Howard Jarvis Sues L.A. over ‘Transfer Tax’; Will ‘Show Up in Higher Rents’

A taxpayer watchdog group is suing the the City of Los Angeles over a new tax on property sales that supposedly raises money for the homeless but which, critics say, will hurt workers and renters without helping anyone.

Measure ULA, if implemented, will require the city to collect a 4% tax on sales over $5 million, and a 5.5% tax on sales of property worth $10 million or more. It passed with nearly 60% of the vote in November 2022.

Jon Coupal, president of the Howard Jarvis Taxpayers Association (HJTA), told Breitbart News on Tuesday that the effect of Measure ULA, which was passed by referendum in November, will be to hurt the middle class.

When an apartment complex changes hands, Coupal warned, and the new owner is forced to pay the transfer tax to the city, “that’s going to show up in higher rents,” further exacerbating the city’s housing crisis.

The new tax could also hurt the city’s contractors, painters, and gardeners — in short, anyone who earns a living by fixing and improving homes and buildings — because owners will have less cash to spend on basic maintenance.

The money to be collected through Measure ULA’s  transfer tax — some $900 million per year — will be used “to subsidize housing, preserve affordable homes, guarantee counsel to tenants in eviction court, and subsidize other progressive priorities,” according to Bloomberg News.

None of those spending priorities will help the homeless directly, and could merely subsidize what Coupal calls the “homeless-industrial complex” — the array of left-wing organizations that have sprung up around the homelessness issue, but which do nothing to solve it.

As the Los Angeles Times noted last month, the HJTA is joining local apartment building owners in its lawsuit, which claims Measure ULA is unlawful, on state constitutional grounds.

“Our strongest argument is that [Measure ULA] violates the L.A. city charter because [the charter] limits the scope of the initiative process in the city to matters that the city itself could do,” Coupal said.

Under Proposition 13, he explained, a city’s power to raise property taxes is limited. Proposition 13 is a state constitutional referendum that passed in 1978, and restricts property tax increases in the state.

Measure ULA violates Proposition 13 because it designates local property funds for a specific purpose, as HJTA explained in a statement last month:

The revenue from the tax would be dedicated to housing and homeless services, which makes the measure a “special” tax, not a “general” tax.

Transfer taxes were prohibited by Proposition 13 (Article XIII A, section 4 of the California Constitution), but in charter cities such as Los Angeles, transfer taxes have been permitted under case law since 1990 if they are for a general purpose. “The Constitution prohibits all local governments from imposing special transfer taxes,” said HJTA Director of Legal Affairs Laura Dougherty. “The Los Angeles City Charter confirms that legislation by initiative may not transcend this prohibition.”

HJTA will also argue, more generally, that outside groups cannot use the referendum process as a workaround to bypass Prop 13, Coupal told Breitbart News.

The HJTA has successfully opposed attacks on Proposition 13 in the past by a state legislature that is constantly hungry for more money to spend.

Measure ULA is just the latest in a series of tax hikes aimed at the homeless problem — all of which have been followed by an increase in homelessness.

In 2017, voters in Los Angeles County approved Measure H, a 0.25% sales tax hike, by a margin of more than two-thirds. Though the new tax raised hundreds of millions of dollars, ostensibly to deal with the homelessness crisis, the local homeless population has merely continued to rise.

(The state’s Fair Political Practices Commission later issued a $1.35 million penalty against the county for its misuse of public funds to support Measure H, “violating the law regarding campaign-related communications.”)

“There’s no accountability, and no oversight,” Coupal noted, describing the Measure H funds. He warned that the same is likely with Measure ULA.

 

Coupal noted that merely spending money on homelessness does not solve it — and that other states, which have spent money more wisely on the problem, have also seen greater success than California.

“Their spending is more targeted to non-profits and faith-based organizations,” he explained. They also impose “metrics by which they have to measure effectiveness” when spending taxpayer money on alleviating homelessness.

In California, where state and local authorities have recently tried moving homeless people to vacant hotel rooms, many people end up back on the street, where they can more easily access and use illegal drugs.

Measure ULA may not even bring in the anticipated revenue, he warned: wealthy property owners were already seeking ways to avoid the tax, which is scheduled to take place on April 1, using creative and complex schemes.

The case is Howard Jarvis Taxpayers Association and Apartment Association of Greater Los Angeles v. City of Los Angeles and All Persons Interested in the Matter of Measure ULA.

Joel B. Pollak is Senior Editor-at-Large at Breitbart News and the host of Breitbart News Sunday on Sirius XM Patriot on Sunday evenings from 7 p.m. to 10 p.m. ET (4 p.m. to 7 p.m. PT). He is the author of the recent e-book, Neither Free nor Fair: The 2020 U.S. Presidential Election. His recent book, RED NOVEMBER, tells the story of the 2020 Democratic presidential primary from a conservative perspective. He is a winner of the 2018 Robert Novak Journalism Alumni Fellowship. Follow him on Twitter at @joelpollak.