Two former Santa Monica mayors are at odds over housing development and taxes after one filed paperwork to alter a real estate tax implemented by the other. Former mayor of Santa Monica, Pam O’Connor, has filed a ballot measure with the city in an effort to amend Measure GS, (that was proposed and funded by former Mayor Sue Himmelrich) to exempt the sale of multifamily housing from the city’s new third tier transfer tax.
GS, known as a “mansion tax” was approved by voters in November of 2022. The measure imposes a $5,600 per $100,000 charge on real property sales or transfers exceeding $8 million. The generated revenue is used to support homelessness prevention, housing projects, and schools. However, a lawsuit was filed challenging the validity of Measure GS, arguing that it violated the “single-subject” rule in the California Constitution. The City prevailed in that case with a judge ruling the tax is consistent with the law and could be implemented.
O’Connor’s measure argues the tax is an impediment to new housing construction and seeks to exempt large apartment developments from the tax.
According to a press release issued by Englander Knabe & Allen, a strategic communications firm specializing in government affairs, political campaigns, reputation and crisis communications, “Instead of alleviating the housing crisis, Measure GS has actually undercut the production of much-needed multifamily housing in the City and threatens the financial feasibility of such new development projects. The City is both losing out on unbuilt multifamily housing units as well as the anticipated funding from Measure GS.”
The press release doesn’t provide examples of lost housing in Santa Monica but does cite a UCLA Lewis Center for Regional Policy Studies report, that says a similar tax in Los Angeles would generate little additional revenue but would reduce housing production.
The Los Angeles tax was predicted to bring in $672 million a year. Instead, it brought in $173 million in its first year, just 25% of its own estimate. According to the LA Times and The Real Deal, the measure has raised money for housing projects but it has also chilled the housing market. Measure GS is estimated to raise about $50 million per year and has generated about $17 million so far.
“Sometimes, initiative measures have unintended consequences that must be fixed,” said O’Connor in the same press release. “Not only will this amendment allow us to meet our State-mandated housing requirements, it will help keep rents lower and prevent displacement.”
O’Connor served on the Santa Monica City Council for 24 years, including five terms as mayor before leaving in 2018. Himmelrich (who was mayor in 2022) is not supportive of this amendment, noting that GS already exempts affordable housing projects from the transfer tax.
“GS was endorsed by Santa Monicans for Renters Rights, the Santa Monica Democratic Club, the Los Angeles County Democratic Party, Santa Monica Forward and numerous others. Developers, landlords and their allies spent more than $500,000 in opposition to GS, but they lost at the polls. They then sued to invalidate GS, but they lost in court,” Himmelrich told the Daily Press.
“This is just their latest desperate effort to undo GS, but this too will fail. Santa Monica voters will not be fooled into signing these petitions which seek to take money from our schools, and from rental assistance and affordable housing programs, in order to further enrich greedy developers and landlords,” Himmelrich said.
“At a time when the State has upzoned our City without requiring any additional affordable housing, developers certainly can afford to and should pay the GS tax if and when they sell their projects for $8 million or more. And landlords likewise can and should pay the GS tax when they sell their buildings for $8 million or more, at which point they are no longer the landlord and cannot raise the rents. The recycled scare tactics being pedaled by disgraced former Mayor Pam O’Connor — who unlawfully pressured the then City Manager to fire Santa Monica resident Elizabeth Riel because of her political views, in violation of the First Amendment — will not fool Santa Monica’s voters.”
The City of Santa Monica states that in order to qualify a measure for placement on the ballot, proponents must obtain signatures from 10% of the estimated 68,952 registered voters in the City.