The So-Called Mansion Tax, Bans on Criminal Background Checks, and Eviction Moratoriums… Oh My!

Written by Apartment Management Magazine on . Posted in Blog

Before “going off” and writing my monthly editorial diatribe, I need to be in the right mood. Sometimes there’s this sort of “spark” that gets my heart racing and compels me to get to my laptop and pound away at its keyboard. That “spark” may be a line or two I have just read in a news article or something that “pops” into my head during a workout or while driving – it is usually the daily workout that does it.

For those of you brave souls that venture to the pages where my editorials appear, and then actually read some or all my monthly rantings, you should know that I often cannot control the timing of this catalyst that causes me to produce my writings, and at times I end up creating my compositions well in advance of the date your copy of Apartment Age lands on your front doorstep. So, please do excuse me if things or events may have transpired differently than I have portrayed or captured them here. I cannot predict the future, but I do see and can comment on trends.

So, now “on with the show” as we say here in Hollywood!

Measure ULA – So-Called “Mansion Tax”

This is just nuts! How insane is a tax on real estate transactions at a rate of 4% or 5.5%? It is a case of the City of Los Angeles voters shooting themselves in their own foot because this new, exorbitant tax will surely find it’s way into the pocketbooks of all consumers in the form of higher prices for all types of goods and services. It is a simple economic equation: when costs go up, prices then increase. There is however, the rent control exception, particularly within the City of Los Angeles where rent prices are being frozen for nearly four years and possibly longer all the while prices for all types of goods and services and for city fees and taxes keeps on going up, and up, and up! It’s seemingly never ending.

So, Measure ULA, which is scheduled to take effect as of April 1, 2023, taxes transfers of real property by 4% if the transaction value is between $5 million and $10 million and by 5.5% if the transaction value is in excess of $10 million.  Now, you need to read the fine print. This is not a 4% tax on the “excess transaction value over” $5 million or a 5.5% tax on the excess transaction value over $10 million, but the tax goes back to and applies to “dollar one.” So, on a $5 million real estate deal, the Measure ULA tax becomes $200,000 (4% times $5 million) and on a $10 million transaction, the Measure ULA tax becomes $550,000 (5.5% times $10 million) and continues going up from there. Wow! And, to make matters worse, there’s no accounting for how much you may have paid for the property being sold, and Measure ULA applies even if you sell your property and are “under water.”

The new, Measure ULA tax is quite a lot of “dough,” and given the City of Los Angeles’ unfortunate track record of deploying billions of dollars from bond proceeds designated for homelessness abatement, the Measure ULA funds raised will surely be flushed down the toilet. At what point will taxpayers learn that throwing more and more money at a solution that just “ain’t” working makes no sense. How’s that old saying go? – Fool me once, shame on you…fool me again, shame on me! Shame on all of us for passing Measure ULA. And, if you’re sitting there thinking: “Ehhh…my property is not worth $5 million, so what do I care?” Well, just give it some time. If the past is any indication of the future, real estate trends would suggest that someday your property may be worth $5 million.”

Measure ULA is horrific for not only property owners, but will be horrible for businesses and consumers in the City of Los Angeles. It is an attempted wealth transfer straight from the dogma of Socialist ideology and will ultimately come back to bite the very voters who approved the measure right in their “bottom” (you know what “A-word” I mean here) through higher costs of goods and services. So, in the face of Measure ULA’s passage, we at the Apartment Association of Greater Los Angeles along with our taxpayer rights friends over at the Howard Jarvis Taxpayers Association, decided to give the City of Los Angeles a little Christmas present, and so on December 22, 2022, we filed a joint lawsuit against the City of Los Angeles seeking to overturn Measure ULA. The arguments in our complaint are strong, and we will prevail. Stay tuned as we release future updates.

Tenant Screening Update: Criminal Background Checks Under Attack

Just picture this…take a deep breath, close your eyes, relax, and visualize a Trojan Horse that opens up with a bunch of criminals dressed in in orange jumpsuits with the word “Inmate” emblazed on the front and back jumping out of the Trojan Horse and storming an apartment building, looting its contents, and terrorizing the people that live there. This may, someday, happen!

Late last year, Alameda County up there in the Bay Area, passed an ordinance that bans rental housing providers from conducting criminal background checks on prospective tenants, a move that county made to make it easier for the formerly incarcerated to get housing and reduce discrimination against convicted pedophiles, rapists, armed robbers, drug dealers, and a long list of other law breakers. (Sarcasm coming…) Of course, we housing providers should be expected to ignore the criminal backgrounds of individuals we allow to live next door to the nice families we rent housing to because these criminals have been reformed, right? Not!

To say “this is bad” that Alameda has banned criminal background checks is putting it lightly. This concept of neutering our right to screen prospective tenants for criminal background checks could possibly careen out of control, and quickly spread throughout other jurisdictions in California. Already, both the city and county of Los Angeles have discussed the possibility of proposed ordinances covering similar ground, and nearly every year, some crazy proposal or two come out of the minds of our legislators in Sacramento meant to help house the formerly incarcerated while at the same time effectively “pulling the wool over the eyes” of housing providers and hiding this very important information from us.

Clearly, it is a misnomer to call these prohibitions on criminal background checks “tenant protections” as was the selling point made by the County of Alameda as it shoved this garbage down the throats of the county’s housing providers when in fact the ordinance (and similar ones that may be forthcoming) places our tenants at great risk by potentially living next door to what may be pedophiles, rapists or other violent criminals.  Perhaps, rather than “tenant protections,” we should call this “thing” what is really is, which is “criminals’ protection.”

Perhaps as this one comes up and is proposed here in the Greater Los Angeles Area, we need to join forces with renter groups and to develop a process to educate the good renters about these bad and potentially very dangerous policies.  Housing providers need to be involved in educating their tenants and must distribute information at their property and on their property management websites to alert tenants about the coming threat to their safety and to ask for their help to advocate against this and other ill-conceived policies. Perhaps we need to circulate petitions and solicit signatures among renters stating their disagreement with these types of policies.

What seems clear is that Alameda County’s goal and what the county clearly cares more about is the welfare of its criminals rather than keeping working class families and individuals safe while at home.  Unfortunately, the Supervisors in Alameda County are not the only fools in politics here in California and we have many more, too many, right here in Southern California that are thinking of like-minded proposals to terrorize the lives of decent, peace-loving human beings.

Moratoriums and Our Lawsuits

As I write this, we have about a month to go before the moratoriums on evictions expire in the City of Los Angeles and County of Los Angeles, with a strong likelihood of rain given the undercurrent on the L.A. City Council and L.A. County Board of Supervisors to extend these measures until at least June 30, 2023. Ugh!

As mentioned in articles, emails, webinars, blog posts, and by other means many times before, our lawsuits against the City of Los Angeles and County of Los Angeles are ongoing and will continue even if or after the moratoriums expire. Our members have been badly harmed by these very bad policies, and we hope to be able to open the door with these lawsuits so that property owners can seek damages from the city and county. Already, we have obtained a District Court ruling that the County’s moratorium was “unconstitutionally vague,” and once we secure a final, unappealable order, that door will be opened. Keep our Legal Fund in mind if you would like to see a “win” in our lawsuit column ( Don’t just complain…write a check, please and thank you.

We must stop this whole idea of “free housing” from “private welfare providing private property owners.” Already, with the worse of COVID in the rearview mirror today, political thinking has already latched onto the bad flu season, the triple virus threat, etc. as a reason for continuing the moratoriums. What’s next…cold season moratorium on evictions?

The problem is that our elected officials fail to recognize that rental housing is a business that they, through their harmful, private property taking policies are forcing to all of us to go bankrupt by preventing housing providers from receiving the funds that renters have contractually agreed to pay. If a person falls behind with their car loan, does the County then require any car dealer to forgive the past payments owed? Not a chance! But isn’t transportation a basic need too? However, no one is discussing instituting a “car repossession moratorium.”  Food is also a basic need, yet no one is saying that grocery stores should not charge people for food they are consuming. 

Sadly, for us, although housing is being consumed by renters, they are receiving what is clearly a “free lunch” forced on property owners by local and state governments in the form of an eviction moratorium.  If the government does not want renters to have to pay their rent, then the government should step in and pay it for them via rent subsidies.  They already have existing voucher programs, and these existing programs should be expanded in the amount of subsidy offered and removal of the miles of red tape that limits availability of these programs.

This entire government created escapade merely punishes small multifamily housing owners and responsible renters that are timely paying the rent that they owe.  The eviction moratorium is no more than a local government created private welfare system being forced onto private property owners.  If the city or county wants to assist renters, then it is up to these governments to pay the rent that is legally owed on their behalf via government financed subsidies. Housing is a societal issue, and all of society needs to stand up and help their fellow man.