LA passed a ‘mansion tax.’ Would it work in SLO County?

Should the wealthy be on the hook for affordable housing?

Los Angeles voters said yes.

In November, they passed a “mansion tax” that charges a one-time transfer tax of 4% on property sales above $5 million and 5.5% on sales over $10 million. The tax is expected to generate between $600 million and $1.1 billion per year for affordable housing construction and homelessness prevention.

“Mansion tax” is a misnomer, since the tax also applies to commercial and multi-family residential properties.

But it was the idea of soaking rich homeowners that no doubt resonated with voters. They passed the measure by nearly 58%, in spite of major pushback from the real estate industry.

Officials expect it to be a game-changer in L.A., though according to the Los Angeles Times, the wealthy are trying to skirt the law by selling their property before it takes effect in April, or by splitting up their holdings so they stay under the $5 million mark.

Despite possible loopholes, it’s worth asking whether some form of “mansion tax” would work elsewhere in California, including here in San Luis Obispo County — the third least affordable housing market in the state?

SLO County isn’t exactly Beverly Hills, but it does have a significant number of luxury homes.

And it wouldn’t have to be a 4% tax on properties over $5 million. For instance, it could be 1% or 2% tax on properties over, say, $2.5 million.

It’s not the only solution — and it may not be the best — but it’s worth having a conversation because the housing affordability crisis isn’t letting up.

Here’s how bad it is: In the second quarter of 2022, only 12% of SLO County households could afford to buy a home at the state’s median price of $883,370.

Will the county Board of Supervisors consider a housing tax?

Some local cities, including San Luis Obispo, Arroyo Grande and Atascadero, already levy fees on new housing projects to help fund affordable housing.

The county had a similar program, but the conservative majority on the Board of Supervisors abandoned it six months ago.

The county’s inclusionary housing ordinance gave builders the option of either including some lower-cost homes in their developments or paying a fee to help finance projects by nonprofit builders.

Critics called it a tax and argued that taxes should only be applied to things we want to discourage, like cigarettes. If we want more houses, they reasoned, we should not be taxing them.

Never mind that houses under 2,200 square were automatically exempt, which meant the vast majority of homes weren’t assessed a fee.

At the time of the repeal, there was vague talk about finding other sources of funding for housing. But six months later, there’s been little to no discussion of that, at least at the board level.

That could change, now that the board has a liberal majority.

“That is among the things that I look forward to next year,” outgoing Board Chairman Bruce Gibson said in an interview. “All options are on the table.”

A tax on sprawling, high-end homes deserves a look. Also consider taxing second homes that sit empty.

Reviving the inclusionary housing program should be on the table.

And while it would be a hard sell, putting a bond measure on the ballot that would tax all property owners is worth examining too.

That idea has come up before; the county did some public opinion polling on an affordable housing bond measure in March 2020, and the response was fairly positive. Two weeks later, though, the COVID shelter-in-place order was issued, and the idea was put on hold.

The amount under consideration then was reasonable: $3.85 per $100,000 in assessed value. For a $500,000 home, that amounted to $19.25.

Keep in mind, the objective isn’t so much to raise a mountain of money, but rather to generate a steady stream of matching funds that nonprofit builders can leverage to obtain grants and loans.

If government won’t act, citizens should

While government agencies generally put tax measures on the ballot, that doesn’t have to be the case.

Citizens can collect signatures to qualify a measure for the ballot, which is exactly what happened with the Los Angeles mansion tax.

“It was an urgent, impatient response to leadership failures, and it dovetails with a progressive shift in city politics,” L.A. Times columnist Steve Lopez wrote. “The old guard is now threatened by those tired of waiting for change in a city of deep socioeconomic divides.”

Another thing: When a tax measure lands on the ballot through the citizen initiative process, the bar for passage is lower. Normally, a tax dedicated to a special purpose — such as roads or parks or public safety — requires a two-thirds supermajority vote.

But when citizens place it on the ballot, courts have upheld that it needs only a simple majority to pass.

We aren’t advocating for citizens to start circulating petitions for a mansion tax — or any other sort of tax.

But local officials need to do more than pay lip service to the need to “do something,” especially at the county level.

County supervisors cannot let another six months go by without taking concrete steps to secure an ongoing funding source for affordable housing and, ideally, for homeless services.

Maybe if we get another revenue stream, we can more widely explore creative solutions like the Cabins for Change transitional housing project that’s about to open in Grover Beach.

Every local city should have one of these facilities.

If the board continues to delay, local citizens would be well advised to follow the example set in Los Angeles.

Let the old guard know it’s time for a change.