LA Mansion Tax Cost City 9,000 Homes, RAND Study Finds

Los Angeles' "mansion tax," officially known as Measure ULA, has led to the loss of over 9,000 new housing units and 16,500 construction jobs, while costing the city $452 million in lost municipal revenue, according to a recent report by the RAND Corporation. The real estate transfer tax, enacted in April 2023, imposes a 4% tax on property sales between $5.4 million and $10.9 million, and a 5.5% tax on sales exceeding $10.9 million, in addition to Los Angeles' standard 0.45% base real estate transfer tax. Contrary to its name, the tax applies to all real estate transactions over $5.4 million, including apartment complexes, office towers, retail spaces, mixed-use buildings, warehouses, and vacant land, not just luxury residences. The 89-page RAND study, titled "The Effects of the Measure ULA (United to House LA) Transfer Tax on Economic Development and Municipal Finances in Los Angeles," found that Measure ULA generated approximately $1.2 billion by early 2026 for affordable housing development and homelessness prevention programs. This amount is less than half of the $2.7 billion initially projected by the measure's proponents. By October 6, the revenue collected by the tax had reached $1.42 million, as per the Los Angeles Housing Department's online tracker. The RAND report's authors stated that the tax has "taken in considerably less than proponents of the initiative originally projected." Furthermore, the study indicates that the tax has "dampened commercial development including market rate housing production, which provides hundreds of millions of dollars a year in fees to fund city services and local schools." Researchers analyzed real estate sales transactions, parcel characteristics, building permits, certificates of occupancy, and other data to assess the tax's economic impact. The RAND Corporation is a nonpartisan global policy think tank that provides objective research and analysis on a wide range of issues. Measure ULA was a ballot initiative approved by Los Angeles voters in November 2022, with the stated goal of generating funds to address the city's housing crisis and homelessness. The measure's revenue was intended to support affordable housing projects and homelessness prevention programs. The RAND study's findings suggest that the tax's design and implementation have had unintended negative consequences on housing supply and economic activity within the city, leading to a significant shortfall in projected revenue and a reduction in new housing construction. The report highlights a disconnect between the intended benefits of the tax and its actual economic outcomes, raising questions about its effectiveness in achieving its stated goals.