L.A. Closer to Scaling Back ‘Mansion Tax’

Los Angeles moves closer to gutting its controversial mansion tax. The City Council voted 9-5 Wednesday to direct the city attorney to draft a ballot measure scaling back Measure ULA, the transfer tax on high-value properties that has drawn consistent pushback from developers and real estate professionals since its 2022 passage.

The proposed amendment would exempt newly constructed homes from the tax. This shift addresses a core complaint from the building industry. New construction has been hit hardest by the levy, which applies a 4% tax on properties selling above $5 million and 5.5% above $10 million. Developers argue the tax suppresses new housing supply in a city facing a severe shortage.

The mansion tax has generated roughly $1 billion annually for affordable housing. Scaling back exemptions risks reducing those revenues, forcing the city to justify the tradeoff between tax revenue and construction incentives. Existing property sellers at higher price points would still pay the full rate under the proposal, but new developments would get relief.

This move reflects growing political pressure on City Hall. Real estate groups have mounted sustained campaigns against ULA, citing its impact on construction timelines and project viability. Some economists argue the tax distorts the market by discouraging new supply at a time when L.A. needs more housing inventory.

Voters would make the final call. Even with council approval to draft the ballot language, the amendment requires voter authorization to pass. This November or next spring election timing remains unclear, but the momentum suggests momentum for some form of relief.

For buyers, the exemption would lower purchase costs on newly built properties but would not affect transactions involving existing homes. Sellers of high-value older properties would still face the full tax rate. Developers should benefit most if the measure passes, as reduced tax burdens could improve project economics and accelerate construction timelines across the city.

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