The “Mansion” tax, ULA has not produced the money it promised.
(Editor’s note: This story first appeared in the Westside Current and is a great analysis of the failure of ULA. It is reprinted with permission.)
By ANGELA MCGREGOR
Despite promises of a billion-dollar windfall to fight homelessness, L.A.’s real estate transfer tax has delivered just a fraction—while stalling development, gutting the tax base, and complicating post-fire recovery.
At the March 19 meeting of the Los Angeles City Council, City Administrator Matt Szabo, delivered a startling presentation about the current state of the city’s finances: Los Angeles is currently facing a nearly $1 billion budget shortfall. This amounts to roughly 13% of the city’s total budget.
This dire situation contrasts starkly with last year’s budget, approved in July, 2024, which noted a few shortfalls, but by comparison was relatively benign, with spending over revenues for 2025-26 estimated at just $61 million. In this series, we’ll look into some of the impacts of this massive budget shortfall, and the ways in which the city is attempting to cut costs and raise revenue.
Although it may seem counterintuitive, one such money-saving move would be to suspend Measure ULA, a transfer tax on the sale of all privately developed properties over $5 million which was passed by voters in November 2022.
Mayor Karen Bass
At a press conference in late March, Mayor Bass said that she was considering a temporary suspension of the tax in order to support post-fire reconstruction efforts in Pacific Palisades. However, within weeks it was reported that she was privately rescinding that proposal. We have reached out to the Mayor’s office for clarification but have not heard back.
In the leadup to the 2022 elections, proponents of ULA – in particular, the affordable housing developers who would be exempt from the tax – were successful in convincing Angelenos that the tax would disproportionately impact so-called high-end, single-family “mansions” and result in nearly a billion dollars in revenues to fight homelessness.
According to a September, 2022 study from the Lewis Center at UCLA, “Measure ULA would raise $923 million annually for affordable housing production and homelessness prevention in the form of rent relief, income support, and legal counsel for tenants. Measure ULA would have a positive impact on the city’s housing crisis, while having no effect on the average Angeleno.” In April of last year the same group of authors issued a glowing report of the Measure’s progress.
In her 2024 budget, the Mayor allocated $400 million in ULA funding to affordable housing production and homelessness prevention. Equally convinced of a forthcoming windfall from ULA, three councilmembers – Raman, Hernandez and Harris-Dawson – authored a motion exploring the possibility of using ULA funds for a social housing program. And just last week, newly elected City Councilmember Isabel Jurado said “ULA is an indispensable force for protecting Angelenos and improving their lives.”
But in two years, the Measure has raised only $632 million — just a third of what its proponents stated it would bring in. As we reported in September, 2024, the tax’s effect on overall housing production in Los Angeles has been disastrous. A study from Hilgard economics of building permits issued before and after the passage of ULA showed a fall of 18.9% between the first half of 2023 (pre tax) and 2024. Since that study was published, the impact of ULA has intensified.
In November, Mott Smith, an Adjunct Professor of Real Estate Development at USC, posted an eye-opening thread about ULA on Bluesky. Examining 160,000 LA County real estate transactions going back to January, 2020, he compared the effects of the measure with a similar one passed in Culver City, which, unlike ULA, created four tax brackets for properties over $1.5 million (beginning with a modest .45% rate and going up to 4%), and exempted first time transfers of multi-family housing and all sales of 100%, deed-restricted affordable housing.
The differences are stark. Culver City’s Measure RE, according to Smith, does not appear to be affecting sales. Measure ULA, on the other hand, “makes it almost a requirement not to sell”, meaning that, under California’s Proposition 13, property values and taxes aren’t being reassessed.
“Measure ULA appears to have caused sales to plummet on high-value commercial, industrial, multifamily & single-family parcels in LA, it’s taken away the primary mechanism by which assessed prop tax valuations climb to market levels. Billions of potential public revenues, gone,” he wrote.
Interestingly, sales of properties not impacted by ULA have actually risen during that period, providing more evidence that the Measure has suppressed economic activity.
ULA’s impacts could prove particularly damaging to efforts to rebuild the Palisades. According one Palisades-based financial consultant we spoke to, “For homeowners in high-value areas like Pacific Palisades, rebuilding could push property values above [ULA] thresholds, resulting in substantial taxes upon sale.
This potential tax burden may discourage homeowners from rebuilding, leading some to leave lots vacant or sell at a loss. Additionally, the added tax liability can affect mortgage lending. Lenders may be hesitant to finance rebuilds if the property’s future sale is encumbered by significant taxes, perceiving increased risk.
This hesitancy can limit homeowners’ access to necessary funds for reconstruction…As for insurance, after a fire, even a large insurance check may not fully cover construction costs (especially with inflation in materials and labor).
Families might need to sell their damaged property to get additional funds. ULA tax makes selling prohibitively expensive: If a family owns a property worth $5M+ (even if it’s damaged), and they need to sell it to fund rebuilding elsewhere, they now face a 4%–5.5% transfer tax — easily $200K–$400K+ in extra taxes. That’s on top of agent commissions, closing costs, and other expenses. Many simply can’t afford to sell because they’d lose too much net cash.”
According to a new study out of the Lewis Center, entitled “The Unintended Consequences of Measure ULA” (co-authored by Smith and Michael Manville, a Professor of Urban Planning at UCLA, who were not involved in the previous study), sales of all properties over $5 million has fallen by 50% since the passage of ULA.
The resulting damage to the growth of the city’s tax base is startling. As Manville and two other co-authors point out in a recent L.A. Times Op-Ed, “Large transactions contribute disproportionately to that growth. Sales over $5 million are only 4% of all transactions but account for more than 40% of the growth in the city’s tax base.”
Simply put, ULA is costing the city’s general fund more money than it is raising, as well as 160 new units of affordable housing per year that are not being built by private developers. The op-ed concludes with a recommendation of action by the state government to amend the measure.
One such state proposal is Assembly Bill 698, authored by East Bay Assemblymember Buffy Wicks. According to Calmatters, “This bill would require a legislative body of a city, as specified, before it adopts any transaction or sales tax on the sale of real property, to develop and post on its internet website an analysis that examines, at a minimum, the effect of the proposed transfer tax on, among other things, the production of affordable housing, including affordable housing produced by market-rate housing projects.”
In their latest email blast to their membership, the Southern California Association of Nonprofit Housing, who were instrumental in the passage of ULA, said that AB698 “could have major implications for locally adopted real estate transfer taxes, such as Measure ULA in Los Angeles.” They go on to say that “after meeting with the Assemblymembers office, the SCANPH Policy Team has strong evidence that the bill may seek to create exemptions for certain market rate housing projects from transfer taxes statewide.” We’ve reached out to the Assemblymember for comment and have not heard back.
In early April, the City Council approved a motion to earmark $15 million in ULA funds for rent relief for Palisades residents impacted by the fires.
Proponents of ULA are pushing back hard against any effort to alter the measure. Joe Donlin, the head of United to House L.A. Coalition strongly disapproved of the City Council’s motion, saying “it would “divert essential administrative funds, trigger a complex revision process and potentially put the city out of compliance with the ordinance.”
He told the LA Times in response to the latest Lewis Center study that “Measure ULA is already producing hundreds of units of affordable housing, protecting tens of thousands of renters and creating thousands of construction jobs,” Donlin said. “Its initial dip in revenue owes more to developers and the real estate lobby hoping to overturn it in court or at the ballot box — and losing.”
But according to Mott Smith, that claim is simply untrue. As he posted on Bluesky, “Nine projects have received ULA funds. Only four are under construction — all started a year before ULA was in effect. The dip in sales has been persistent, even after the court challenges to ULA were lost.”
Whether or not Mayor Bass is still considering suspending ULA, it may be that the city can no longer afford it.
Frankly, I’ve never understood why anyone needs a 5 million dollar home…