A new report from UCLA’s Lewis Center for Regional Policy Studies takes a closer look at the impact of Measure ULA, a controversial tax implemented in Los Angeles back in 2023. Depending on who you ask, this “mansion tax” has either been a blessing or a curse for the city’s real estate market. The report, authored by Michael Manville and Mott Smith, suggests that the tax has had unintended consequences, particularly when it comes to commercial development in L.A.
Measure ULA, which went into effect in April 2023, imposes a 4% charge on property sales above $5 million and a 5.5% charge on sales exceeding $10 million. The revenue generated from this tax is earmarked for affordable housing and homelessness prevention initiatives, with over $632 million raised in the first two years alone. However, the UCLA report indicates that the tax has had a chilling effect on the once-vibrant real estate market in Los Angeles, particularly in the commercial sector.
Analyzing data from 338,000 property sales over the past five years, the study found that non-single-family transactions in L.A. ZIP Codes affected by the tax dropped significantly, with a 7-15% decrease each month, leading to a cumulative decline of 30-50% over two years. Interestingly, sales above $5 million have remained relatively steady in other areas of L.A. County that are not subject to the tax.
Mott Smith, one of the authors of the report, highlights that the hardest-hit properties are not luxury homes but multifamily, commercial, and industrial buildings — properties essential for housing production and job growth in the city. The decline in commercial property sales not only results in a loss of tax revenue for the city but also hampers new multifamily development, exacerbating the ongoing housing crisis.
According to the report, the drop in commercial property sales has led to a $25 million annual loss in property tax revenue, a figure that is expected to increase over the coming years. The proposed reform to the tax system suggests targeting properties that have not been reassessed in the last 20 years, which could exempt multifamily developers while still capturing the appreciation in value of luxury properties.
Joe Donlin, the director of United to House L.A., the organization behind Measure ULA, defends the tax, stating that it is already delivering results by creating affordable housing units, protecting renters, and generating construction jobs. He attributes the initial decline in revenue to opposition from developers and the real estate lobby seeking to overturn the tax through legal and political means, efforts that have largely been unsuccessful.
Despite facing legal challenges and revenue shortfalls in its early years, Measure ULA has managed to survive and even thrive. Revenue from the tax has increased year over year, reaching $320 million in fiscal year 2025. While these numbers fall short of the initial projections, the tax continues to make a substantial impact on affordable housing initiatives in Los Angeles.
As the city grapples with the consequences of Measure ULA, the debate over its effectiveness and implications for the real estate market rages on. The report from UCLA sheds light on the complexities of balancing revenue generation with the need for housing development, offering valuable insights for policymakers and stakeholders in the ongoing discussion surrounding the controversial tax.
