LA's Mansion Tax Backfires, Causing Housing Shortage and Job Losses, Report Finds
A new report indicates the "mansion tax" has significantly hampered the real estate market, leading to fewer homes, lost jobs, and reduced revenue.
Los Angeles' "mansion tax," intended to fund housing initiatives, has inadvertently led to the cancellation of approximately 9,100 housing units, the loss of 16,650 construction jobs, and a revenue shortfall of $452 million, according to a recent report. The tax, officially known as United to House LA (ULA), was projected to generate around $900 million annually but has collected only about $1.2 billion over its first three years, less than half of its initial target.
The ULA tax, which went into effect in April 2023, imposes a 4% tax on property sales over $5.4 million and 5.5% on sales over $10.9 million. Despite its name, the tax applies to a broad range of properties, including apartment buildings, offices, and vacant land, not just luxury homes.
A report by the RAND Corporation, a non-partisan research group, suggests that approximately 1,000 of the lost housing units would have been affordable homes, contradicting the tax's stated goal of increasing affordable housing stock. Westside real estate broker Danny Brown criticized the tax, stating it has "chopped the legs from under the residential and commercial real estate industry, which is one of the largest parts of our city’s economic engine."
The ULA tax has reportedly slashed high-value property sales by an estimated 31% and apartment and commercial sales by more than 46% through early 2026. This has discouraged property owners from selling and developers from undertaking projects that are no longer financially viable due to the added tax burden.
Joel Berner, a senior economist at Realtor.com, noted that the transfer tax adds friction to the housing market, slowing transaction numbers. He also pointed out that builders, already contending with high labor and material costs, face squeezed profit margins, potentially making projects unworkable.
Beyond the economic impact, the tax has also led to a significant loss in potential government revenue. In addition to the $452 million in lost revenue, the equivalent of 16,650 full-time construction jobs have been eliminated. As of May, the city had spent only $114 million of the collected funds, with a recent vote allocating $324 million from the ULA fund towards affordable housing projects.
Councilwoman Nithya Raman, a key proponent of the ULA tax, has since acknowledged the need for reform, suggesting exemptions for newly built projects. However, her proposal did not make it to the ballot. Mayor Karen Bass has also explored ways to adjust the tax, including attempting to modify it at the state level and offering temporary breaks for specific groups.
Some of the funds collected are being used to preserve existing affordable housing units rather than to build new ones. For instance, $55.5 million was allocated in April to preserve 3,713 existing affordable units. However, concerns have been raised about the condition of some of these properties, with tenants in one building receiving ULA funding alleging severe living condition issues.
Researchers from UCLA and USC have observed a sharp decline in property transactions above the ULA threshold. Michael Manville, chair of UCLA’s urban planning department, stated that deterring market-rate units does not contribute to affordability, comparing the situation to "robbing Peter to pay Paul."
Other analyses suggest that broader economic conditions, such as high interest rates, may also be contributing to the slowdown in development. Jason Oppenheim, a luxury broker, claimed that while the ULA has funded some affordable housing units, its tax has prevented the construction of a larger number of apartments.
Despite the criticisms and the mixed outcomes, efforts are underway to direct the ULA funds. Applications for the latest funding round, totaling $466.6 million, opened in October.