The pace of new apartment development in Los Angeles has fallen sharply since the city’s criticized “mansion tax” took effect in 2023, a new study shows, raising fresh concerns about the levy's unintended consequences on real estate.
Permitting for new multifamily housing projects in the city dropped 18% in the year after Measure ULA’s implementation, according to a report from UCLA’s Lewis Center for Regional Policy Studies. That translates to at least 1,910 fewer units being built annually in projects with 20 or more apartments — a steep drop for a city in the middle of a housing affordability crisis.
Measure ULA, passed by voters in 2022 and implemented in April 2023, funds affordable housing and homelessness prevention efforts by taxing high-value property sales. The tax applies a 4% levy to transactions above $5.15 million and assesses 5.5% for deals above $10.3 million, charges that are far steeper than the city’s previous 0.45% transfer tax.
According to the study, the policy may be undermining its own goals by slowing development and reducing the supply of deed-restricted affordable housing by an estimated 168 units per year or more. That's the conclusion of Shane Phillips, housing initiative manager at the Lewis Center at UCLA and author of the report, titled “Taxing Tomorrow: Measure ULA’s Impact on Multifamily Housing Production and Potential Reforms.”
The findings add to growing concern that Measure ULA is discouraging property transactions that drive new housing and refresh aging real estate. The tax is also discouraging investment when parts of Los Angeles are working to rebuild after the most destructive wildfires in California history, according to developer Rick J. Caruso.
"We are not letting this issue go. We are going to chase it down to every corner and find a solution for" the challenges presented by the tax, Caruso said during a meeting with Palisades residents. "Not only should it be suspended for this fire, but for victims of any natural disaster."
Other real estate professionals argue the measure should be amended further to exempt certain sellers to promote new investment.
“We strongly recommend that elected officials reform Measure ULA, exempting multifamily projects from transfer taxes when sold within 15 years of construction,” Phillips wrote. “This would increase multifamily permitting and reduce ULA revenues only modestly. It would also increase other revenues, such as sales taxes and property taxes, at a time when the city is facing a nearly $1 billion budget deficit.”
Calls for reform
Two years after taking effect, Measure ULA has raised about $632 million for housing and homelessness programs, including $320 million so far in fiscal 2025. But UCLA’s research suggests that revenue has fallen far short of expectations because of a dramatic slowdown in large-scale property deals.
A separate report, “The Unintended Consequences of Measure ULA,” by UCLA researchers Michael Manville and Mott Smith, found that sales of apartment buildings, office towers and industrial properties within Los Angeles city limits have declined as much as 50% since the tax took effect in April 2023. Meanwhile, sales in neighboring cities without such a tax have remained relatively stable.
The report estimates that this drop in transactions has already cost Los Angeles $25 million in property tax revenue, with the potential for far greater losses over the next decade. Critics argue that by taxing sales rather than profits, Measure ULA penalizes even those selling at a loss —discouraging turnover that is essential to housing reinvestment and economic growth.
“It’s one of the steepest transfer taxes in the country — and unusually, it’s not marginal,” Smith wrote. “A single extra dollar over the threshold can trigger a tax bill of more than $200,000. That’s a design flaw with serious consequences.”
Though it has raised hundreds of millions, Measure ULA has yet to meet its original projection of $900 million annually. The "Unintended Consequences" report argues that a more surgical approach — such as targeting properties that haven’t been reassessed in 20 years — would better align with the measure’s goals while minimizing damage to the city’s tax base.
Backers of the measure blame inflation and high interest rates for slower housing development. Joe Donlin, director of the ULA program, argues the policy is working as designed, while Greg Good, director of strategic engagement and policy at the Los Angeles Housing Department, notes the measure has raised hundreds of millions of dollars "that otherwise would not have materialized to address the greatest existential crisis of our time: housing insecurity and homelessness."
Still, developers and analysts alike are urging city and state leaders to reconsider the law’s reach. Phillips argues that exempting multifamily projects sold within 15 years of completion would modestly reduce ULA revenue while unlocking private-sector housing production.
Caruso's Steadfast LA, a private sector-led group tasked with advising officials on fire rebuilding efforts, has hired a team of lawyers to find ways to exempt those affected by natural disasters from the transfer tax, such as people looking to sell their burned-out lot. But it's not clear how much can be changed without another referendum.
"We recognize that unilaterally the mayor nor City Council can probably do anything that repeals what was a referendum, and we'll see if they bring it back to the ballot in the future," Nick Geller, COO of Lafitte Management Group and a volunteer with Steadfast LA, said during the community meeting hosted by the volunteer group 1Pali.
Inadvertent consequences
Amending the measure wouldn’t be simple. Measure ULA, passed via ballot initiative in November 2022 with 58% voter approval, significantly limits the Los Angeles City Council’s ability to make changes without another public vote.
The alternative to amending the measure, critics say, is a chilling effect on construction.
Only 8% of current ULA revenue — about $29 million annually — comes from sales of multifamily properties built within the past 15 years, the study notes. And taxing these deals is delaying or eliminating the construction of at least 100 affordable units per year, according to the analysis.
Smith, who is also CEO of commercial kitchen developer and operator Amped Kitchens and a member of the California Infill Builders Association, said the current structure is discouraging the very investments Los Angeles needs. “Its design has inadvertently created a drag on the parts of the real estate market we depend on to revitalize communities and fund long-term services,” he told CoStar News.
The state legislature is looking to weigh in on transfer taxes: Assemblymember Buffy Wicks has introduced AB 698, which would require deeper economic analysis before local governments can enact them. Smith called it a good start but said more reforms are needed to fix the law’s deeper flaws.