidWow. And if you're in Bel Air at $12 million, 5.5% kicks in, $660,000 out of pocket.

JordynOn one transaction. Gone.

DavidAnd look, I'll say it. If you priced your listing around a Sacramento deal that hadn't even cleared committee yet, that's not a strategy. That's a bet. You lost the bet.

JordynOkay, David, harsh.

DavidI'm just saying, Sacramento was not your exit strategy.

JordynFair. Group two is actually where it gets worse. Commercial and multifamily sellers. Under AB 736, their rate would have dropped. dropped to 1.5%. The Real Deal reported that the current bill would have imposed that flat rate statewide and blocked local jurisdictions from going higher.

DavidAB 736 is shelved, so those sellers, apartment buildings, retail strips, office product, they're still sitting at 4% and 5.5% brackets. Same the Bird Streets mansion.

JordynAnd the UCLA Lewis Center put out research finding Measure ULA would

Speaker 3It reduced multifamily housing production by at least 18% relative to the 2020 to 2022 average among projects with 20 or more units.

David18% and that number came out before AB 736 collapsed. So whatever chilling effect existed, it just got colder.

Speaker 3Wikipedia's Measure ULA entry citing city data puts total revenue collected at $1.2 billion since since April 2023. Three years, 1.2 billion. The proponents initially projected 600 million to 1.1 billion annually. They're not even hitting that per year.

DavidWait, so they raised $1.2 billion total over three years and spent how much of it?

Speaker 3As of April 30th of this year, 120 million spent.

DavidOut of $1.2 billion?

Speaker 3Yeah, yeah. And there's a separate L.A. City Council. council push, two local ballot measures for November that could create a multifamily exemption within a 10-year window, that's the only local reform path still breathing.

DavidHmm, that requires a November vote, council placement of voter approval. You're looking at a 2027 outcome at the earliest, if it even passes.

Speaker 3So for the commercial seller in Culver City, the apartment owner in Palms trying to exit a $12 million building, nothing has changed.

JordynChanged-nothing.

DavidThe five point three million dollar threshold isn't a negotiation any more, it's

Speaker 3wrecked.

Davidjust furniture.

JordynAnd speaking of permanent exposure, there was one group that AB 736 specifically tried to protect: wildfire rebuild sellers. That exemption is gone, too.

DavidRight, and that one's a lot harder to write off as a speculative bet.

Speaker 4Ssss!

Speaker 3So those wildfire rebuild sellers, let's actually talk about them for a second.

DavidYeah, because this is not the same conversation as a luxury speculator who priced around a ballot deal.

Speaker 3Not even close. Picture this. Someone in 90272, January 2025. The Palisades fire comes through. House is gone. Gone. They spend eighteen months fighting insurance, pulling permits, watching their canyon view turn back into something livable-new foundation, new framing, everything.

DavidAnd then they sell.

Speaker 3And then they sell, and AB 736 had a specific exemption: first sale of a rebuild property within five years of a disaster?

DavidWow.

Speaker 3Zero local transfer tax. Not reduced. Zero.

DavidThe Real Deal reported the exemption covered the first sale of a single family rebuild within five years of a wildfire or

Speaker 5similar disaster.

DavidFire, earthquake, or flood-that window would have caught almost every Palisades for sale. Rebuild timelines are running eighteen to thirty six months.

JordynSo we're talking about families who literally lost their homes-not investors, not flippers-and they were the ones AB 736 would have actually protected.

DavidAnd on that eight point two million dollar close we open the show with? That exemption was worth three hundred and twenty eight thousand dollars at closing. Gone.

JordynOkay, real talk. When Sacramento framed this whole deal as a win for housing and working families, and the one provision that directly helped fire survivors just evaporated in the negotiation, that is a story.

DavidAnd there's no fix that's coming. The L.A. City Council could theoretically put a local ballot measure together with its own disaster exemption built in.

JordynBut that's a November vote, city council placement, and then voter approval. You're looking at 2027 at the absolute earliest.

DavidIf it passes. Which is not guaranteed. The Howard Jarvis Group already walked away from the Sacramento compromise. They're pushing a separate sales tax ballot measure now, according to the SJV Sun. The political appetite for another ULA fight in the next 12 months? I'm skeptical.

JordynSo the Palisades Rebuild seller has Sacramento's deal to thank for their six-figure tax bill.

DavidFollow the money. The deal preserved ULA intact, which means the homelessness and affordable housing programs it funds stay funded. That was the trade. Fire survivors were not in the room.

JordynThat's a brutal trade to be on the wrong side of.

DavidAnd there's no reform path that gets to those salaries before 2027. The only remaining door is local. And that door requires a key that doesn't exist yet.

JordynWhich brings us to what properties above $5.4 million are actually supposed to do with all of this information right now. So with all that in mind, what do sellers above $5.4 million actually do right now?

DavidPrice it in and move. That's my read. Carrying costs compounds fast when you're waiting on a political solution that keeps not showing up.

JordynOkay, real talk. I'm mostly with you, but I want to push back a little on who we're actually talking about. A Brentwood seller at $6 million? Yeah, price it in, close it, done. 4% is painful, but you can model that.

DavidRight. The math is straightforward at that level.

JordynBut a Bel Air compound at eighteen twenty million? That's a different conversation. Because the constitutional amendment heading to November voters, the one that came out of the Sacramento deal, it only raises the threshold for future special taxes, not touching existing ULA rates, not one dollar.

DavidZero. It changes nothing about what sellers owe today.

JordynSo the escape hatch everyone was banking on closed.

DavidAnd here's where I actually complicate your close it now argument, Jordyn. Buyers above 54M. Holmby Hills, Bird Streets, the big Bel Air compounds, they've already priced ULA in, their offers reflect it. So a seller holding out at seventeen million isn't just absorbing a transfer tax hit, they're negotiating against a buyer who already discounted for five point five percent before they made the opening offer.

JordynThat's a leverage problem on top of a tax problem.

DavidExactly! You're not just losing the ULA math at closing. You're losing it- Using it twice, once in the tax, once in what the buyer was willing to pay before negotiations even started.

JordynSo what's the move for those sellers?

DavidHonestly, they either cut the ask to where the buyer's math works or they sit, and sitting has a clock on it. Mortgage carry, maintenance, insurance if they're in a fire zone, those compound.

JordynRight. And LAist confirmed the constitutional amendment going to November voters raises the two-thirds threshold for new special taxes.

Speaker 3Right!

JordynFuture taxes-not this one-the only remaining reform path is the local LA ballot, which CalMatters called a twenty twenty seven problem, at earliest.

DavidTwenty twenty seven, which for someone sitting on a Bird Streets listing right now at fifteen million is not a useful answer.

JordynNot even a little bit.

DavidAB 736 is gone, the Howard Jarvis ballot measure is gone, the November escape hatch is closed.

Speaker 4Yeah.

DavidWhat's left is eighteen months of deal flow where every buyer above five point four million knows the seller has nowhere to run.

JordynRisky is what I'd call any pricing strategy still built around a Sacramento rescue.

DavidFile that away. The next 18 months in this market, the tax isn't the variable. The buyer's leverage is.

Speaker 6Hmm.

JordynReal talk, that $328K check due at closing on an $8.2M Palisades lot with charred neighbor lots on both sides? That's the image that stays with you.

DavidAnd the Sacramento deal that buried the ballot measure buried AB 736 right along with it. Transfer taxes weren't even in the final handshake. Fire area sellers got nothing.

JordynZero. Which means if you're a seller above $5.4M right now? You pray for the world that exists, not the reform that didn't happen.

DavidFollow the money. The developers who funded the initiative ended up pledging to oppose it; that tells you everything about how this one went.

JordynAbsolutely everything. Okay, David laid it out cold today. Close it now or negotiate hard. Pick one.

DavidNo middle ground on this one.

JordynThanks for riding along with us. New episodes drop every Tuesday, follow Listing Price wherever you listen, and if you've got a deal worth covering, send it our way.

DavidWe'll see you next week.