How L.A.’s Mansion Tax Backfired When it Comes to Affordable Housing

Tuesday, April 22, 2025

• Mansion misfire: L.A.’s so-called Mansion Tax, has sharply reduced high-value property sales slowing housing development, job creation, and tax revenue while falling short of its projected income goals.

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Urban Development

How L.A.’s Mansion Tax Backfired When it Comes to Affordable Housing

When they went to the polls in 2022, voters in Los Angeles thought they were voting for a straightforward solution to the affordable housing crisis. Measure ULA called for a "Mansion Tax" on high-end property sales that would help fund housing programs in the city. But now that it is over two years in, a new report from UCLA reveals a far more complex and potentially damaging reality unfolding. What was intended to exclusively target the city's wealthiest has instead cast a wide net, taxing not just opulent estates but crucial commercial, industrial, and multifamily properties as well. This unforeseen consequence is dramatically chilling high-value real estate transactions, raising serious questions about whether this well-intentioned measure is inadvertently undermining the very economic engines and housing development it aimed to support.

The stark findings of the UCLA study paint a picture of a market reacting sharply and unexpectedly to Measure ULA. Since its implementation, the likelihood of a property transaction exceeding the tax threshold has plummeted by half, with commercial and residential development seeing significant drops in activity. This isn't just about wealthy homeowners reconsidering their next move, it's about stalled investments in the creation of new housing and the potential stagnation of vital economic sectors. The report argues that by also taxing developers and income-producing properties, ULA penalizes the very activities needed to address the housing shortage and generate city revenue, creating a paradoxical situation where the cure might be exacerbating the disease.

As other cities contemplate similar policies, Los Angeles's experience serves as a critical cautionary tale. The unintended consequences of ULA highlight the delicate balance required when designing taxes meant to serve the public good. While the desire to address inequality and fund vital services is undeniable, the UCLA report suggests that a poorly structured tax, even one with noble intentions, can trigger unforeseen behavioral shifts that ultimately harm the broader economy and the very populations it seeks to help. The debate now centers on whether Los Angeles can recalibrate its approach before the ripple effects of this "Mansion Tax" create even deeper challenges for the region's housing and economic future.

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Propmodo Daily is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.

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