To the editor: I have been a builder of commercial properties in Southern California for over 30 years. Unfortunately, “the mansion tax” has resulted in the practical end of most new commercial construction in the city of Los Angeles (“Letters to the Editor: Eliminating the so-called mansion tax would reduce resources to build affordable housing in L.A.,” April 9).
How so? A developer hopes to make 20 cents to 25 cents on every dollar invested in land and construction. Taking 5 cents off the top doesn’t sound like much, but it’s 20% to 25% of the profit that a developer would generally hope to make, which is considerable.
In addition, this same 5% fee would apply also to all future sales of that property, which we estimate depresses the value an additional 5% to 10%. If the choice was to develop in L.A. or anywhere else, you would chose anywhere else. This doesn’t negate the fact that Los Angeles has an enormous shortage of housing. How to solve the problem?
First, start by making the “mansion tax” truly a tax on mansions. Have it apply only to single-family residential housing sales rather than sales of commercial property. This will give multifamily and commercial construction a fighting chance.
Second, eliminate prevailing-wage requirements when it comes to building affordable housing. Prevailing-wage requirements add 30% to 50% to the cost of construction. If we are serious about solving the housing crisis that affects us all, we must look to assisting developers rather than handicapping them at a time when, frankly, we need them the most.
David Botfeld, Santa Monica
