Measuring Ula has been a godsend or disaster in the Los Angeles real estate market, depending on who you ask. A new report hints at the latter.
A new analysis The so-called “luxury home tax” slows sales, especially for commercial properties, according to Michael Manville and Mott Smith.
The ULA measure was passed in 2022 and effective in April 2023. All Los Angeles real estate sales charge more than $5 million and 5.5% of sales of $10 million. Earnings Funds Affordable Housing and Homelessness Prevention Plan; Transfer Taxes Has Increased More than Two Years $632 million.
However, the report (released Tuesday, titled “Measure the Unexpected Consequences of ULA”) suggests that the tax has kept Los Angeles a once-time market, while more than $5 million in sales remained stable in other markets in Los Angeles County, which are not affected by the tax.
The study, which analysed 338,000 real estate sales over the past five years, found that the decline was the sharpest in terms of business. Under ULA, non-single parent transactions fell 7-15% per month in LA postal codes, a trend that grew to 30-50% over a two-year period.
“The property that has been hit hard is not luxury homes, but multi-family, commercial and industrial buildings, which is the type we need to support housing production and job growth,” Smith said.
The report believes that the decline in business has hurt the city in two ways. First, commercial properties are usually sold much higher than single-family homes, so even a slight decline in sales can lead to a significant decline in tax revenue. Furthermore, commercial sales often lead to new multifamily development, which the city is desperately needed in the housing crisis.
Smith said the decline caused $25 million in property tax revenue per year, which will intensify in the coming years. Loss of income may exceed the funds brought by taxes within a decade.
Property taxes are different from the money brought by ULA transfer taxes. Property taxes flow into the city’s general budget, while ULA taxes are specifically used for affordable housing and homeless programs.
Smith and Manville recommend tax reforms to affect properties that have not been re-evaluated for 20 years, which could exempt multiple-family developers while still targeting luxury homeowners whose property values have soared over the years.
Joe Donlin, director Let’s uniteThe organization that measures Ula says taxes are going on for their purposes.
“On its second anniversary, ULA is already producing hundreds of affordable homes, protecting thousands of renters and creating thousands of construction jobs,” Tang Lin said. “Its initial revenue decline was attributed to developers and real estate halls, hoping to overturn it in a courtroom or ballot box and then lose.”
Taxes survived Legal Challenges Over the past few years, the luxury real estate community has tried to declare the measure unconstitutional. Additionally, revenues splashed in the first year of the program Vulnerabilities found Avoid paying.
As the legal challenges disappeared, revenue and sales both increased year-on-year. The tax raised about $296 million in fiscal year 2024 and has raised $320 million so far in fiscal year 2025. However, these figures are still less than the initial forecast of $900 million per year.
