Update, Thursday evening: The chair of the Santa Monica Democratic Club wrote in response to the original draft of this story on our Instagram. “The support of the Santa Monica Democratic Club is not “a question mark.” Our board voted last night to formally oppose this effort to amend Measure GS, and we’ll be taking that to a vote at our April meeting.”

Former Santa Monica Mayor Pam O’Connor has taken the first step to place a measure on the fall ballot that would amend Measure GS, a ballot measure passed by Santa Monica voters in 2022 (not to be confused with the 2016 ballot measure of the same name.) On Thursday, March 28, O’Connor filed proposed initiative measure language with the Santa Monica City Clerk to exempt multi-family dwellings from the city’s “transfer tax.”

Measure GS created a real estate fee collected when properties costing $8,000,000 or more were sold. Funds generated go to support schools, homelessness prevention, and affordable housing. When the measure was proposed, the city estimated it would raise $50 million a year. So far, it has raised just over $17 million, with $10 million of that going towards school’s. In Los Angeles, a similar ballot measure was passed and the city predicted it would bring in $672 million a year. It brought in $173 million in its first year instead. Real estate news website The Real Deal described the measure in LA’s impact bluntly, “Residential and commercial sales have both collapsed.”

The politics of this proposal are interesting. Measure GS passed with the support of progressive political groups such as the Santa Monica Democratic Club, Santa Monicans for Renters Rights (SMRR) and Santa Monica Forward. Those same groups were also supporters of O’Conner during her career and will need to be on-board for this amendment to pass. 

SMRR Co-Chair and longtime head Denny Zane has been an outspoken opponent of large residential projects and was instrumental in the drafting and supporting of Measure GS in 2022. Getting his, and SMRR’s endorsement seems a tall task, but could be the difference between the measure succeeding or not.

The support of the Santa Monica Democratic Club is also a question mark. 

Measure GS was sponsored by Sue Himmelrich, who was mayor in 2022 but did not seek re-election that year. Himmelrich is not supportive of this amendment, noting that Measure GS already exempts affordable housing projects from the transfer tax. The only affordable units that are taxed under the transfer tax program are ones that are included as parts of developments that have luxury or market-rate housing included. Himmelrich gave an interview to the Santa Monica Lookout where she argues that the city will be able to meet its affordable housing requirements without Measure GS and that O’Connor’s amendment is about maximizing profit for developers. She followed up with a letter in today’s edition that bluntly states, “The proposed ballot initiative to amend Measure GS is just the latest desperate effort by developers, landlords and their allies to undo Measure GS, which was approved by Santa Monica voters in 2022.”

Himmelrich’s husband, Michael Soloff, is vice-president of the Democratic Club.

But O’Connor believes that Measure GS, while an important measure for the city, has and will stifle the growth of housing that could lead to the city not making its state-mandated housing goals.

“Sometimes, initiative measures have unintended consequences that must be fixed,” said O’Connor in a statement. “Not only will this amendment allow us to meet our State-mandated housing requirements, it will help keep rents lower and prevent displacement.”

The state has mandated that the city provide 8,895 new housing units with roughly  6,200 of them affordable by 2029 or lose local control of its development, zoning and housing approval processes…similar to what happened in 2022 when the state rejected the city’s Housing Element leading to a rush of large developments the city had no power to stop and a bargain with developers that will lead to more development that the City Council grudgingly accepted.

Supporters of the ballot measure point to How Will the Measure ULA Transfer Tax Initiative Impact Housing Production in Los Angeles?, a study by UCLA’s Lewis Center for Regional Policy which analyzed a similar ballot measure that was passed by Los Angeles voters in November of 2022, the same time that Santa Monica voters passed Measure GS. The report found that only a small percentage of potential new units would be impacted, but that the cost of replacing these units would sharply cut into the amount of money generated by Los Angeles’ measure.

However, the UCLA study also recommended that Los Angeles exempt new apartment construction from the measure. The supporters of this amendment for Santa Monica argue that doesn’t go far enough, because investors will consider the cost of the transfer fee on second (and third, and fourth and…) generation buyers and it will lower the value of any development. As profit margins are often not a high percentage of a new building’s total cost, a future transfer tax would lower the cost of the first sale to the point that it would erase that margin.

In order to qualify for the ballot, a measure for placement on the ballot, proponents must obtain 10% signatures of the registered voters in the city. There are currently 68,952 registered voters in Santa Monica.

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