A comprehensive guide to LA's Measure ULA transfer tax, why it's controversial, and the effort to repeal it through the Local Taxpayer Protection Act.
What Is Measure ULA?
Measure ULA, often called the "Mansion Tax," is a transfer tax on Los Angeles real estate transactions that took effect in April 2023. Despite the nickname, it applies to far more than mansions—including many multifamily apartment buildings.
The Tax Rates
- 4% transfer tax: Properties selling between $5,300,001 and $10,000,000
- 5.5% transfer tax: Properties selling above $10,000,000
These rates are in addition to existing transfer taxes, making LA one of the most expensive places in the country to sell commercial real estate.
What It Funds
ULA revenues are dedicated to homelessness prevention and affordable housing initiatives in Los Angeles. The measure was positioned as a way to address the city's housing crisis by taxing high-value real estate transactions.
How ULA Passed
Measure ULA was approved by Los Angeles voters in November 2022 with approximately 58% support. This is where the controversy begins.
The Two-Thirds Question
California's Proposition 13 (1978) generally requires a two-thirds supermajority to pass special taxes. However, a 2017 California Supreme Court ruling created what critics call a loophole: citizen-initiated measures could pass special taxes with a simple majority.
ULA was structured as a citizen initiative specifically to take advantage of this ruling, allowing it to pass with 58% rather than the 67% that would otherwise be required.
The Legal Challenge
The Howard Jarvis Taxpayers Association (HJTA) argues this approach violates the spirit—if not the letter—of Proposition 13. They contend ULA was unconstitutional from inception and have pursued both legal challenges and now a ballot initiative to overturn it.
Impact on the LA Multifamily Market
Transaction Volume Has Dropped
Since ULA took effect, sales of properties above the $5.3 million threshold have declined significantly. Many owners who would otherwise sell have chosen to hold, unwilling to pay what can amount to hundreds of thousands of dollars in additional transfer taxes.
Real Dollar Impact
Consider a 20-unit apartment building selling for $8,000,000:
- ULA tax (4%): $320,000
- Plus existing transfer taxes: ~$36,000
- Total transfer taxes: ~$356,000
That $320,000 ULA payment comes directly out of the seller's proceeds—or gets factored into pricing negotiations between buyer and seller.
Market Distortions
ULA has created some unusual market dynamics:
- Threshold effects: Properties priced just above $5.3M may be harder to sell than those priced below
- Hold decisions: Owners delay sales waiting for potential repeal
- Negotiation complexity: Buyers and sellers must decide who bears the tax burden
- 1031 exchange complications: The tax reduces exchange equity, affecting replacement property options
The Repeal Effort: Local Taxpayer Protection Act
HJTA has filed a statewide ballot initiative called the Local Taxpayer Protection Act to Save Proposition 13. If passed by California voters, it would:
- Repeal Measure ULA at the end of 2028
- Prohibit future transfer taxes above 0.11% statewide
- Close the loophole that allowed ULA to pass with a simple majority
- Require two-thirds approval for future special taxes via citizen initiative
Qualification Requirements
The initiative requires approximately 875,000 valid signatures from California voters to qualify for the November 2026 ballot. HJTA has submitted over 1.2 million signatures, providing a buffer for invalid submissions.
Arguments For and Against Repeal
Arguments for Repeal
- Constitutional concerns: ULA circumvented Prop 13's two-thirds requirement
- Economic impact: The tax has frozen transactions and reduced market liquidity
- Broad application: Despite "mansion tax" branding, it affects commercial and multifamily properties
- Competitiveness: Makes LA less attractive for real estate investment
Arguments Against Repeal
- Voter approval: LA voters approved ULA with a clear majority
- Funding source: Provides dedicated revenue for homelessness programs
- Wealth taxation: Targets high-value transactions rather than broad-based taxes
- Housing crisis: Addresses urgent need for affordable housing funding
Timeline to Watch
- Now: Signature verification underway
- Mid-2026: Measure certified for ballot (if signatures verified)
- November 2026: California voters decide
- If passed, end of 2028: ULA repealed
What Should Property Owners Do?
Stay Informed
This is a developing situation. Monitor campaign developments, polling, and fundraising to gauge likely outcomes.
Plan for Multiple Scenarios
Don't make major decisions based solely on repeal hopes. Consider:
- What if ULA remains in place permanently?
- What if it's repealed in 2028?
- What's your optimal strategy in each scenario?
Consult Professionals
Work with your CPA, attorney, and broker to understand how ULA affects your specific situation and what planning opportunities exist.
Consider Your Timeline
If you were planning to sell anyway, does it make sense to wait for potential repeal? Only if:
- You can afford to hold for 3+ more years
- The tax savings exceed your carrying costs and opportunity costs
- You're comfortable with political risk
The Bottom Line
Measure ULA has significantly impacted Los Angeles real estate transactions since April 2023. The repeal effort represents a serious challenge to the tax, but the outcome remains uncertain. Property owners should stay informed, plan for multiple scenarios, and make decisions based on their individual circumstances.
Questions about how ULA affects your property? Request a valuation to discuss your options.