Mansion Tax Drives LA Housing Projects

Measure ULA in Action

Measure ULA took effect in April 2023. It imposes a 4% tax on property sales over $5.15M and 5.5% on sales above $10.3M. The funds support affordable housing and homelessness prevention.

According to CoStar, despite criticism, the tax has already had a visible impact. In November, developers broke ground on two new affordable projects:

• Alveare, a 303-unit building downtown
• Grace Villas, a 48-unit complex in Lincoln Heights

Both projects received ULA funding. Alveare received $11M of its $72M budget from the tax, while Grace Villas secured $7M toward its $47M cost.

In total, nine previously stalled developments have resumed construction through a $54M accelerator fund tied to the tax. These projects represent 795 new affordable units.

Wider Impact on Housing

Measure ULA has fueled Los Angeles’ largest-ever affordable housing funding round. The current pool totals $376.7M, far above the usual $50M annual average.

These funds are now available to nonprofit builders, for-profit affordable developers, and community groups. They can be used for new construction or adaptive reuse projects. Depending on the project type, funding can cover 30% to 100% of costs.

In addition, Grace Villas shows how ULA funds fit into complex financing. The developers—WORKS, Linc Housing, and GTM Holdings—used a mix of public dollars, tax credits, project-based vouchers, and a city-owned land lease to move the project forward.

The 48 units will be reserved for households earning 30% to 60% of the area median income for the next 55 years. This long-term affordability is crucial in a city where average rents are 35% higher than the national average.

Pushback from Critics

However, real estate leaders say the tax is having a chilling effect. They argue that developers are pulling back due to the reduced returns caused by the high tax rates.

“Developers are hesitant to build in Los Angeles because of the ULA tax on the back end,” said Kitty Wallace, vice chair at Colliers. “That tax significantly impacts returns, and as a result, many projects aren’t moving forward.”

A UCLA study supports that concern. It found that the tax may have reduced transaction volume, costing the city roughly $25M per year in lost revenue. Some multifamily investors have also scaled back activity in Los Angeles as a result of the tax’s impact on deal economics.

Where the Money Goes

Despite concerns, the tax has produced more than $830M in funding. Of that, about $163M came from residential sales between $5.3M and $10.6M. Nearly $350M came from larger sales. The rest came from commercial and land transactions.

So far, funds have supported eviction defense, homelessness prevention, and construction efforts. Officials report that nearly 800 affordable homes have been created or preserved and that over 11,000 households have received assistance.

In 2024, Los Angeles saw its first decline in homelessness in years. Supporters of Measure ULA say that result shows the tax is working.

Moreover, the city’s Housing Department will now issue funding rounds every year instead of every two years. This change increases the speed at which housing funds can be deployed.

Political Challenges Ahead

Even as Measure ULA funds are being spent, political efforts to weaken or eliminate the tax are gaining momentum.

Mayor Karen Bass has proposed exemptions for wildfire-damaged homes in areas like Pacific Palisades. She has also supported proposed state legislation to exclude certain multifamily properties from the tax.

Meanwhile, the Howard Jarvis Taxpayers Association is backing a 2026 statewide ballot measure. If approved, it would cap local transfer taxes and reinstate a rule requiring two-thirds voter approval for new tax measures.

Legal analysts say the ballot measure would effectively dismantle Measure ULA. It would also limit the ability of other cities to adopt similar taxes in the future.

Why It Matters

For housing advocates, the stakes are high. They argue that Measure ULA has become one of the city’s most powerful tools for fighting homelessness and unaffordability.

Although opposition is growing, supporters point to early successes. In their view, these show what’s possible when cities combine land, policy, and funding to tackle a crisis head-on.

The months ahead will determine whether Los Angeles can continue to scale up its affordable housing efforts—or whether the “mansion tax” will be curtailed before its long-term impact is fully realized.

What’s Next

The city is actively reviewing applications for the current funding round. Meanwhile, the 2026 ballot initiative looms large, with the potential to reshape the future of housing policy in Los Angeles and beyond.