Los Angeles has a history of progressive housing policies that sound good in theory but prove counterproductive in practice. Measure ULA, the city’s so-called “mansion tax,” is the latest example, and it’s one of the most unreasonable.
Approved by voters in 2022, Measure ULA imposes steep taxes on real-estate sales worth over $5 million. The revenue is meant to fund affordable housing and tenant assistance. Advocates’ pitch for the measure was straightforward: tax luxury-property sales and use the proceeds to tackle homelessness and affordability. Supporters estimated that the measure could generate nearly $1 billion annually for housing programs.
Finally, a reason to check your email.
Sign up for our free newsletter today.
Four years later, Los Angeles officials are beginning to acknowledge that the policy has not worked as intended. Last month, City Councilmember Nithya Raman—who supported Measure ULA when it was on the ballot—introduced a motion calling for changes to the tax, warning that it had produced “unintended consequences.” Measure ULA, she argued, “stalls housing production” and “ultimately undermines the very goals voters asked us to achieve.”
Raman is right. Measure ULA has both raised less revenue than promised and discouraged the kinds of property transactions that make new housing possible, including new multifamily units. In trying to tax its way to affordability, L.A. has worsened its housing shortage.
Measure ULA imposes a 4 percent tax on property sales between $5 million and $10 million, and a 5.5 percent tax on sales above $10 million, on top of the city’s standard 0.46 percent transfer tax. Though similar rates exist elsewhere, ULA applies them at comparatively low thresholds and across a wide range of property types, making it one of the most burdensome transfer taxes in the nation. By targeting high-value transactions, the measure earned its “mansion tax” nickname.
That label, however, is misleading. Measure ULA applies not just to luxury single-family homes but to all property types: apartment buildings, mixed-use developments, commercial properties, industrial sites, and redevelopment parcels.
In a city where most new housing comes from redeveloping existing property—not from building on vacant land—that distinction matters. Large multifamily properties, for example, routinely sell for more than $5 million, placing them squarely within the tax’s reach.
The tax is also crudely designed. Unlike some other cities’ transfer taxes, Measure ULA is not imposed on a marginal basis. A property sold for $4.99 million faces no surcharge, while a $5.01 million sale triggers a tax bill of more than $200,000. A property selling for more than $10 million faces a bill of $550,000 or more.
These sharp “notches” can discourage transactions near the thresholds, especially for large parcels and multifamily properties most likely to cross it. Less turnover in turn means fewer redevelopment projects—and fewer new housing units.
Transfer taxes are politically appealing because they are hidden, paid only when a sale occurs and ostensibly by wealthy sellers. But their economic effects are felt well before that point. Developers factor the tax into project feasibility, buyers reduce what they are willing to pay, and sellers demand higher prices. Some projects no longer pencil out; others never get proposed in the first place.
The economic burden of this effect does not neatly fall on wealthy sellers. It spreads to buyers, renters, and would-be residents through reduced supply.
These consequences are not theoretical. Researchers at UCLA’s Lewis Center for Regional Policy Studies have found a robust causal link between Measure ULA and reduced housing development. Comparing transactions inside Los Angeles with those just outside city limits, they estimate that the tax has reduced multifamily housing production by at least 1,910 units per year—an 18 percent decline relative to pre-ULA averages.
The fiscal picture is equally troubling. Measure ULA has generated roughly $280 million to $350 million per year. That’s far below the $600 million to $1.1 billion supporters projected.
But even the quoted figures overstate the tax’s net fiscal effect due to its perverse interaction with another California housing measure, Proposition 13. Under Prop 13, California limits property tax increases until a property changes hands, at which point assessments reset to market value.
For example, a home purchased decades ago for $1 million may now be worth more than $5 million, thanks to appreciation. But under Prop 13, it still gets taxed close to its original assessed value. If the home is sold, its assessment resets, and the city begins collecting taxes on the full market value. But if the sale is discouraged—or never happens—the city forgoes that revenue indefinitely.
That structure has long constrained municipal revenue, encouraging cities to seek alternatives like transfer taxes. But by discouraging sales, Measure ULA reduces reassessments. The two measures therefore work in tandem to gut municipal income.
A recent analysis by researchers at Harvard, UC San Diego, and UC Irvine quantifies this effect. The study estimates that Measure ULA reduced eligible property transactions in Los Angeles by 38 percent. More remarkably, the researchers estimate that between 63 and 138 percent of the revenue raised by the tax was offset by lower future property-tax revenue. In other words: when you account for forgone property taxes, Measure ULA may actually generate negative net revenue for the city.
None of this is surprising. Transfer taxes are economically inefficient precisely because they discourage taxable transactions. In housing markets, those transactions are essential: they allow properties to move from lower-value to higher-value uses, enable new development, and—under California’s tax system—generate the property-tax reassessments that fund local services. By treating a new 50-unit apartment building the same as a Bel Air mansion, Measure ULA suppresses both housing supply and local property tax revenue.
Councilmember Raman’s proposed reform would have exempted new apartments, condos, and commercial projects from the transfer tax for 15 years after construction. But even this modest carve-out was too much for the tax’s defenders, who dismissed concerns about housing production as “boogeyman” tactics to secure “tax breaks for developers.” After a heated debate, the city council refused to take up Raman’s measure, referring it instead to the council’s Housing and Homelessness Committee.
Los Angeles faces a choice. It can continue with a policy that sounds progressive but achieves the opposite of its stated goals. Or it can acknowledge what the evidence shows: blunt-force taxes on housing transactions reduce housing supply and thwart affordability. For a city desperate for housing, this shouldn’t be a difficult decision.
Photo by Myung J. Chun / Los Angeles Times via Getty Images