Mansion tax is a big idea with big bumps in area
MEASURE ULA, THE “MANSION TAX” needs to find a balance so the city can continue to prosper in all directions.
A couple of years ago, Los Angeles voters approved Measure ULA—better known as the “mansion tax.” The idea was simple enough: when a property sells for more than $5 million, the seller pays an extra tax and that money goes straight into housing and homelessness programs.
The tax is steep: 4% on sales between $5 and $10 million, and 5.5% on anything higher. That means if your home sells for $6 million, the city collects $240,000 before you even get to escrow fees.
The good news first
Since it kicked in, Measure ULA has brought in over $702 million. For this year alone, the Los Angeles City Council has approved a $425 million spending plan. About $100 million will go toward helping people stay in their homes—things like rent support for tenants at risk of eviction and free legal help if they’re facing it. The lion’s share, roughly $288 million, will be used to build or preserve affordable housing.
At a time when other funding sources are shrinking, this cash is keeping a lot of important programs alive. Supporters say the measure is doing exactly what voters wanted: providing stable, ongoing funding to tackle L.A.’s housing crisis.
But here’s the catch
The name “mansion tax” makes it sound like it only applies to palatial estates in the Hollywood Hills. In reality, it hits a lot more than that. It applies to small apartment buildings, commercial properties and even older medical or office buildings in the $5 million–plus range.
And that’s where the trouble starts.
Studies from UCLA and RAND show that since ULA took effect, the number of sales above the $5 million threshold has dropped by about half. Commercial and multifamily sales—the kinds that often lead to new housing or revitalized spaces—are down by 30 to 50%.
When high-value properties stop changing hands, two big things happen: first, fewer new homes get built. Developers often buy older buildings, renovate or replace them, and then sell. If they get taxed heavily at both the buying and selling stage, many simply skip the project. That means fewer new units, including affordable ones.
Second,property tax revenue stalls. In California, property taxes mostly go up when a property sells. High-value sales make up only 4% of transactions but account for over 40% of new tax revenue. Without those sales, schools, public safety and city services feel the pinch.
Why this matters in
Hancock Park
Even if you’re not planning to sell a $6 million home anytime soon, the ripple effects can hit close to home. Hancock Park and its surroundings have plenty of properties that fall above that threshold—from historic mansions to small apartment buildings tucked along side streets.
When those properties don’t sell, the market tightens. Fewer listings means fewer chances for new buyers to get in, and fewer redevelopment projects result in fewer rental options. It’s one reason home prices across the board can creep up—even for homes well below $5 million.
A cliff, not a slope
One of the quirks of ULA is how it’s structured. The moment a sale price crosses $5 million—even by a dollar—the full tax kicks in on the entire amount. That’s why you’ll see some listings carefully priced just under the line. It’s also why owners who might otherwise sell sometimes decide to hold on, rent out or just wait.
Possible fixes
Policy experts have tossed around a few ways to keep the funding but cut down the side effects. One is to make it a true mansion tax by applying it only to single-family homes above the threshold.
Another is to use marginal rates so only the amount above $5 million is taxed, rather than the entire sale price.
And lastly, adjust the tax to target windfall profits instead of taxing sales where the owner might actually be taking a loss.
These changes would require state action, but they could keep the money flowing while reducing the drag on property turnover and housing production.
Where we go from here
This area has seen plenty of changes over the decades, and ULA is just another chapter in the city’s ongoing push and pull between funding public needs and keeping the real estate market healthy.
Right now, ULA is delivering big dollars for affordable housing and homelessness prevention. But it’s also slowing down the kind of sales that help build new housing, boost tax revenue and keep neighborhoods vibrant.
The challenge ahead is finding the sweet spot—one where we still fund the programs we desperately need, without choking off the property turnover that fuels the city’s growth. If Los Angeles can get that balance right, neighborhoods like Hancock Park can keep their historic charm while still playing a role in solving the city’s housing crisis
By Jon Vein
Category: News
