Los Angeles implemented a new tax on property sales above certain thresholds to generate funds for more housing and other public benefits. For transactions over $5.4 million, there's a 4% tax, increasing to 5.5% for those over $10.9 million. However, this has led researchers Michael Manville of UCLA and Mott Smith of USC to find that property sales above these thresholds have fallen by up to 50%, significantly impacting commercial, industrial, and multifamily properties. This decrease in transactions is estimated to reduce housing construction and local government revenue from property taxes by about $25 million annually initially. Despite this, the city is still allocating funds raised through ULA towards affordable housing projects.
Written locally by qwen2.5:14b on 2026-10-04,
using this article's own text rather than the other coverage of the
same event (that is the story summary below).
Story summary
The LA mansion tax, officially known as United to House LA (ULA), aimed to address the city’s housing crisis by taxing real estate transactions above certain thresholds. Implemented in April 2023, it imposed a 4% tax on sales over $5.4 million and a 5.5% tax on sales over $10.9 million. However, a new report reveals that instead of generating the expected $900 million annually, or $2.7 billion over three years, ULA brought in only around $1.2 billion, failing to meet its revenue targets by almost half.
The tax has also had unintended consequences, blocking the construction of nearly 9,100 homes and eliminating approximately 16,650 full-time jobs in the construction sector. Approximately 1,000 of these homes would have been affordable units needed to alleviate housing shortages. Additionally, ULA applies beyond luxury homes to include apartment buildings, commercial properties, and vacant land, impacting a broader range of real estate transactions than initially anticipated.
Written for “LA Mansion Tax Backfire” on 2026-10-04,
grounded in this article and the 1 other(s) covering the same event.
They were told they were voting for a “mansion tax” on millionaires and billionaires.
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they → tell → millionaires
Far less attention was paid to apartment buildings, commercial property and development sites.
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attention → pay → buildings
Start your day with all you need to know
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you → start → all
Morning Report delivers the latest news, videos, photos and more.
Sell an apartment building above the threshold?
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Report → deliver → threshold
Today, ULA adds a 4% tax to qualifying property sales above $5.4 million and a 5.5% tax to sales of $10.9 million or more — on top of the city’s existing transfer tax.
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ULA → add → tax
And those dollar thresholds are set to increase automatically, tied to inflation.
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thresholds → set → inflation
Even worse, once a sale crosses the threshold, the tax applies to the entire sale price — not just the amount above the threshold.
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tax → cross → threshold
Sell a property for just over $5.4 million and the ULA tax alone can top $216,000.
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tax → sell → 216,000
The distinction matters because politicians love talking about who supposedly pays a tax.
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who → matter → tax
What matters in the real world is what transaction government is taxing — and how people change their behavior to avoid it.
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people → matter → it
Tax cigarettes and politicians expect people to smoke less.
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people → tax → cigarettes
Tax carbon and they expect people to emit less carbon.
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people → tax → carbon
Tax high-value real-estate transactions and apparently everyone is supposed to be shocked when people engage in fewer high-value real-estate transactions.
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people → tax → transactions
Researchers Michael Manville of UCLA and Mott Smith of USC estimate that after ULA took effect, the odds of a Los Angeles property selling above the tax threshold fell by as much as 50%.
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property → estimate → %
Their strongest evidence showed transactions involving commercial, industrial and multifamily properties fell an estimated 30% to 50%.
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transactions → show → properties
That’s the real-estate economy.
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That → ’ → ?
Then comes the real absurdity: housing construction.
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absurdity → come → ?
Los Angeles imposed a tax to produce more housing that researchers now estimate is causing the city to produce less.
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city → impose → less
New housing gets built because somebody believes that after buying land, getting permits, paying fees and financing construction, there will be money to be made.
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somebody → build → construction
Land changes hands.
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Land → change → hands
Apartment buildings are bought and sold.
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buildings → buy → ?
Investors can put their money somewhere else.
Make those transactions more expensive and some housing projects simply don’t happen.
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projects → put → money
Slap another 4% or 5.5% on qualifying property transfers and some deals no longer pencil.
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deals → slap → transfers
Fewer sales carry another cost.
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sales → carry → cost
Because California properties are generally reassessed when ownership changes, Manville and Smith estimate ULA initially reduces property-tax revenue to local governments by roughly $25 million annually, with the losses compounding over time.
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losses → reassess → time
A new tax is suppressing the activity that generates an existing tax.
Meanwhile, Los Angeles is spending the proceeds.
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Angeles → suppress → proceeds
As the California Post reports, the city just authorized a record affordable-housing funding round, with hundreds of millions of dollars coming from ULA.
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hundreds → report → ULA
Of the latest funding round, $55.5 million is going toward 3,713 existing affordable-housing units rather than new construction.
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million → go → construction
That includes properties on Skid Row where court records describe allegations of bedbugs, cockroaches, rats, sewage leaks and human waste.
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records → include → bedbugs
That’s a long way from the sales pitch about producing tens of thousands of affordable homes.
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That → ’ → homes
And it raises another question: After doing all this economic damage to raise the money, are Los Angeles politicians even spending it wisely?
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politicians → raise → it
The Post’s reporting gives taxpayers plenty of reason to ask.
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reporting → give → reason
One developer quoted by the Post distilled this entire fiasco into seven words: “You are taxing housing to pay for housing.”
Hard to improve on that.
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You → quote → that
The sales pitch focused on who would write the check.
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who → focus → check
It ignored what the tax would do.
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tax → ignore → what
Transactions decline.
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Transactions → decline → ?
Projects don’t pencil.
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Projects → pencil → ?
Housing that otherwise might have been built never gets built.
uncertain
that → build → ?
Politicians sell taxes by identifying an unpopular taxpayer and promising everyone else something for free.
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Politicians → sell → something
But Los Angeles didn’t tax rich people.
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Angeles → tax → people
…and 4 more, not listed.
The Aporia
