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A UCLA study finds that Los Angeles' "mansion tax," a levy on property sales above USD 5 million, has led to a 50% drop in high-end transactions. Intended to fund affordable housing, the tax has instead slowed residential construction and commercial development while generating far less revenue than expected. Originally projected to raise up to USD 1.1 billion annually, it has averaged just USD 288 million per year. The sharp decline in new housing projects and job creation raises concerns that the tax may be discouraging investment, reducing economic activity, and prompting calls for policymakers to reassess its impact on the city's housing market and financial stability.
In November 2022, Los Angeles voters approved Measure ULA, known as the "mansion tax", which took effect in April 2023. The measure imposes a 4% tax on property sales above USD 5 million and a 5.5% tax on those exceeding USD 10 million. It applies to all property types, including luxury homes, apartment buildings, and commercial real estate. The tax was projected to generate between USD 600 million and USD 1.1 billion annually to support affordable housing programs and homelessness prevention. Advertisement
A study from UCLA's Luskin School of Public Affairs found that sales of properties priced over USD 5 million in Los Angeles have dropped by 50% since the tax was introduced. This decline has negatively impacted housing construction, commercial projects, and overall property tax revenue growth. Meanwhile, high-end property sales have remained strong in other parts of Los Angeles County, suggesting that investors and buyers are avoiding the city due to the tax.
In addition, the tax has failed to generate the expected revenue. Instead of the projected USD 600 million to USD 1.1 billion per year, it has only raised USD 480 million between April 2023 and December 2024-an annual average of USD 288 million, significantly below expectations.
The decline in high-value property transactions has also led to a sharp drop in new housing development. The number of permits for multifamily buildings with at least five units fell from 11,786 in 2022 to just 4,775 in 2024, according to the California Homebuilding Foundation, an industry trade group.
UCLA professor Michael Manville and USC adjunct professor Mott Smith, who co-authored the study, noted that while high-value transactions account for a small percentage of total sales, they contribute disproportionately to the city's property tax revenue and housing starts. The slowdown in these sales has not only reduced tax income but has also stifled job creation and new real estate investments.
The study suggests that while Measure ULA aimed to address housing affordability and homelessness, it may be discouraging real estate investment and economic activity. The lower tax revenue means fewer funds for housing initiatives, and reduced construction could worsen housing shortages.
As Los Angeles faces these challenges, experts suggest that policymakers may need to reconsider the tax's impact and explore adjustments to balance revenue goals with economic growth.
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