CA Council of Infill Builders’ Mott Smith on the Imperative Need for Measure ULA Reform

Mott, as former editor of The Planning Report, it's a delight to have an opportunity to interview you about a subject you know well. From your vantage point as a both an advocate for infill housing and a practitioner, how has Measure ULA—originally sold as a tool to fund affordable housing and homelessness prevention—affected the economics of residential development in LA, especially multi-family housing?

It's a great question. Measure ULA, while well-intentioned, has thrown a wet blanket over new development in Los Angeles–commercial/industrial projects and multifamily housing, alike.

LA has long been known as a challenging place to build. Projects here have only worked at the highest price points or with major subsidies. But Measure ULA has exacerbated this, cutting conventional projects’ profitability by about half and driving even more capital sources out of LA.

I believe ULA’s drafters are smart people committed to funding vital housing and homelessness prevention programs. But they didn’t do enough to understand how conventional development works. The result is a series of unintended consequences that Mike Manville and I, and Shane Philips and Jason Ward describe in detail in our respective UCLA Lewis Center papers: a 30-50% drop in high-value sales, a significant reduction in affordable and market rate housing production, and a concerning slowdown of property tax growth in LA. 

Now, I’m not here to argue against the goals of Measure ULA–they’re good! I’m just trying to highlight that it badly needs reform.

ULA proponents called it a “mansion tax” and purported that the measure would only impact high-end property sales. In practice, what's been the effect?

Let me say that in general, I think transfer taxes are a pretty cool idea. In a Prop 13 world where public revenue growth depends on sales and development, it would be nice if we could also capture some of the value from long-held, underinvested properties when they sell. There are a lot of those. And transfer taxes can help do that, in theory.

But ULA turned out to be less a tax on unearned wealth and more a tax on progress. It’s got provisions that voters likely didn’t fully discern from its 29 pages of dense legalese, that are hurting housing, job and public revenue growth. 

Also, contrary to its “mansion tax” branding, about 40% of the properties taxed under ULA aren’t luxury homes at all. They’re apartment buildings, retail centers, offices, industrial buildings, sound stages–the backbone of our city’s economic and housing infrastructure. 

If ULA only impacted luxury homes, that would be one thing. But people weren’t expecting it to treat a 50-unit apartment building in South LA the same as a Bel Air mega-mansion.  And that’s exactly what it’s doing–much to the detriment of our housing and economic goals.

It’s like the old tuna nets that caught dolphins along with the fish. We want to catch the tuna, we don’t want to catch the dolphins. 

How has Measure ULA altered land valuation and underwriting assumptions for developers trying to pencil residential projects in LA?

 The TLDR [Too Long; Didn’t Read]— it's basically crushed underwriting.

ULA hits both ends of the deal. It lowers what developers can pay for sites, so fewer acquisitions happen up front. Then it lowers what you can sell a finished project for, so fewer deals pencil out at the back end.

ULA’s backers assumed developers wouldn’t care about a transfer tax since many hold projects for years. But that’s not how conventional development actually works.

Most deals of a certain scale are underwritten to sell once, twice, or even three times in the first 15 years. Each of those sales gets taxed by ULA. Even for long-term holds, banks and investors still underwrite as if the property will sell. So there’s currently no escape from the way ULA drags down project feasibility.

And this makes it harder to acquire sites in the first place. Say you’re planning a $10 million multifamily project in Echo Park. You’d have to factor in a $550,000 ULA tax on the eventual sale on the back-end. That 5.5% tax at exit might seem modest, but $550,000 is no joke, and it could represent 30% or more of the initial site cost. Will a seller slash their price by 30% to make your deal pencil? Why would they?

Some ULA supporters argue the market will eventually “adjust” to the tax—that if developers can’t pay as much, land prices will fall. But that fundamentally misunderstands who’s actually buying properties. Roughly 90–95% of commercial and multifamily buyers in LA are owner-operators and investors, not developers. These buyers don’t have to price-in ULA the way developers do. That means developers will continue to get outbid by owner-operators and others, and the share of buyers who are developers will continue to shrink. 

We’re already seeing this play out. Building permits in LA fell 57% in Q1 2025 compared to the same period last year, according to Hilgard Analytics. That’s huge. And the trend likely won’t reverse until ULA is fixed.

The goal of Henry George’s notion  of value capture was to tame—as he would put it—“the hungry dogs” of land value speculation. Has ULA tamed the “hungry dogs?”

I love Henry George. But no, ULA hasn’t “tamed the hungry dogs”—it’s just crushed the market. It sadly follows the same logic as tariffs: make things expensive for a small group of people, hopefully raise money, and cross your fingers that nothing else important changes.

But just like tariffs, Measure ULA has changed important things in a big way. Most importantly, it changed the character of the market by ossifying it.  And while it does successfully pull some money from a small subset of sellers who have to transact at all costs, the end result is actually fewer sales–and less jobs, less affordable housing, and frankly, steeper demands on our social safety net.

As a founder and leader in the Council of Infill Builders and outspoken on the need for predictable, transparent development rules of Los Angeles, how does ULA fit into—or disrupt—efforts to create a coherent & practical framework for greater housing production in the city?

 ULA doesn’t speak to transparency, predictability, or efficiency in development. ULA just showed up alongside a broken process and made the economics worse.

What reforms or clarifications of ULA would you advocate for to ensure LA remains a viable environment for housing, innovation and more production?

People assume if you say ULA needs fixing, you’re just “anti-tax.” That’s not my position, nor is it the Council of Infill Builders’.

One of the smartest things the pro-ULA side did—whether by luck or design—was to get John Coupal of the Howard Jarvis group to write the “No on ULA” argument. I read that and thought, as I think a lot of people did, “Oh, it's just the same old anti-tax arguments again, I probably should vote for it!”

That kind of rush to polarization makes it too easy to dismiss good-faith critiques like we’re bringing. And it stifles the real conversation we need to be having about how to balance funding for critical needs with a functional economy. We need nuance.

People like me—and there are many of us—want ULA to succeed in funding low-income renters and the safety net while protecting our regional economic health at the same time.

To that end, there are a few simple reforms the Council of Infill Builders is calling for, all of which are covered in the recent UCLA studies.

Our top priority is a 15- to 20-year new construction waiver. If you build a new soundstage, renovate an office, or develop a multifamily project—like a 100-unit apartment complex in Koreatown—you should be able to sell it within 15–20 years without the ULA tax. This would broadly restore project feasibility and revive construction activity we’ve lost, creating much needed jobs and housing.

Critically, this wouldn’t significantly reduce ULA’s revenue. UCLA’s Shane Philips’ and Jason Ward of RAND found that only 5% of ULA-taxable deals in the past two years were commercial/industrial properties less than 15 years old. Only 8% were similarly-aged multifamily. So, we can protect almost all of ULA’s funds for homelessness prevention and affordable housing while restoring the feasibility of development.

We’d also need to address ULA’s arcane but problematic subordination and resale provisions, which have turned out to be incompatible with most conventional debt. So far, only one of the nine projects with a ULA award has managed to finalize its funding docs with the City. And this issue has exacerbated the City’s struggle to move ULA funds out the door. 

Of the $650 million raised so far, only $69 million has actually been spent—and only about 1% of that has gone to new construction. Despite some claims to the contrary that have turned out to be premature, very few of the high quality construction jobs people were expecting have been created. (More ULA money has been committed to projects; it just hasn’t moved yet.)

The LA Housing Department is working with Fannie Mae and Freddie Mac to find a solution to the subordination and resale problem, but since ULA was drafted to be legally bulletproof, the options at the City level are quite limited. We probably need state legislation to introduce some flexibility so the money can be put to more productive use, creating the affordable housing and quality jobs we all want to see. 

Speaking more broadly, how should LA address the “process” challenges of building more affordable housing that you alluded to earlier? 

There is a belief in our bureaucracy that our fundamental problem is a staffing shortage.

I'm here to say that’s not entirely accurate.  We could always use more great people at City Hall. But we also need to take a good, hard look at our building rules. Some are just bureaucratic busywork. Others create serious internal conflicts that require intervention at the highest levels to resolve—often with very little value added as a result.  And, again, staffing isn’t the problem. 

The classic example is, LADWP tells you to put a transformer pad in front of your building, right where Urban Forestry says you can't remove any trees. So what do you do?  Fight LADWP or fight Urban Forestry? No increase to the Planning Department or Building Department staff will help resolve that conflict. 

We need to fix the rules where we can and, in the meantime, radically remake our culture. We have to stop treating deviations from mutually incompatible rules as failures and instead start celebrating creative solutions as successes. And this is fundamentally a leadership thing. It starts at the top. 

New York talks about being a “City of Yes.” We desperately need that culture here, too. If we can successfully make it so our staffers are more worried about getting in trouble for saying “no” to projects that might create housing and jobs than they are about saying “yes” to ones that could create traffic and parking problems, we will be lightyears ahead. I would love to see a leader in Los Angeles—a coalition in Los Angeles—who gets that. 

Well said, Mott, but ought not local policy makers be equally concerned about crippling traffic congestion and too little parking? 

Well sure, but you're not going to manage them by micromanaging what developers do on their sites. Instead, we need to do real planning of the public realm and management of our public resources, including our streets and sidewalks, transit systems and parking facilities, ala the late, great Don Shoup. 

“Planning” has to be much more than just a pretext for negotiating public goods from private developers, even though that pretty much describes how we do it in LA. We don't really plan our public realm and infrastructure in a meaningful way anymore. Instead, we create a wish list that we hope the next developer who shows up can magically pay for. And that delivers exactly the results we’re living with.

Taking a step backward, who in Los Angeles is the current steward of the built environment?

The real answer is nobody. Nobody is the real steward, and everybody punts to everybody else. It's like watching a terrible hacky sack game from 1995.    

You mentioned how brilliant ULA’s proponents were in securing Jarvis’ Coupal to write the argument against it. Who would you like to be the signer of a ULA reform measure?

I think Assemblymember Buffy Wicks sees the bigger picture. She’s worried about transfer taxes being adopted all over the state with zero analysis—and what that would mean for housing and public finance.

Measure ULA has shifted the fiscal balance in LA County, and it didn’t have to. It’s suppressing property tax growth that would have benefited schools and the county safety net—and channeling money into a hard-to-spend special fund at the City. Her AB 698 would require these things be studied and hopefully optimized before new taxes are implemented.

We’d also like to see AB 698 amended to include some of the fixes I’ve outlined. That would help turn ULA into a reliable generator of funds for low-income renters that also supports a functional economy.

Buffy Wicks is bold, and I’d love to see a Southern California legislator step up alongside her and say, “We can fix this–we must fix it.” Because the truth is, if we don’t make these reforms soon, the case for full repeal will eventually become irresistible. 

Well, we can't conclude this interview without asking the budgetary question. With the city's current budgetary constraints, how likely and/or imperative is repeal or reform of Measure ULA?

I think it's essential. Just consider the projects that have been lost to measure ULA. UCLA estimates that about 1,900 or so units per year–including nearly 180 affordable apartments–are not being built because of the economic damage that Measure ULA has wrought. Those projects are worth approximately $50 million a year in City fees we’re not getting, and they account for about half of our lost property tax growth.  With the city’s budget in crisis, it’s reckless to forgo that revenue. 

This will be an important test for our leaders.  Can they stand up to protect what’s essential about ULA—funding for housing and homelessness programs—while demanding fixes for what’s broken? Embracing reforms like the 15-20-year new construction waiver alongside “City of Yes” culture change is essential. No exaggeration: our region’s housing, jobs and fiscal future hang in the balance.