If you're looking to pass a new ordinance and/or create a new tax, it's important to have the right name. Take, for example, Los Angeles' new "mansion tax." The majority of people do not have a so-called "mansion." And so signaling to people that you're going to tax this thing and then redistribute the funds to help others with better housing is, not surprisingly, attractive to many. Here's how the new tax works:

Known as Measure ULA — for “United to House LA” — the ordinance marketed as a “mansion tax” will impose a 4% tax on property sales above $5 million, rising to 5.5% on sales above $10 million. So a $5-million sale would include a $200,000 tax, and a $10-million sale would include a $550,000 tax, which is typically paid by the seller.

Of course, if you're a rich person with a mansion, your first thought is going to be, "how do I avoid having to pay this?" Here are two unproven and possibly illegal options that I am not condoning in any way:

For example, if a homeowner is selling a mansion for $15 million, they’d be slapped with a $825,000 tax bill. But if they split up the property into three parts owned by three different entities and sold all three pieces for $4.999 million each, they would hypothetically elude the tax since it only kicks in at $5 million.

Another strategy might be to hatch deals off the books to keep a sale under $5 million. For example, if a seller wanted $7 million for their house, they could reach a deal with a buyer to sell it for $4.999 million, thus avoiding the tax, but then sell the furniture in the home for $2 million.

I don't have a mansion, so I'm fortunate enough not to have to worry about such things. But I do think about the impact on things like new rental supply. My understanding of the ordinance is that if you're a developer of rental housing, and you buy a lot for $4.99 million, build a mid-market apartment, and then turn around and sell it to a pension fund for $10.01 million, you would be subject to this new tax.

Hmm. I wouldn't call this a mansion.

One of the things that cities often try and stamp out is speculation. Homes should not sit empty (enter vacant home tax). Storefronts should not sit empty (enter vacant commercial tax). And development land should not sit undeveloped. To correct this latter problem, one idea that is sometimes floated around is "use-it-or-lose-it" zoning.

The way it works today in, I believe, most cities, is that if you do a site-specific rezoning on a property -- and secure additional density -- you get those special permissions forever. If you want to wait 100 years before starting construction, you are technically entitled to do that. Of course, in the interim, no new housing is actually being created. It's all just on paper.

The idea with "use-it-or-lose-it" entitlements is that -- instead of these permissions lasting forever -- they would expire after a certain period of time, which would mean that the entire rezoning process would need to be done all over again. These take time (at least a few years) and cost money (it's in the millions). And so it has been suggested that this would incentivize developers to not sit on entitled land.

While I do understand where this line of thinking is coming from, let me make a few points:

• Generally speaking, most developers don't just sit on entitled land for fun. They need things to happen, and to happen quickly, so that value can be realized. If there is a problem of too many developers not actually building, it could be a sign that there are other market factors impacting feasibility.

• There is nothing wrong with rezoning a property and then "flipping it out" to another developer. This is often viewed negatively. But some developers only rezone properties and some developers only buy zoned sites. These can be different phases of the value chain. A rezoning can take years and millions of dollars, and so sometimes developers don't have the wherewithal or desire to do both.

• A use-it-or-lose-it approach unfairly punishes developers during market cycles and bear markets, like the one we are experiencing right now. There is no way to predict when the next global pandemic will hit, when construction costs might surge 40%, and when the fed could start rapidly increasing rates to calm inflation. Maybe waiting out the storm is all you can do.

• If you're building condominium housing in our market, you generally need pre-sales in order to secure a construction loan. Let's call it 70% pre-sold. What happens if this takes longer than expected? And what happens if you sell 50%, your site-specific rezoning expires, and then you have to restart the entire process? At this point and in this current market environment, you would likely have to cancel the entire project and reboot it.

• Timing is important. To give a specific project example, we had planned to launch condominium pre-sales for our One Delisle project in the fall of 2020. And we were ready to do that. But sentiment didn't feel right. Too pandemic-y still, and so we waited until the spring of 2021. This turned out to be the right decision. But what would have happened had we had this timing gun to our head? (Truthfully, it always feels like there's a timing gun to our head.)

• I have written about this before, but go-to-market strategies are changing in this current environment. It is taking longer to start sales and construction because, among other things, developers are spending more time trying to pin down their construction costs. Would rezoning expiries take all of this into consideration and adjust accordingly?

• Finally, if one is going to do something like force developers to pull all of their building permits within X months of receiving zoning approvals -- or else suffer the consequences -- then everything required to get there should also have a maximum timeline associated with it. In other words, cities would also need to do things like commit to issuing permits within Y months of receiving a submission -- or else. It's only fair that this cuts both ways. But just to be very, very clear, I do not think this is a good idea.

What I am broadly saying is that (1) development is a pain in the ass and (2) developers are already heavily incentivized to move quickly and make things happen. It is not uncommon for projects to take 5-10 years from site acquisition to completion. And a lot of unexpected things can happen during that time period. Hopefully losing your entitlements doesn't become one of them.

If you're looking to pass a new ordinance and/or create a new tax, it's important to have the right name. Take, for example, Los Angeles' new "mansion tax." The majority of people do not have a so-called "mansion." And so signaling to people that you're going to tax this thing and then redistribute the funds to help others with better housing is, not surprisingly, attractive to many. Here's how the new tax works:

Known as Measure ULA — for “United to House LA” — the ordinance marketed as a “mansion tax” will impose a 4% tax on property sales above $5 million, rising to 5.5% on sales above $10 million. So a $5-million sale would include a $200,000 tax, and a $10-million sale would include a $550,000 tax, which is typically paid by the seller.

Of course, if you're a rich person with a mansion, your first thought is going to be, "how do I avoid having to pay this?" Here are two unproven and possibly illegal options that I am not condoning in any way:

For example, if a homeowner is selling a mansion for $15 million, they’d be slapped with a $825,000 tax bill. But if they split up the property into three parts owned by three different entities and sold all three pieces for $4.999 million each, they would hypothetically elude the tax since it only kicks in at $5 million.

Another strategy might be to hatch deals off the books to keep a sale under $5 million. For example, if a seller wanted $7 million for their house, they could reach a deal with a buyer to sell it for $4.999 million, thus avoiding the tax, but then sell the furniture in the home for $2 million.

I don't have a mansion, so I'm fortunate enough not to have to worry about such things. But I do think about the impact on things like new rental supply. My understanding of the ordinance is that if you're a developer of rental housing, and you buy a lot for $4.99 million, build a mid-market apartment, and then turn around and sell it to a pension fund for $10.01 million, you would be subject to this new tax.

Hmm. I wouldn't call this a mansion.

One of the things that cities often try and stamp out is speculation. Homes should not sit empty (enter vacant home tax). Storefronts should not sit empty (enter vacant commercial tax). And development land should not sit undeveloped. To correct this latter problem, one idea that is sometimes floated around is "use-it-or-lose-it" zoning.

The way it works today in, I believe, most cities, is that if you do a site-specific rezoning on a property -- and secure additional density -- you get those special permissions forever. If you want to wait 100 years before starting construction, you are technically entitled to do that. Of course, in the interim, no new housing is actually being created. It's all just on paper.

The idea with "use-it-or-lose-it" entitlements is that -- instead of these permissions lasting forever -- they would expire after a certain period of time, which would mean that the entire rezoning process would need to be done all over again. These take time (at least a few years) and cost money (it's in the millions). And so it has been suggested that this would incentivize developers to not sit on entitled land.

While I do understand where this line of thinking is coming from, let me make a few points:

• Generally speaking, most developers don't just sit on entitled land for fun. They need things to happen, and to happen quickly, so that value can be realized. If there is a problem of too many developers not actually building, it could be a sign that there are other market factors impacting feasibility.

• There is nothing wrong with rezoning a property and then "flipping it out" to another developer. This is often viewed negatively. But some developers only rezone properties and some developers only buy zoned sites. These can be different phases of the value chain. A rezoning can take years and millions of dollars, and so sometimes developers don't have the wherewithal or desire to do both.

• A use-it-or-lose-it approach unfairly punishes developers during market cycles and bear markets, like the one we are experiencing right now. There is no way to predict when the next global pandemic will hit, when construction costs might surge 40%, and when the fed could start rapidly increasing rates to calm inflation. Maybe waiting out the storm is all you can do.

• If you're building condominium housing in our market, you generally need pre-sales in order to secure a construction loan. Let's call it 70% pre-sold. What happens if this takes longer than expected? And what happens if you sell 50%, your site-specific rezoning expires, and then you have to restart the entire process? At this point and in this current market environment, you would likely have to cancel the entire project and reboot it.

• Timing is important. To give a specific project example, we had planned to launch condominium pre-sales for our One Delisle project in the fall of 2020. And we were ready to do that. But sentiment didn't feel right. Too pandemic-y still, and so we waited until the spring of 2021. This turned out to be the right decision. But what would have happened had we had this timing gun to our head? (Truthfully, it always feels like there's a timing gun to our head.)

• I have written about this before, but go-to-market strategies are changing in this current environment. It is taking longer to start sales and construction because, among other things, developers are spending more time trying to pin down their construction costs. Would rezoning expiries take all of this into consideration and adjust accordingly?

• Finally, if one is going to do something like force developers to pull all of their building permits within X months of receiving zoning approvals -- or else suffer the consequences -- then everything required to get there should also have a maximum timeline associated with it. In other words, cities would also need to do things like commit to issuing permits within Y months of receiving a submission -- or else. It's only fair that this cuts both ways. But just to be very, very clear, I do not think this is a good idea.

What I am broadly saying is that (1) development is a pain in the ass and (2) developers are already heavily incentivized to move quickly and make things happen. It is not uncommon for projects to take 5-10 years from site acquisition to completion. And a lot of unexpected things can happen during that time period. Hopefully losing your entitlements doesn't become one of them.