A new apartment complex in Los Angeles is listed for over $5.3 million, influenced by the Measure ULA, often referred to as the “mansion tax,” which applies to all property types, including apartments.
In 2022, Los Angeles voters approved Measure ULA, which they were told would generate funds for affordable housing by imposing taxes on high-end property sales. However, the reality has been somewhat different. Approximately a third of the anticipated revenue has been held back due to sellers being responsible for these taxes, causing many homes and buildings to be withdrawn from the market. One real estate agent noted that luxury home sales in LA have dropped by around 40%, with commercial property transactions reflecting a similar downturn.
The situation is even more dire with Measure ULA hindering the reconstruction efforts in Palisades following a fire, delaying vital real estate projects.
According to a report from the Los Angeles Times, Measure ULA has faced backlash for its impact on apartment construction.
From September to September, fewer than 19,000 apartments were being built—about 30% less than three years prior, based on Costar’s data.
Investors have expressed concerns regarding public policies like ULA, which affect housing in Los Angeles, along with temporary measures that imposed transfer taxes on significant real estate transactions put in place during the pandemic.
“There’s a fear of what future policies might be,” stated Goldstein, co-founder of GPI Cos.
It’s somewhat ironic that Measure ULA has led to increased housing costs by limiting new supply artificially.
Other factors contributing to the slowdown include tariffs on construction materials and immigration enforcement, which some believe will reduce the availability of migrant labor for construction and subsequently increase labor costs.
Despite issues with Measure ULA’s funding effectiveness, the LA City Council has been working on various programs. However, much of the funding also comes from management fees.
Los Angeles Mayor Karen Bass had considered efforts to repeal Measure ULA, but ultimately backed down last month when it became clear that state lawmakers were not inclined to act on it.
