L.A.’s Mansion Tax Was Meant to Fund Housing. Research Says It May Be Backfiring.
New research suggests Los Angeles’s “Mansion Tax” cancels out a portion of the revenue it was meant to generate. Measure ULA, passed by voters in November 2022, adds a 4% to 5.5% levy on property sales above $5 million to fund affordable housing and homelessness prevention. According to the researchers, California’s Proposition 13 creates an unintended complication: assessments reset only when a property sells, so every sale the tax discourages is also a reassessment — and a property tax increase — that gets deferred.
In Fiscal Externalities of Transaction Taxes: Evidence from the Los Angeles Mansion Tax, academic researchers Daniel Green, Vikram Jambulapati, Jack Liebersohn, and Tejaswi Velayudhan examine how Measure ULA interacts with Proposition 13 to erode the city’s broader property tax base and what that means for the tax’s net fiscal impact.
Key Takeaways:
- Transaction suppression: Measure ULA reduced the monthly sales rate of eligible properties by approximately 38%, a sustained decline in high-value real estate transactions.
- Fiscal offset: Under several realistic alternative scenarios, Measure ULA costs the city more in lost property tax revenue than it raises. Even under the researchers’ baseline estimates, every dollar the tax brings in offsets 63 cents from the property tax base.
- Commercial fragility: While the policy targets “mansions,” commercial properties bear the brunt: monthly turnover plummets 78% compared to a 25% decline for single-family homes, and commercial properties account for roughly half of all Measure ULA revenue.
To arrive at these figures, the researchers combined parcel-level data from the Los Angeles County Assessor’s Secured Roll with deed records from CoreLogic and commercial transaction data from CoStar, covering roughly 2.2 million taxable parcels from 2020 through early 2025. Their core strategy is a difference-in-differences comparison, tracking changes in transaction rates for properties valued at $4.9 million and above within the City of Los Angeles, compared with similarly valued properties elsewhere in LA County, where the tax does not apply. They then used those estimates to calculate the long-run value of both how much revenue Measure ULA generates and how much property tax revenue the city forgoes when fewer sales mean fewer reassessments.
Here’s what their analysis found:
- High-value property sales fall by 38%. In the months leading up to April 2023, owners rushed to close deals to avoid the new tax. After the tax took effect, sales of properties above $5 million fell, and once the distortion from that pre-tax rush is accounted for, a long-run decline of 38%. Under California’s Proposition 13, every sale that doesn’t happen is also a missed opportunity to reset a property’s tax assessment to its current market value.
- The tax may cost more than it raises. Under the researchers’ baseline estimates, 63 cents of every dollar Measure ULA raises is offset by future property tax revenue the city loses — because every sale that doesn’t happen is also a reassessment that doesn’t happen. That problem worsens in a market where sales are already sluggish. In several realistic scenarios, the city collects less total tax revenue than it would have without Measure ULA. Beyond government revenue, the researchers also calculate that for every $1 the tax actually collects, it costs the broader economy $21.
- The “Mansion Tax” hits commercial real estate hardest. Though named for “mansions,” the tax lands hardest on commercial real estate — monthly turnover falls 78% compared to 25% for single-family homes — because commercial owners have more tools to defer or restructure a sale when facing a large transaction tax. That also makes commercial properties the biggest driver of property tax losses.
The researchers point to two directions supported by their findings. The large commercial response suggests that limiting the tax to residential property — as New York and New Jersey do — could substantially reduce fiscal spillovers. More broadly, they note that easing Proposition 13 limits on commercial properties would allow local governments to raise revenue from high-value real estate through more flexible instruments, reducing the dependence on transaction taxes that carry these other costs.
The findings reveal that in a system where property tax growth depends on property sales, taxing those sales risks a self-defeating cycle. Housing program dollars may still flow, but the city’s general fund absorbs losses that accumulate year after year.
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