The Truth about ULA and its impact on real estate and revenues

THE SELF STORAGE REPORT — EPISODE TRANSCRIPT Episode: The Truth about ULA and its impact on real estate and revenues Guest: Mott Smith — co-owner, Amped Kitchens; adjunct professor of real estate development, USC; co-author, UCLA Lewis Center "unintended consequences of Measure ULA" study Host: Chris Berg — Abernathey Development Recorded: May 6, 2025 Video: https://www.youtube.com/watch?v=tz9zonlg-RU Key topics: Measure ULA's 5.5% transfer tax on LA sales above $5 million; UCLA Lewis Center study co-written with Mike Manville; $320 million in FY2025 revenue versus the $600 million-$1.1 billion promised to voters; 30-50% of the drop in LA transaction volume attributed to ULA; Commonwealth Land and Title data on every LA transaction 2020-2024; difference-in-differences regression; $912,000 of $69 million actually spent on affordable housing construction; 9 funded projects totaling 795 units; Measure ULA lending rules incompatible with Fannie and Freddie; the 8% statutory floor on admin and overhead; Shane Phillips and Jason Ward's estimate of ~1,900 lost market-rate units and 180 affordable units a year; $25 million a year in suppressed property tax growth compounding to $250 million; Santa Monica's parallel transfer tax; Buffy Wicks' AB 698; Infill Builders' proposed 15-20 year new construction exemption costing 13% of revenues; Henry George, Progress and Poverty, and Donald Shoup; Nithya Raman's architect self-certification motion and San Diego's Elyse Lowe Note: Speaker attribution reconstructed from raw captions. Light cleanup of transcription errors only; wording preserved. Timestamps and YouTube chapter markers removed. Turns marked [attribution inferred] could not be attributed with certainty. ————————————————————————————— Chris Berg: Welcome to the Commercial Real Estate Report. A report from UCLA recently released in regards to the unintended consequences of Measure ULA, otherwise known as the mansion tax. Good marketing branding there. Um, the co-author of that study is joining us today. He's also an adjunct professor of real estate development at USC, plus the co-owner of a business called Amped Kitchens, Mott Smith. Mott, welcome to the show. It's great to have you. Mott Smith: Great to be here, Chris. Chris Berg: Let's jump right in. And so I'd like for you to share with us, um, I'm presuming most people understand what the ULA is. So based on your study, what's the single most important thing you think our audience should know from that study? Mott Smith: Um, the most important thing is that this is not really primarily a mansion tax. Uh, it was sold to voters as a way of generating money to support low-income renters, a very worthy cause, by taxing very high-end sales of single family residential property, which, you know, would affect a tiny share of the population and a share of the population that a lot of people don't have a ton of sympathy for. So it kind of seemed like a magic combination. And, um, it was a 29-page law that was boiled down to 3 bullet points in a marketing slogan and was sold very effectively on that basis. And the reality is that it's not just affecting high net worth individuals. It is a tax on multifamily housing. It's a tax on sound stages. It's a tax on vacant office buildings that we're trying to reposition. And it's underperformed as a revenue generator. It's raised a good amount of money, but it's less than half per year what was sold to voters. And it's been hard to spend that money, which is something we can talk about a little bit later. But most importantly, it has had an absolutely devastating effect on an already teetering market for new development in Los Angeles. LA has for years not been seen as a great place to build if you're building apartments or commercial or industrial projects. And I would say that Measure ULA has been the final nail in that coffin. And it is the final thing that has driven a lot of capital flight from the city at a time where we need investment instead. Chris Berg: Now, a couple things just to be fair and also maybe to play devil's advocate a bit. I know that Mayor Bass, at least within her State of the City, there's some conversation now where she's trying to at least change it, maybe even nullify it. Any, you know, veracity to that, and where do you see that going? Mott Smith: Um, you know, I think the most important thing that we need to see from the mayor and others in the city right now is an acknowledgment that there is a problem with Measure ULA. And I think in private people are acknowledging it. Uh, I've talked to staff at the city who understand that it's really creating tons of problems, both on the market impact side, and it's got structural challenges to the use of the funds that it's generating. Um, people are willing to say that in private, but it is a very touchy political conversation because the backers of ULA are very, very influential. And so people, um, or I should say, one, they're influential, and two, they're sort of conflating efforts like ours to reform Measure ULA and help it work with efforts to fully repeal the measure and kind of eviscerate the program. And there are plenty of people out there who want to do the latter. We want to do the former. And we're hoping that others in the city who would like to keep the mansion tax and just have it work will start to say publicly what they're saying privately. Chris Berg: Let's get into some of the revenue. You talked about how it's not hitting revenue expectations. I think it was projected to do $600 million to $1.1 billion annually. Is that a pretty fair assessment? Mott Smith: That's correct. Yeah, that's what was sold. That's right. Chris Berg: Um, so this is the website from LA City Gov. I just want to go through some numbers here, just again to sort of be fair, play devil's advocate. So first year clearly didn't generate a lot of revenue, but you can see as I go through the years here, um, it's starting to tick up, right? You go from a little under $300 [million] to over. I say this in the context of, many people said part of what the lag might be is because there were so many deals done before it actually went into effect. Mott Smith: Sure. Chris Berg: So any veracity to that, and do you say, okay, well, we had this mountain of deals done before it went into effect, now things maybe are starting to catch up, people are starting to just get used to it, and maybe it'll actually hit the revenue projections? Mott Smith: Yeah. Um, so our study — and we looked at this very question — the study that I co-wrote with Mike Manville from UCLA and published by the UCLA Lewis Center. Um, we wanted to tease out what Measure ULA was doing to property transactions in the city of LA. And it is those property transactions that are driving the revenues that you just showed on that graph, Chris. Um, it is true that revenues are accelerating, but as you can see, even in fiscal year 2025, it's still just $320 million, which is less than half of the lowest end estimate of what Measure ULA might generate. And so even though that's better than $15 million or $20 million or whatever it is, it's still less than half of what was projected. And so I don't see a world in which an unreformed Measure ULA does much better than this. Chris Berg: Um, you talk a little bit about, we're having a challenge just even to deploy the capital that is being raised. You put out a tweet — uh, I'll share this with everybody here. I think this was just a couple days ago. So, one is I want you to address, um, where is the capital being allocated to? And then just yesterday I had lunch with a gentleman in construction, multifamily, and the thing that really jumped out to him that I wasn't aware of, he goes, "Man, $6 million in admin and overhead — like, is that a fair number here, or is there something going on here that we should be aware of?" Mott Smith: Yeah. So, uh, now I want to be clear that this is not a table showing how much money from ULA has been allocated or encumbered under contract. That's a much bigger number. This is a table showing the actual dollars out the door, dollars that have been spent. And so, to be fair, um, you know, for example, this first line here, um, affordable housing construction, $912,000 out of $69 million. That's about 1% of the total that has gone out the door has gone to new construction. And what somebody who works for the city might say is that, well, we've committed about $55 million to new construction, which is true. Um, there are 9 projects representing 795 units of housing that have received awards of Measure ULA money. It's an average of less than 10% of the project costs for each of them. That's Measure ULA. The ones that are actually under construction were all funded primarily by, uh, Prop H — sorry, Measure HHH — and have actually been under construction since 2022, and Measure ULA is just set to fund cost overruns. So it's just there as sort of like a little topper. Um, and until those projects run out of the rest of the money, they're not going to tap the Measure ULA money. That's a fair retort to this. What isn't adequately discussed is that even among those projects — and most of the others on that list of 9 — is, um, the Measure ULA lending rules are written so prescriptively and incompatibly with industry standards. So, like, basically they don't play well with Fannie and Freddie. So if you are trying to build a project right now and you get Measure ULA money, it is currently impossible for you to structure that in conjunction with a standard permanent loan from a traditional funding source. And a couple of funding sources have kind of worked this out through, you know, by hook or by crook. Um, I think 2 projects have actually closed their transaction documents with the city, but the rest — the city's furiously trying to work and figure this out with Fannie and Freddie and some of the others, and maybe there's going to be a solution. I hope there's a solution, but there might not be. And so that's one big issue. The vast majority of the funds — Mott Smith [attribution inferred]: Oh, yeah. Yeah. Chris Berg: Sorry. So just so I'm understanding this correctly, because, you know, how often we see intentions from the government and yet, like your report suggests, unintended consequences. So what you're telling me is that, hey Chris, we wanted to allocate this money, but we can't even really deploy now because it doesn't line up with Fannie and Freddie, so it just sort of sits in this account and doesn't really do much. Is that a fair assessment? Mott Smith: Yeah. I mean, I would say that the money hasn't been called on by the projects. So there's, before they actually wrote it — Chris Berg: Nobody thought about that before they wrote it and put it together. Mott Smith: Yeah. I don't want to speak on behalf of the people that wrote it, but from what I've heard, there was a rush to get this out the door during an open window of voter policy. Um, and there weren't, as far as I know, too many banks who sat in on the drafting of this. And there certainly weren't any commercial developers who sat in on the drafting of this or were invited to sit in. And what we have is a 29-page law that has a lot of issues that should be fixed. Chris Berg: And I just want to bring this up to provide some context for people, that here we are putting forth, um, this ULA, bringing it to the voters, and now because of these unintended consequences that you discussed — I don't know if this is in your report, but these are some things that are coming about from, uh, The Real Deal in different places. You know, $25 million less in tax revenue. Then you've got 57% plunge in LA construction, in large part due to ULA. And of course, as we all know, the housing crunch, then with the fires on top of that, LA multifamily permitting falls 18%. I mean, these are major consequences, as your report suggests. And I guess I just get frustrated, because again, I know maybe there were good intentions, but gosh, then the impact — this impacts so many people that no one really thought about or talks about. Mott Smith: Very well said. Very well said. You know, one thing I'd love to show, if you could pull it up, on our unintended consequences report — the charts that show what Measure ULA has done to transactions. Chris Berg: And, um, yeah, what page is that on, by chance? Mott Smith: I think it's going to be coming right up. Um, keep going there a little bit more. A little bit more. Okay. Chris Berg: If I cruise by too fast, just holler and I'll go back. Mott Smith [attribution inferred]: But, um, we're good. There you go. Uh, so scroll up a little bit if you would. One. Okay. Right there. Perfect. Mott Smith: Okay. So what we're looking at here, especially those top 2 charts — this is the fundamental thing that our study did. Um, you know, when Measure ULA came out there were a lot of people saying, guys, it's going to really mess up the real estate market. And then other people were saying, don't worry, the real estate market's going to adjust to it like it adjusts to everything else. The truth is that the real estate market doesn't adjust to everything else. But that said, um, we finally got data. Um, Commonwealth Land and Title Insurance Company kindly provided us with every transaction in Los Angeles from the year 2020 through the end of 2024. And this enabled us to do what's known as a difference-in-differences regression analysis. And, um, you know, one of the other things you'll hear is that, you know, real estate transactions have fallen everywhere since, you know, since 2020 or 2021, and that is true. But the question we wanted to tease out, the answer we wanted to tease out, is how much of that was because of Measure ULA versus all the other macroeconomic factors like interest rates and construction costs, et cetera. So that's exactly what our data show. So if you look at that top left graph, that is the volume of real estate transactions below the threshold where Measure ULA kicks in. Measure ULA kicks in to properties that are $5 million and up. And that number changes with the consumer price index annually, but let's just call it $5 million for the sake of conversation. And so what you'll see is that over time, you know, starting from 2020, transaction volume went up, peaked somewhere in 2021, and fell back down, and then, uh, you know, bumped along. And what's interesting is, if you were to graph an index of interest rates, you would see that it is the exact inverse of that chart that we're looking at on the left. So what we're seeing is, this is how the market responds to changes in interest rates. And the left axis there, which is sort of that teal color, that's the transaction volume inside the city of Los Angeles. The right axis and the black line, that is the transaction volume outside the city, but still in the county. And so what this graph shows us is, one, the market responds to interest rates. Okay, we knew that. It also shows us that the city and the county are basically the same market. They follow exactly the same pattern. And so when we use regression — again, this difference-in-differences regression analysis — to assess how much of the change in the city of Los Angeles is due to Measure ULA, you can see visually what that looks like by looking at the right hand chart. So still, the left side is city of Los Angeles, the teal line. The right side is county of LA with the black line. And if you just sort of squint, you can see that the black line on the left and the black line on the right are very much the same shape. So on the left, it's transactions below the ULA threshold of $5 million. On the right, it's transactions above $5 million. But you can see that the LA city curve diverges wildly. So Measure ULA passes in Q3 of 2022, and you could see that there's a spike in transactions in Los Angeles. That's everybody going, "Oh boy, we better get our properties out the door." So that's what happened. And then it drops. And so we wanted to figure out, again statistically, what is the amount of the drop in Los Angeles that's attributable specifically to Measure ULA as opposed to everything else. And, um, we excluded that peak before and we excluded the valley after, because we felt that those were probably anomalous time periods and we wanted to look at what the persistent change was. And the most conservative estimates we have show 30 to 50% of the drop in volume in Los Angeles — 30 to 50 percentage points — are attributable to Measure ULA. And that's specifically above $5 million. Um, we've got charts further down which, you know, I could just describe quickly, for multifamily, for commercial, for single family, and the pattern repeats itself. The data are a little noisier just because there aren't as many transactions in those specific categories, but it's basically all the same. One thing that's interesting is, we believe — and this is not something we covered in our report, but it's something I can comment on — that what we're seeing to a certain extent is the difference between consumer real estate and investor real estate. And, uh, you know, consumer real estate being single family homes — like, people do buy them as investments, but people buy them largely to live in. Um, I think there's a greater likelihood that those will recover substantially to some extent. Whereas the investor real estate — apartment buildings, commercial structures, industrial buildings — are unlikely to recover in the current environment, just because Measure ULA absolutely tanks the returns of them. And I want to say one more — I know your audience is sophisticated and they probably get this, but I just want to say it for all the normies out there — that, you know, Measure ULA taxes properties above $5 million at 5.5%. It's a sales tax of 5.5%. And people might say, well, 5.5%, I mean, sure, it's not small, but it's not very big. You know, what people don't realize is that 5.5% can be half of the profit of a new development project. And if I've got $50 million to invest or I've got $10 million to invest, am I going to do it in a city that's going to take half my profits, or am I going to do it somewhere that's a little bit more friendly to development and I get to keep most of my money, because I'm already paying taxes, I'm already paying capital gains, I'm already paying all these other things? And so, um, if people are wondering why there's been capital flight from Los Angeles, this is it. Chris Berg: You know, it's great to see the numbers. I think it's also really — like, I come from a sales background where facts tell and stories sell. If you don't mind, I'd love to hear just some anecdotes and some stories that you're hearing from, whether it be investors, brokers, just — Mott Smith: Sure. Chris Berg: — things that jump out to you. Think it would be important for people to know? Mott Smith: Yeah. Well, I mean, we are working with a coalition of people who are trying to reform Measure ULA, um, who are made up largely of multifamily and commercial builders in Los Angeles. We've got one member — actually one of the leaders in our coalition — has probably 7 or 8 projects in LA and actually Santa Monica, which passed a very similar transfer tax at about the same time we passed ours in LA, that — he owns the land, the financing is there, he's got the permits, and he's not building because it doesn't make sense to. He can't make the deals work, because his business model, as many builders' business models are, is to build the project, get it leased up, and then sell it to an investor that's sort of lined up ready to take it over. And with the transaction cost at the end, it no longer makes sense. It's better to keep sitting on that property and hope that the economics will shift at some point. Right now there are many, many projects throughout the city — again, LA and Santa Monica — that are just sitting there that could be under construction today but for the Measure ULA tax. Chris Berg: Um, let's talk about — one, if you can share some of the conversations, you don't have to name names, what you're hearing from people in the city specifically. And then secondly, you know, if you watch the State of the City, not so much this year, but definitely last year, a little bit this year — but, you know, big conversation right now is, hey, 2026, we got the World Cup, '27's the Super Bowl, '28's the Olympics. How do you see this impacting, you know, the future of LA as we prepare for the world stage? Mott Smith: Yeah, it's a great question. Well, um, one of the consequences of the reduced transaction volume that we showed — well, let me back up and say this. I find those graphs powerful where you see that spike and then you see the persistent drop. Um, a lot of people might say, well, what — if you scroll up, that's the main one. Yeah, there you go. Actually, yeah, right there. That one on top. A lot of people might say, well, okay, fine, so some real estate agents aren't going to make their commissions, what's the big deal? And the big deal of this is that every new development, almost every new development, starts with one of those acquisitions on that teal line on the right. And so this means that if half those transactions are gone, we can guess that a significant number of those developments are going to be gone as well. Every transaction, every development either ends, or at least is underwritten to end, with one of those teal transactions on the right side there. And so if those things are cut off, that means it's another reason to believe that development is going to stall. Um, we see that intuition backed up in the permitting numbers and the construction numbers that you showed before. Um, so this is real and this is happening. What that means is millions and millions of dollars per year in fees to the city that the city's not getting. Um, you know, rough estimates — the reduction in development that another UCLA study that our colleagues Shane Phillips from UCLA and Jason Ward from the RAND Corporation recently published, they're estimating that Measure ULA is costing the city of LA about 1,900, give or take, market rate units, or units in market rate projects I should say, per year, um, of which close to 180 would have been affordable because of density bonus. And those aren't happening. Um, the 180 units of affordable housing isn't getting built, and, you know, at a time when the city's trying to fund this stuff, you would think that they would want more of that. Very importantly as well — and this is a subtle point, again, for financially sophisticated audiences, they'll get this — um, we all know about the power of compounding. Um, you showed that headline from The Real Deal that Measure ULA is reducing property tax growth in the city by about $25 million a year. And that's because most property tax growth comes from sales and development. Um, and in fact, 40% of the property tax growth in Los Angeles comes from sales and development of properties worth $5 million and over. So it's a very small share of the properties. It's a giant share of our property tax growth. And so when you cut that in half, you are cutting the primary driver of property tax growth in half. And so you might say, well, $25 million, I mean, sure, it sounds like a lot of money, but really in the scheme of things, you know, a billion dollar budget, who cares? This is where those of us who understand the power of compounding can understand why this matters. Because $25 million of suppressed growth per year, after 10 years becomes $250 million a year of revenues you're not getting. And so relatively soon we can actually imagine a world in which the property tax growth crosses that curve with the ULA revenues, and we're actually losing more in property taxes than we're getting in ULA revenues. And that alone should concern us, especially in the context of all these deals that aren't happening, all this investment in our economy and jobs and housing that's not happening. That should concern us by itself. But it should really concern us that this is a situation of robbing Peter to pay Paul, where Peter is a kid on public assistance in LA County going to an LAUSD school in South Gate, um, and Paul is, you know, a nonprofit that's distributing relief to low-income renters in Los Angeles. Like, both worthy causes, but we need to fix this so we're not robbing Peter to pay Paul, is the long and short of it. Chris Berg: I mean, very well said. I just think there's so many — and that's the title of your report, unintended consequences — that we could be here all day. I do want to touch on 2 more things, just to respect your time, and we'd love to have you back. This has been an amazing conversation. I feel like there's a lot more for you and I to discuss. At one point we need to talk about Henry George, but that's for another day. Okay. Few things. Mott Smith: Believe it or not, this will be my second Henry George podcast question today. Chris Berg: Believe it or not? Come on. Mott Smith: I'm not joking. Chris Berg: Where did the first one come from? Mott Smith: I just did an interview with The Planning Report, and Henry George came up there as well. So, there you go. Chris Berg: Within the LA planning. Yeah. Yeah. So since you brought it up — and this could be some interesting news, if you don't mind — like, yes, for people that don't know Henry George, if you'll give us some context, and then what came up in regards to LA planning and Henry George. Mott Smith: Well, so it was a publication called The Planning Report, so not LA City Planning. But, uh, well, Henry George — he wrote a book called Progress and Poverty in the late 1800s. He was an economist and a journalist and a brilliant, brilliant person. And the one-liner in Henry George is, we need land value taxes. Um, because his whole thing was that our tax policy reaps what it sows, and when we tax productivity, we get less productivity, and we actually empower people who are kind of, you know, land owners to just get more and more value by charging higher and higher rents. And we suppress productivity and we enrich the incumbents, and that's not good for progress. And if we want progress, we should actually tax people who don't use their stuff, who don't deploy their capital to the benefit of everybody. And we should free people who are going to be productive to do what they're going to do with as few limitations as possible. And, you know, it's funny, because he was kind of a leftist, um, because he believed that we should be helping poor people and we should have policies that help poor people, but he also believed that we should be helping everybody, and that we should be having a vibrant society that just kind of works and provides a pathway up. And, uh, I'm an avowed Georgist. I would say, um, a lot of people out there — the most consequential planning professor in the last century, Donald Shoup from UCLA, created many convert Georgists during his professorship over there. Chris Berg: And yeah, he's very popular, very popular thinker right now. We need to have this conversation more in depth. Just for our audience, for people that aren't aware — I mean, there were a lot of people back in Congress in the early 1900s that were taking on a Henry George type approach to land, if you really start to understand his thesis. Um, I'm not saying it's going to eradicate, but could greatly mitigate homelessness across the country. Um, as I talked about with ULA at one point, I tweeted out, Mott said, hey, anytime you want less of something, tax it, right? So you just talked about now we're taxing productivity, we obviously have less of that. And there's a whole conversation to go there, but I just think it's really fascinating that you, um, are about George, and also are having these kind of conversations. And very powerful people out there, if you're not familiar with him — uh, Peter Thiel starting to talk about Henry George. So it's coming up, it's coming up, and I think it's a good conversation for us to have in the future. So, um, 2 things that are left, and gosh, thank you for — this is this tweet that you put out. And my buddy, again, construction multifamily — I don't think we fully addressed this admin cost of $6 million. I think it was like 10%, if I remember correctly, the whole budget was — I was going through some information, but it's about 18% of the total budget is going to admin and overhead. So to my buddy, he was like, "What is happening? $6 million bucks to run the —" Like, is that a fair number, or is this an exorbitant amount for admin costs? Mott Smith: I don't have a good sense of it. I suspect — and I want to be very clear that this is complete speculation on my part — that some of what may be happening is, well, first of all, Measure ULA requires that no less than 8% be spent on overhead and administration. That's written into the law. Uh, I think that other measures that have approved money for affordable housing and that sort of thing, um, are often associated with bond issues. And as a feature of the laws around bonds, you can't spend bond money on operating costs, you have to spend them on capital. And so I wonder — and this is really a question — if Measure ULA has come in a little to help supplement some of the bond programs that might not be able to spend their own money on admin and overhead. I suspect that might be something that's going on. Um, I'll also say that there's probably some inefficiency in there. There's probably, um, you know, again, as I said, it's a 29-page law. Uh, you know, Proposition 13 was like one paragraph. And, you know, I mean, it's a lot to administer. Chris Berg: Just the premise alone that we're going to put a floor on admin costs — just like, hey, why don't we focus on how can we do this as efficiently as possible, rather than saying that an absolute minimum has to be spent. Again, I don't understand it, but I didn't write it. Um, let's talk about the conversations that you or others within your group are having with the city, and what do you see, or what are some solutions, and how long until we actually get some changes to the situation? Mott Smith: Yeah. Um, again, people are saying privately — there's very little disagreement about this in the private conversations in the city. And so the trick right now is getting people to feel safe enough to make these — I should say safe enough, or frankly brave enough, courageous enough — to say these things publicly. Um, because it's not until we are able to talk about this openly that we're actually going to get the change we need to see. And people shouldn't be afraid to speak to that. Chris Berg: So let's talk about some suggestions. Should the real estate community come together and build a coalition and start showing up at city council meetings, emailing city council people, the mayor — like, what are some of your ideas here to help them understand the voices across the community that say, "Hey, this isn't working"? Mott Smith: Yeah, 100%. Well, so Assembly Member Buffy Wicks, uh, who's from Northern California, from Alameda County, uh, she's got, I think, 4 or 5 jurisdictions in her district that have transfer taxes. Now, um, San Francisco has also a very steep transfer tax, and she is fundamentally a housing advocate, and she wants to see the state solve its housing crisis. And she understands, from what I can see, that that's not going to happen when more and more places start adopting these deal-killing and market-killing transfer taxes. And so she's got a bill on the floor right now called AB 698, and, um, it requires a study before a transfer tax is approved, which is the most common sense thing you can imagine. Because, you know, Measure ULA — it looks like it was studied, but it really wasn't. Really wasn't. The first rough draft was given to voters and we said yes because we liked the slogan, and that can't happen again. And so AB 698 seeks to address that. Now, there is a large and growing coalition of real estate people, and frankly affordable housing people and foundations and nonprofits and even labor groups, who realize that we got sold a bill of goods, if I'm being honest, with Measure ULA. Who would — I think some people in this coalition would love to see Measure ULA repealed completely and would like to never see a transfer tax again. Other people — and I'll say that this is the official position of my organization, the Infill Builders — we would like to see it reformed, because it's good to help low-income renters. I mean, that's something that we desperately need, but we need to do that in a way that doesn't kill the market and actually leave us worse off than we were before the tax. And so there are a few simple things that we're recommending, that we're calling for, that we'd love to see, that we think would make Measure ULA and other transfer taxes like it work a lot better. One is there's got to be an exemption for people who are investing in their properties. This goes back to the Henry George idea that we shouldn't be taxing the stuff that we want. And right now Measure ULA disproportionately taxes people who invest. And the perfect example of this is — people vastly overestimate the share of property buyers who are real estate developers. If you ask a person on the street, they'll say probably 80, 90% of them are real estate developers. The truth is it's probably more like 90, 95% are not real estate developers, even of developable commercial properties. Almost everybody out there in the market is buying because they're going to be a user, or they want to invest, or something like that. Literally almost everybody. And so when we make it hard for developers, we don't change the market so much as we tip the scales in favor of people who are not developers. And so, um, because of the impact that Measure ULA has to me as a developer, if I'm going to buy a car wash that's for sale, um, even if it's above $5 million, I now can pay even less than I could pay before Measure ULA, which might have been less than somebody who just wants to keep it as a car wash. And so, um, we believe that there should be a new construction exemption for 15 to 20 years. So if I'm going to invest in fixing up an old apartment building, or renovating a distribution center, or, um, you know, building housing or whatever it is, um, we should say for the next 15 to 20 years that property does not pay a ULA tax. Um, and for commercial industrial properties, the most that we believe that would reduce Measure ULA's revenues is just 5%. That's it. We could save the commercial industrial market for 5%. On the housing side, same, very similar situation. A 15 to 20 year look back for new construction would absolutely open up the market again, and that would cost 8% of Measure ULA's revenues. So for 13% of Measure ULA's revenues — and it's similar in other jurisdictions, I haven't done the math on them, but it's roughly similar — we would have a functional market and almost the same level of funding to these important programs that transfer taxes are paying for right now. And so that's what the Infill Builders are fundamentally calling for, in this growing coalition of real estate professionals. Um, you know, one other thing we'd love to see is have the tax become marginal, meaning that, you know, today if you have a $5 million property, you pay no tax. If you've got a $5,000,001 property, you pay $200,000. So that really messes with market behavior. We'd like to see it implemented much more like an income tax, where you only pay the higher tax on the amount over the threshold. But frankly, the new construction exemption would go a long way. Chris Berg: And on top of that, if you did get the new construction exemption, how much of that $25 million property tax would be recoverable? Mott Smith: That would — you know, I haven't done that math rigorously, but I believe at least half of that would probably come back in the form of increased property values because of the new construction. That's my guesstimate. Chris Berg: Man. Um, I thought this was going to be maybe a 10, 15 minute conversation. We went well beyond that. I've really enjoyed it. So I do want to give you a chance — anything else you want to add or share you think people should know that I haven't asked yet? Mott Smith: No, I think you've done an awesome job. I really appreciate you getting all those papers up there and ready to go, and clearly you've done your homework, which I wish we in the community had done before we voted on Measure ULA. So, thank you. Chris Berg: Uh, I just love this answer. Let's please do this again. Then we can talk Henry George, other issues. Like, one of the things I'd like to really get into is, since you're in development, is where do you see things going for obviously the Olympics and this housing situation in LA, maybe in the context of Henry George — like, how do we solve this problem? Because I just think California is amazing. It's just, we're not necessarily managing our resources as effectively as possible. Is that the best way I can say that? Mott Smith: Very fair. That'd be a very fair way to put it. I mean, we're at the point right now where the city is way over capacity in terms of what it has the ability to process, given what it thinks it needs to do to process stuff. And, um, this is the fundamental change in thinking that I would love to see. We're taking as a given all the crazy amount of reviews and back and forth and all the stuff that we have to do before we build anything, and just saying that, well, that's in a black box somewhere, so now we just need to have an infinitely large team to help implement that. Um, I don't think that's the right answer. I think the right answer is having a really rigorous look at the rules that we play by and the systems that we use to get stuff built. And it's starting to happen. By the way, you know, Council Member Nithya Raman put forward a motion to start looking at what we call architect and engineer professional certification, or self-certification, meaning that if you've got a licensed architect or engineer designing your project and it's a simple project, skip plan check and go straight to the clearance process. Chris Berg: Yes, that's a great step. Mott Smith: Um, city of San Diego actually made excellent progress when they faced a similar challenge maybe 3, 4 years ago with a huge backlog of permits and a shrinking staff because of COVID. And they brought in a new director of development services, Elyse Lowe, who radically changed the culture down there and got them to the point where they're issuing half of all their permits same day. And I know Council Member Raman invited Elyse Lowe to speak to our 12 development services departments here in Los Angeles, and that was a good conversation. I would love to see our mayor step up and say, "We don't need to reinvent the wheel. Let's just look at successful cities and take the best of them and have version 2.0 here in LA." Let's do that. Chris Berg: Yeah. I hope the mayor does that. She's got a great deputy mayor that comes from a real estate background. I don't want to say any names, but she does a fantastic job. I think she's great. So, um, hopefully we'll see some movement in that direction. Again, the lights are going to be bright in '28. I mean, very bright. So I just hope that we are prepared. So Mott, if people want to reach out to you — I know we put up your Twitter account here a couple times, but is there any other way that people can reach out to you? Mott Smith: Yeah, they could email me if they want. Um, just mott at Amped Kitchens — Amped Kitchens with an S at the end — dot com. Chris Berg: Awesome. Really appreciate it. Again, Mott Smith. Um, check them out. Great information here. Check out his study. This is the Commercial Real Estate Report. Please share this with your colleagues. — END OF TRANSCRIPT —