Assessing Los Angeles’ Measure ULA: Objectives, Efficacy, Impact, and Legal Compliance

in Real Estate/Tax/Volume VI

By Allen Nobel


Measure ULA, the “Mansion Tax” or the “Homelessness and Housing Solutions Tax,” voted on the November 2022 ballot, aimed to raise taxes on property sales exceeding $5 million within the City of Los Angeles. Measure ULA was approved by voters and became a legally binding ordinance on April 1, 2023.[1]

Amidst widespread debate, Measure ULA introduced a new provision, Section 21.9.2(b), to the Los Angeles Municipal Code. Under this new provision, a 4% tax is imposed on property transfers with a gross value ranging from $5 million to $10 million, while a 5.5% tax applies to transfers of properties exceeding $10 million in gross value.[2]

Notably, this tax is calculated based on the entire property value, irrespective of whether the property is sold at a profit or loss, or if it’s encumbered by a deed of trust. Unlike standard property taxes that are often based on the assessed value of a property, Measure ULA imposes its tax based on the property’s entire value at the time of transfer, without consideration for the property’s selling price or its financial encumbrances. Ultimately, the tax is calculated on the total market value, making it a fixed percentage of the property’s worth. 

Moreover, the tax applies irrespective of the property’s financial obligations. Typically, when a property is under a mortgage or any other form of financial encumbrance, the outstanding debt might impact the property’s market value. However, Measure ULA does not take these encumbrances into account1. Whether a property is free and clear or mortgaged, the tax liability remains the same, calculated on the property’s entire value. It essentially means that property owners need to factor in the full market value of their property when considering the financial implications of a sale, regardless of their specific financial situation. This unique taxation method has brought forth challenges and concerns among property owners, developers, and investors, as they grapple with the implications of Measure ULA on their real estate dealings.


The House LA Fund, established by Measure ULA, serves to collect special tax revenue to allocate resources to specified projects for a specific purpose. Revenues from a special tax don’t go into the city’s general fund but rather a fund for a dedicated purpose. 

Measure ULA’s objectives were ambitious: it was expected to generate $600 million to $1.1 billion annually, earmarked for various housing-related initiatives such as subsidized housing development, property acquisitions and refurbishments, rent assistance, and other programs addressing housing and homelessness issues. Mayor Karen Bass has outlined a budget plan amounting to $13.1 billion, with a dedicated allocation of $1.3 billion to address the issue of homelessness.[3]

However, after the bill went into effect, the projected revenue from Measure ULA has been significantly lower, expected to be only $150 million. Out of this amount, $62 million is earmarked for property acquisition and rehabilitation, $25 million is designated for eviction defense, and $20 million is set aside for providing short-term emergency assistance to tenants.[4] The shortfall has raised concerns about the initiative’s efficacy and its impact on the real estate market. 

In the midst of heated debates surrounding the bill, prominent advocates share, “We’re talking about very, very high-wealth individuals, but even more so large real estate corporations that honestly have not been paying their fair share and have been making a killing off of this housing market as it is now.”[5] This encapsulates the passionate discourse surrounding this legislation, highlighting the focus on high-net-worth individuals and corporate entities, shedding a light on a pressing issue of equity and taxation within the housing sector. City financial advisors are warning about potential risks tied to a special tax, cautioning that the city may have to refund all funds if a consolidated lawsuit ends unfavorably.[6]

Efficacy and Impact on Real Estate

The Measure ULA tax is levied in addition to the existing documentary transfer taxes imposed by both Los Angeles County and the City of Los Angeles prior to April 1, 2023. Importantly, the Measure ULA tax also applies to real estate transactions that are part of Section 1031 exchanges, a provision in the U.S. Internal Revenue Code that allows investors to defer capital gains taxes on the exchange of certain types of property, including real estate, for similar properties. Furthermore, the tax applies to all asset classes of real estate, including commercial, residential, and industrial properties located in the City of Los Angeles. 

The inclusion of real estate transactions under Section 1031 exchanges in Measure ULA’s tax purview introduces a significant complexity in the realm of tax-deferred exchanges. Section 1031 exchanges are instrumental for investors seeking to defer capital gains taxes by exchanging one property for another similar property. This mechanism promotes property investments and portfolio growth. However, with Measure ULA’s imposition of additional taxes on these exchanges, investors engaging in 1031 transactions face a considerable financial burden. Not only are they navigating the intricate process of exchanging properties, but they must also calculate and incorporate the Measure ULA tax into their financial considerations. The added tax layer in 1031 exchanges alters the cost-benefit analysis, potentially deterring investors and significantly impacting decision-making, potentially reshaping the landscape of property exchanges in Los Angeles.

To gain a comprehensive understanding of Measure ULA’s impact on the Los Angeles real estate market, it is most informative to contrast Measure ULA with the previous City transfer tax rates that were in place prior to the implementation of the ‘mansion tax’. Previously, all real estate transactions incurred a City transfer tax of 0.45% and an additional County of Los Angeles transfer tax of 0.11%.[7] The substantial increase in these tax rates will inevitably have a far-reaching influence on the real estate industry.

As reported by The Los Angeles Times, data from the Multiple Listing Service (“MLS”) revealed a significant shift in the high-end real estate market during March and April of 2023.[8] The immediate effect of Measure ULA was a rush of high-end property transactions in March 2023. In March, there were 126 homes and condominiums listed with prices exceeding $5 million in the city, but in April, this number decreased significantly to merely two listings. This sharp decline can be attributed to the understandable rush by property owners and developers to finalize escrow transactions before the effective date of Measure ULA on April 1st. 

Certainly, the opposition to the bill is rooted in concerns that its implementation would have significant repercussions on the real estate market in Los Angeles. One of the major contentions raised by critics is that the bill’s structure, which heavily relies on revenue from apartment building sales, would act as a deterrent for developers looking to invest in the city.

Developers operate within a competitive market where profit margins are crucial. When a developer invests in a project, they calculate costs, potential profits, and associated risks. The scenario outlined by real estate executive Moses Kagan exemplifies the issue at hand. In this example, a developer invests $7 million to construct an apartment complex and aims to sell it for $10 million, making a profit of approximately $2.3 million after factoring in all expenses.[9]

However, if the bill imposes a 5.5% transfer tax on the sale, it amounts to a hefty $550,000 tax. In the context of the deal, this tax constitutes roughly 24% of the total profit. Typically, deals are structured with investors receiving 80% of the profit and developers getting 20%.[10] With such a substantial portion of the profit being claimed by the transfer tax, the financial viability of the deal comes into question. For the developer, this tax burden could potentially render the entire project unfeasible.

This situation creates a dilemma for developers. They would have to either absorb the additional cost, cutting into their profits significantly, or attempt to pass the burden onto the buyers, which could lead to higher property prices. Higher prices, in turn, might discourage potential buyers, further stagnating the real estate market. Moreover, the bill could disincentivize developers from new projects altogether, fearing similar financial hurdles in future ventures.

The consequences extend beyond developers. Landowners, too, face challenges. The discouragement of developers from investing in properties means that landowners might find it harder to sell their land at competitive prices. Reduced demand for land could potentially lead to stagnation in property values or, in extreme cases, depreciation. This scenario would negatively impact both property owners looking to sell and the overall economic landscape of the city. Additionally, it may contribute to a shortage of affordable housing because developers may be deterred from building new projects. 

Additionally, the bill’s impact on the real estate market could have a ripple effect on related industries, such as construction, architecture, and interior design. A slowdown in real estate development could lead to job losses and reduced economic activity in these sectors, contributing to a broader economic downturn.

Legal Compliance 

Measure ULA’s tax legality has been challenged on multiple fronts. On the ballot in November 2022, it garnered the support of 57% of voters. In December 2022, two special interest groups, namely the Howard Jarvis Taxpayers Association and the Apartment Association of Greater Los Angeles, initiated a lawsuit.[11] Their argument centered on the assertion that this specific tax was unconstitutional due to its violation of Proposition 13 of the California Constitution, which limits property tax increases on both residential and commercial properties. Proposition 13 establishes fixed base year values for all real property, imposing a capped annual increase of assessments at 2%, and limits property taxes to 1% of the assessed value, along with additional voter-approved taxes. According to their claim, the contested tax contradicted these foundational principles, forming the basis of their legal challenge.

Shortly after the initial legal proceedings, a state-level lawsuit was filed by Newcastle Courtyards, asserting that local governments lack the jurisdiction to impose the contested “special tax.”[12] This additional lawsuit adds to the complexity of the case, further challenging the authority of Measure ULA and raising significant questions about the legality of the transfer tax imposed by the local government. The ongoing legal battle now involves both the initial constitutional concerns and this new dimension, intensifying the scrutiny on the city’s actions and the legal intricacies of Measure ULA.

Following the legal action initiated by the Howard Jarvis Taxpayers Association and the Apartment Association of Greater Los Angeles to block the implementation of Measure ULA, Laura Raymond, co-chair of the YES ON ULA Coalition and director of the Alliance for Community Transit-Los Angeles (ACT-LA), issued a statement. 

Raymond expressed disappointment but no surprise at the efforts of real estate and corporate interests attempting to maintain the current situation and perpetuate the homelessness and housing crisis. Despite their considerable spending to dissuade city voters, Raymond emphasized that the citizens’ authority to introduce the measure, backed by a coalition of over 230 community and labor organizations, is substantial. She added, “this would be the biggest investment in tenant protections in the history of LA.”[13] She highlighted the rulings from the California Supreme Court and recent Court of Appeals decisions affirming the broad initiative power of citizens, indicating confidence that Measure ULA’s validity will prevail, similar to other comparable measures. 

Subsequently, many of the supporters have joined as defendants to the lawsuit, they contend that the California Supreme Court has previously affirmed citizens’ ability to propose measures for the ballot, and recent rulings from the Court of Appeals have reiterated that cities cannot restrict residents’ initiative power concerning special tax measures on the ballot.

On September 5, a federal judge, John Kronstadt, dismissed the legal challenge against Measure ULA, stating that the federal court was not the appropriate venue for the case involving Newcastle Courtyards LLC v. City of Los Angeles.[14]

Judge Kronstadt asserted that federal courts possess limited jurisdiction and, when lacking subject matter jurisdiction, must dismiss the complaint entirely. Newcastle Courtyards’ attorney, Keith Fromm, plans to appeal the decision, insisting that the ULA violates the U.S. Constitution’s equal protection clause, harming the city’s real estate industry and impeding affordable housing efforts. 

Despite the challenge’s rejection in federal court, Newcastle Courtyards is also engaged in a separate legal battle against Measure ULA in L.A. Superior Court, where their case was combined with those of Howard Jarvis Taxpayers Association and Apartment Association of Greater Los Angeles.[15] The Los Angeles Superior Court faced challenges in finding a suitable judge for the high-stakes legal battle over the city’s controversial transfer tax. After the initial judge, Curtis Kin, was reassigned, the second assigned judge, Joseph Lipner, recused himself following concerns about his impartiality raised by a lawyer involved in the case. The attorney representing one of the plaintiffs questioned Lipner’s suitability due to his previous association with a law firm representing a defendant in the case. Lipner’s recusal triggered a search for a third judge. On August 24, Judge Barbara Scheper was assigned to the case.[16]

On October 24, 2023, a Los Angeles County judge swiftly concluded the legal battle over the city’s “mansion tax” by dismissing the lawsuit that sought to declare it unconstitutional. Judge Barbara Scheper of the Los Angeles Superior Court issued a tentative ruling dismissing the challenge after hearing arguments from both parties. With the court’s recent decision, the City Council is expected to revisit spending plans, potentially directing more resources toward housing and homelessness issues.[17]


In light of the complexities and controversies surrounding Measure ULA, the “Mansion Tax” or the “Homelessness and Housing Solutions Tax,” it is my strong recommendation that this tax be repealed. The implications of Measure ULA on the real estate industry are profound, with a direct impact on the middle and low-income classes due to the escalating housing costs it triggers. This tax, despite being calculated on the entire property value at the time of transfer, fails to consider the financial encumbrances or obligations tied to the property. Such a blanket approach can lead to unforeseen financial burdens for property owners, especially those under mortgages or other forms of financial constraints. Furthermore, the initial projections of revenue generation from Measure ULA have fallen significantly short, raising doubts about its efficacy and its alignment with Proposition 13. Considering these factors, it is evident that the tax is not only causing financial strain but is also falling short of its intended revenue targets, making its repeal a sensible course of action.

The objectives outlined by Measure ULA, such as the creation of the House LA Fund to address housing and homelessness issues, are commendable. However, the substantial shortfall in the expected revenue poses a significant challenge to the successful implementation of these initiatives. The discrepancy between the promised $600 million to $1.1 billion annually and the actual projected revenue of $150 million raises questions about the tax’s effectiveness in achieving its goals. Additionally, the potential risks associated with a special tax, as warned by city financial advisors, and the looming threat of a state ballot initiative further highlight the need for a reconsideration of Measure ULA. The discrepancy in revenue projections and the potential risks make it clear that the tax may not be the most efficient or sustainable solution to address the housing crisis in Los Angeles.

In assessing the impact of Measure ULA on the real estate market, it is evident that the tax has disrupted established practices and introduced complexities, particularly with its application to Section 1031 exchanges. The immediate rush of high-end property transactions before the tax’s implementation in April 2023 suggests a lack of confidence in its implications on the real estate market. Furthermore, the disproportionate burden placed on developers and investors, as illustrated by the example of a 5.5% transfer tax eroding a significant portion of a project’s profit, raises concerns about the long-term viability of real estate ventures in Los Angeles. 

The potential ripple effect on related industries and the broader economy underscores the need for a careful reevaluation of Measure ULA to ensure a balanced and sustainable approach to addressing housing and homelessness issues without unduly burdening the real estate sector.

[1] Los Angeles “Mansion Tax” – Measure ULA, Its Impact on Property Owners, & Refunds, JDSUPRA, (last visited October 20, 2023).

[2] Id.


[3] Shane Phillips, Maya Ofek, How Will Measure ULA Transfer Tax Initiative Impact Housing Production in Los Angeles?, UCLA LEWIS CENTER, (last visited November 7, 2023).

[4] Id.

[5] YES ON ULA STATEMENT, YES ON ULA, visited October 19, 2023).

[6] Can LA’s ‘Mansion Tax’ Unlock Affordable Housing Across California?, BLOOMBERG, (last visited November 14, 2023).

[7] Id.

[8] Shane Phillips, Maya Ofek, How Will Measure ULA Transfer Tax Initiative Impact Housing Production in Los Angeles?, UCLA LEWIS CENTER, (last visited November 7, 2023).

[9] Can LA’s ‘Mansion Tax’ Unlock Affordable Housing Across California, supra note 6.

[10] Id.

[11] Andrew Asch, Second Judge Steps Away From Measure ULA Lawsuit, THE REAL DEAL,,Amendment%20of%20the%20U.S.%20Constitution. (last visited November 2, 2023).

[12] Andrew Asch, Measure ULA Lawsuit Rejected By Federal Judge, THE REAL DEAL, (last visited November 2, 2023).

[13] YES ON ULA STATEMENT, YES ON ULA, visited October 19, 2023).

[14] Andrew Asch, Measure ULA Lawsuit Rejected By Federal Judge, THE REAL DEAL, (last visited November 2, 2023).

[15] Id.

[16] Id.

[17] Jack Flemming, ‘Mansion Tax’ prevails in court as judge dismisses lawsuit challenging Measure ULA, LOS ANGELES TIMES, (last visited November 21, 2023).