Los Angeles’s “mansion tax” has a problem, and city officials know it.
Measure ULA, approved by voters in 2022, imposed a new transfer tax on high-value real estate transactions. The resultant revenue was meant to fund affordable housing programs, tenant protections, and homelessness prevention. Supporters pitched it as “a tiny tax on mega mansions” that would benefit all Angelenos.
But three years later, ordinary Angelenos are paying a steep price for the measure. Because ULA applies to all high-value transactions, it treats a luxury Bel Air estate the same as a new 100-unit apartment building. In a city starved for new housing, the tax has made large apartment projects harder to pencil out, discouraging precisely the kind of construction Los Angeles needs most.
Now, as evidence of these perverse effects mounts, some city councilmembers are attempting to fix the measure. Last week, an effort to advance reforms failed amid objections from progressive interest groups and labor unions. The episode exposed something important about L.A.’s housing politics: the city’s political class may be willing to acknowledge that policies such as ULA have problems. They are less willing, however, to surrender the revenue stream and interest-group machinery the tax created.
Measure ULA levies a 4 percent transfer tax on property sales above $5.3 million and a 5.5 percent tax on sales over $10.6 million, all on top of the base city rate. Although sold as a “mansion tax,” it applies not just to single-family homes but to nearly every type of real estate transaction above those amounts. That includes sales of apartment buildings, mixed-used developments, commercial properties, and redevelopment sites, which frequently exceed the ULA threshold and often involve multiple transactions. A developer who buys land for a multifamily project, for example, will be hit by the tax when acquiring the site and then again when selling the completed building.
The effects are now hard to dismiss. As the Wall Street Journal recently reported, multifamily building permits in the city are down 46 percent since 2022 and have reached their lowest level since 2013. Sales of multifamily-zoned properties above the ULA threshold are down nearly two-thirds.
The losses to housing production are substantial. A recent UCLA study estimated that the tax reduced multifamily family housing by at least 1,910 units per year, an 18 percent decline relative to pre-ULA levels. That comes as Los Angeles already lags far behind its state-mandated housing targets, with builders citing high fees, slow approvals, and ULA as part of the broader gauntlet that makes new projects harder to justify.
Nor is ULA bringing in as much revenue as expected. City officials initially estimated the tax would generate $600 million to $1.1 billion per year. In practice, it’s struggled to produce even half that amount annually.
That’s an unintended consequence of the policy’s design. Because the tax discourages all high-value real estate transactions, fewer properties change hands. In California, property taxes are generally capped until a parcel is sold, at which point the property is reassessed at current market value. By reducing transactions, ULA also reduces reassessments and therefore suppresses property-tax revenue. One recent analysis by researchers from Harvard and elsewhere estimated that 63 percent to 138 percent of ULA’s revenue gains may be offset by lower property-tax collections. That implies the tax is both discouraging new housing and cannibalizing other local revenues.
Reforming the law has proven difficult, however—not because its failures aren’t widely known, but because they are politically inconvenient. Several councilmembers, including L.A. mayoral candidate Nithya Raman, have proposed changes to reduce or temporarily exempt the tax on new apartments, condos, and commercial projects.
Even these modest reforms have met stiff resistance. Councilmember Ysabel Jurado, chair of an ad hoc committee formed to examine potential changes to ULA, argued last week that it’s still “too early to fully evaluate” ULA’s long-term impacts. Jurado warned that changes could threaten critical funding for affordable housing and homelessness-prevention programs. Meanwhile, progressive groups and labor unions have framed ULA reform as a giveaway to real estate interests and claimed it would reduce funding for affordable housing.
But the real issue is not that ULA’s impacts have yet to be fully evaluated. It’s that, as with much of L.A.’s dysfunction, the policy has created constituencies committed to preserving their funding. Today, an entire ecosystem of L.A. nonprofits, advocacy groups, labor interests, and subsidized-housing providers depend on a steady flow of dedicated public money. Keeping that system in place often takes precedence over actually building the housing the city needs.
That’s certainly true for ULA. Revenues from the tax are set aside for nonprofit affordable housing projects built by a local union that campaigned for the ballot initiative. Tenant rights organizations also benefit directly from funds earmarked for eviction defense and rental assistance programs. This self-reinforcing circuit of tax revenue flowing to union labor, nonprofit developers, and advocacy groups helps explain why reform efforts have failed, even as the measure’s perverse effects have become clear.
The reforms proposed in the Council were hardly radical. Instead of repealing the tax or exempting certain project types, the leading proposal would have simply reduced the transfer-tax rate on multifamily and mixed-use developments from 4 and 5.5 percent to 2 and 3.5 percent, and only on a temporary basis. Yet even these minor adjustments were blocked by a 2-1 committee vote. It seems ULA’s dedicated revenue stream has become too important to allow even modest reform attempts.
But if Los Angeles cannot bring itself to fix its mansion-tax mistake, statewide voters may soon do it for them. A statewide initiative backed by the Howard Jarvis Taxpayers Association has qualified for the November 2026 ballot. The Local Taxpayer Protection Act would cap real estate transfer taxes at roughly 0.11 percent, which would effectively eliminate ULA and similar taxes in other California cities. The measure is a direct backlash to steep local transfer taxes like ULA, which rank among the most burdensome in the nation.
It shouldn’t take a statewide referendum to undo a local policy that punishes housing production. L.A. can, and should, reform ULA on its own. But doing so would require the city’s leaders to choose housing production over the interest groups that benefit from the tax. So far, they have done the opposite. If Los Angeles will not reform a tax that makes housing harder to build, California voters may soon force the city to eliminate it altogether.
A fine illustration of the harm that government excels at doing when it messes with market forces. With ULA, the city has simply siphoned off more public money to influential groups who understandably (if wrongly) oppose any move to shut down the bleeding.