Los Angeles Taxed Real Estate to Fund Housing — Economists Say It’s Building Less

Los Angeles voters approved a tax on high-value property sales to fund affordable housing. New research suggests it may be doing the opposite of what was promised.

The measure, known as ULA, was marketed to voters as a tax on mansions owned by millionaires and billionaires. In practice, it applies to any qualifying real estate transaction — apartment buildings, commercial properties and development sites included, not just luxury homes.

Under the current rules, ULA adds a 4% tax on qualifying property sales above $5.4 million and a 5.5% tax on sales of $10.9 million or more, stacked on top of the city’s existing transfer tax. Those thresholds rise automatically with inflation. Once a sale crosses the threshold, the tax is calculated on the entire sale price, not just the portion above it — meaning a property sold just over $5.4 million can generate a ULA tax bill topping $216,000.

Proponents had projected the tax could help produce more than 26,000 affordable homes over a decade.

What the research found

Researchers Michael Manville of UCLA and Mott Smith of USC estimate that after ULA took effect, the odds of a Los Angeles property selling above the tax threshold fell by as much as 50%. Their strongest findings showed transactions involving commercial, industrial and multifamily properties dropped an estimated 30% to 50%.

A 2026 econometric analysis cited by UCLA estimates ULA reduced permitting for multifamily projects of 20 units or more by 31% — roughly 1,900 housing units a year.

Because California properties are generally reassessed when ownership changes, Manville and Smith estimate the tax has also reduced property-tax revenue to local governments by roughly $25 million annually, with losses compounding over time, as fewer transactions trigger reassessment.

Where the money is going

Los Angeles recently authorized a record affordable-housing funding round, with hundreds of millions of dollars coming from ULA revenue. Of that latest round, $55.5 million is going toward maintaining 3,713 existing affordable-housing units rather than building new ones. Some of those properties are on Skid Row, where court records describe allegations of bedbugs, cockroaches, rats, sewage leaks and human waste.

One developer quoted by the New York Post summarized the arrangement bluntly:

“You are taxing housing to pay for housing.”

The underlying dynamic is straightforward: new housing construction depends on investors believing a project will be profitable after land, permits, fees and financing costs are accounted for. Adding a 4% to 5.5% tax on the transactions that fund those projects changes that math for some developments, and researchers say the result has been fewer transactions, fewer permits and less new construction — even as the city collects and spends the tax revenue on housing programs.