The Ripple Effects of Measure ULA: Assessing Its Impact on LA's Housing Market

In a city long plagued by housing shortages, Los Angeles voters made headlines in 2022 by passing Measure ULA—a new real estate transfer tax designed to help solve homelessness and fund affordable housing development. At first glance, it seemed like a powerful tool: target the city's highest-value property sales and use the revenue for the public good.

But according to a recent policy study from UCLA's Lewis Center for Regional Policy Studies, the full impact of Measure ULA may not be so straightforward. In fact, it could be unintentionally discouraging multifamily housing development, making it harder—not easier—for LA to address its housing crisis.

What Is Measure ULA?

Effective April 1, 2023, Measure ULA (also called the "Homelessness and Housing Solutions Tax") introduced:

• A 4% one time transfer tax on property sales or transfers between $5 million and $10 million

• A 5.5% one time transfer tax on those over $10 million

This tax is levied in addition to existing city and county transfer fees, and it applies to both commercial and residential real estate transactions. The revenue—estimated at $600 million to over $1 billion annually—is intended to support housing initiatives such as rent assistance, homelessness prevention, and new affordable housing construction.

The Unintended Impact on Housing Production

The UCLA report takes a closer look at the unintended effects of this new tax. While designed to apply to high-end properties, in reality, many standard multifamily developments in Los Angeles exceed the $5 million threshold, especially in neighborhoods where land and construction costs are high.

Key takeaways from the study include:

• Developers may delay or cancel projects due to slimmer profit margins post-tax.

• Transaction volume has fallen, especially for mid-sized and larger deals.

• Developers may try to recoup tax costs by raising rents, which could unintentionally offset affordability efforts.
  
  

This highlights a growing concern: while Measure ULA’s revenue may support affordable housing, the tax might also reduce the pipeline of new homes, especially those in the multifamily sector.

Rethinking the Policy: Ideas for Reform

To mitigate these impacts, the researchers recommend exploring targeted policy reforms, such as:

• Exempting new construction from the tax until stabilization or resale.

• Increasing the tax threshold specifically for multifamily or mixed-income developments.

• Offering credits or rebates for projects that include a high percentage of affordable units.

• Reduce the tax to make it more affordable.

These proposed changes wouldn’t undermine the purpose of Measure ULA, but would help align it with economic realities and developer behavior.

What’s at Stake?

Los Angeles has long struggled with producing enough housing for its growing population. According to the Los Angeles County Registrar-Recorder, Measure ULA passed with strong public support, reflecting widespread frustration with homelessness and rising rents.

However, public policy needs more than voter support—it requires careful calibration to ensure long-term success. As the UCLA study authors suggest, LA’s ability to adapt and refine its housing strategy will be critical.

Final Thoughts

Measure ULA represents a bold and ambitious move by the City of Los Angeles to address one of its most pressing social issues. But well-intentioned policies must also be flexible. As the city continues to evaluate ULA’s impact, it's essential that future decisions be guided by clear data, on-the-ground realities, and an openness to reform.

By making thoughtful adjustments, Los Angeles can still meet its housing goals—without discouraging the development needed to reach them.

Sources:

• Taxing Tomorrow: Measure ULA’s Impact on Multifamily Housing Production and Potential Reforms – UCLA Lewis Center

• City of Los Angeles – Measure ULA Overview

• Los Angeles County Registrar – Official 2022 Election Results