The United to House LA (ULA) “mansion” tax has been a complete and utter failure for the city of Los Angeles. In 2022, the measure was put on the ballot, described as a “mansion tax for millionaires and billionaires to pay their fair share” to fund affordable housing and homeless services.
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On the surface, it sounded like a well-intended, logical way to support hard-working families who are struggling to afford housing. In reality, once ULA was enacted in April 2023, it became crystal clear that the voters had been misled and manipulated.
The impact of ULA on the LA luxury market
In fact, not only did ULA add a 4 percent tax to homes sold over $5 million and a 5.5 percent tax on homes sold over $10 million, but it also added the 4 percent or 5.5 percent tax to all commercial real estate sales over $5 million and $10 million. This includes all multifamily, office, retail, mixed-use, industrial, land and all other real estate asset classes. Why was it described to voters as a mansion tax?
For those not familiar with the housing stock in Los Angeles, there are plenty of tear-downs and old fixers that trade in the $5 million to 10 million-plus range each year. Many of these homeowners paid $100,000 – $500,000 for these properties decades ago and will only become millionaires when their properties sell, which is often after they have deceased.
The sales proceeds are generally split among multiple family members after all debts and obligations have been paid off. These home sales do create a level of wealth, but my point is the vast majority of sellers in Los Angeles are not crypto billionaires, tech venture capitalists or A-list celebrities.
There is another tranche of sellers who are selling their homes at a loss, which includes some developers and some owners who bought their properties at peak prices during the COVID years. If you bought your home for $5.25 million in 2020 and sell it for $5.75 million in 2025, you still have to pay 4 percent ULA tax on top of the 6 percent broker commissions and closing costs, which means you are selling at a loss. Why are homeowners forced to pay a 4 percent or 5.5 percent tax when they sell at a loss?
The impact of ULA on real estate professionals
There is another quiet underlying current that no one likes to address, so I have taken the liberty to do so. The real estate ecosystem is one of the main drivers of the Los Angeles economy, and as a result of this bill, the real estate industry has been devastated.
Residential sale sides over $5 million in the MLS have plunged almost 40 percent since ULA kicked in. The calculus gets even worse when you deduct the transfer tax and ancillary tax revenues the city did not collect from the $6 billion of home sales that did not happen.
The real estate eco system is vast and includes real estate agents, brokerages, lenders, banks, escrow and title companies, builders, architects, designers, contractors, inspectors, food vendors, cleaning services, plumbers, electricians, roofers, landscapers, pool services, sub contractors, suppliers, manufacturers, labor, construction vehicles, tools, utilities, security companies, insurance and on and on and on.
Keep in mind, there is just as much, if not more, tax revenues that were not collected from the commercial real estate engine that has been impacted just as much, if not more.
With the pace of home sales stalled dramatically since ULA went into effect, the measure will end up raising about $800 million over the first three years, which is well short of the $600 million to $1.1 billion annually projected. We need to deduct all of the tax revenues and opportunity costs noted above from the $800 million collected to get to the net value of the ULA tax.
I have been an Angelino my entire life, and the affordable housing and homeless crisis is horrific. Billions of dollars have been raised and squandered annually, and the issue has only compounded. This is an entirely different topic for another day.
The ULA mansion tax is not going to make a dent in our housing crisis, and it is by no means a viable solution to a cancer that is plaguing one of the greatest cities in the world. Real estate is critical to our vibrant economy as thousands of people depend on it to support themselves and their families.
The leadership in the city of Los Angeles has to do better and take accountability. The ULA mansion tax has been a failure and needs to be overturned immediately.
