(Bloomberg) -- Housing construction and tax revenue in the city of Los Angeles are being hurt by a voter-approved levy on high-priced property sales, according to researchers at the University of California at Los Angeles.
The tax on high-value properties, including multi-unit buildings, has caused a 50% drop in sales above the $5 million threshold, researchers at the Luskin School of Public Affairs estimate in a report released Tuesday.
That decline has undermined residential construction, limited new commercial and manufacturing opportunities and weakened the city’s property tax revenue growth, the researchers said. Elsewhere in Los Angeles County, sales of high-end properties have risen, they found.
Building permits for multifamily projects in the city of Los Angeles also plunged in 2023 and 2024 after Measure ULA took effect. The number of applications for apartments in buildings with at least five units fell to 4,775 in 2024 from 11,786 in 2022, according to data collected by the California Homebuilding Foundation, an industry trade group.
“The high-value transactions that ULA targets are only a small share of total sales in the city,” UCLA professor Michael Manville and Mott Smith, an adjunct professor of public policy at the University of Southern California, wrote in the report. “But they account for a disproportionate share of growth in the city’s property tax base, and a disproportionate share of the sales that lead to new housing starts and new local jobs,”
{{/usCountry}}“The high-value transactions that ULA targets are only a small share of total sales in the city,” UCLA professor Michael Manville and Mott Smith, an adjunct professor of public policy at the University of Southern California, wrote in the report. “But they account for a disproportionate share of growth in the city’s property tax base, and a disproportionate share of the sales that lead to new housing starts and new local jobs,”
{{/usCountry}}Dubbed the “mansion tax,” Measure ULA went into effect in April 2023, imposing a 4% tax on Los Angeles properties that sell for $5 million or more, and a 5.5% tax on those priced at $10 million or above. The tax also applies to sales of apartment buildings worth more than $5 million. Its thresholds adjust for inflation.
Revenues from the tax are earmarked for affordable housing production and homelessness prevention.
The program was projected to raise $600 million to $1.1 billion annually, but from April 2023 to December 2024, it generated just $480 million, or $288 million per year, well below expectations, according to the city’s ULA Dashboard.
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