LA’s Luxury Home Market Generates Most Measure ULA Funds
Measure ULA proponents may have justification for the nickname “mansion tax.”
Residential Transactions Dominate Revenue Generation
Single-family residential transactions account for the largest bucket of money generated so far by the property transfer tax. Revenue from the residential category totaled $11.6 million, or 59 percent of the total, in September, according to the most recent data available from the Los Angeles Housing Department. Residential’s lead is a trend that has held since Measure ULA went into effect last April, with the segment accounting for nearly 39 percent, or $156.6 million, of total funds raised to date.
Commercial and Multifamily Transactions Lag Behind
Commercial in September was the laggard of the property types in terms of revenue generation, bringing in $4.5 million across four deals. Since the start of ULA, commercial deals generated $112.4 million from 126 transactions. Revenue from multifamily is reported separate from commercial, with one transaction last month that brought in $4.7 million. Multifamily deals have totaled 63 transactions since Measure ULA’s start, equating to $48.1 million in revenue.
Top Performing ZIP Codes
The ZIP codes with the highest number of transactions since implementation are 90272, which is Pacific Palisades, and 90049, which includes neighborhoods such as Bel-Air and Brentwood.
Voter-Approved Measure and Revenue Projections
Voters approved Measure ULA in November 2022, with the ballot initiative originally projected to bring in $600 million to $1.1 billion annually to fund affordable housing, homeless prevention, and tenant assistance programs. Media and proponents labeled it a “mansion tax.” The ballot initiative also created a Citizens Oversight Committee, which held its October meeting this week, to function as a watchdog.
Revenue Shortfall and Efficacy of Measure ULA
The program has missed on its initial revenue estimates with $296.7 million collected in the 2024 fiscal year ended in June. A report released in April and co-authored by individuals from Occidental College, UCLA, and USC largely applauded ULA as “effective in improving housing conditions” in the city. The report, called “Measuring LA’s Mansion Tax,” cited $54.7 million in development projects being funded by ULA and another $24 million in rental assistance as some examples of that efficacy.
Real Estate Agent Perspective
For real estate, agents have reported a cooling of sales activity because of the tax, or in the case of residential, deals shifting to cities other than Los Angeles, such as Malibu or Beverly Hills, to avoid the issue. Brokers say some sellers have largely accepted that the tax is not going away any time soon.
Expert Insights
Nourmand & Associates President Michael Nourmand described two different client perspectives in relation to Measure ULA. One client told Nourmand he will no longer buy property within the city. Another is happy because they have no plans to sell and, therefore, don’t have to think about paying the tax.
"For a lot of people, it has postponed things," Nourmand said.
Christie’s International Real Estate Southern California CEO Aaron Kirman said, "I think the city eventually is going to realize they’re losing billions of dollars to make a couple hundred million."
Conclusion
The luxury home market in LA has generated the most revenue for Measure ULA, but industry experts warn of long-term consequences, including deal contraction, and broader economic impacts. As the program continues to evolve, it remains to be seen whether it will live up to its original intentions.
FAQs
Q: What is Measure ULA?
A: Measure ULA is a property transfer tax imposed on properties sold for $5.15 million or more, with a 4% tax applied and a 5.5% tax applied for deals of $10.3 million or more.
Q: What is the purpose of Measure ULA?
A: The purpose of Measure ULA is to raise revenue to fund affordable housing, homeless prevention, and tenant assistance programs.
Q: How much revenue has Measure ULA generated so far?
A: As of September, Measure ULA has generated $156.6 million in revenue, with $11.6 million coming from residential transactions in September alone.
Q: Are there concerns about the impact of Measure ULA on the luxury real estate market?
A: Yes, some real estate agents report a cooling of sales activity and deals shifting to other cities to avoid the tax, while others have accepted that the tax is here to stay.
