UCLA Professor Warns Los Angeles ‘Mansion Tax’ Has Undermined Housing Goals

Photo credit: Allison Saeng via Unsplash

LOS ANGELES, Calif. — A new opinion essay by UCLA Luskin School of Public Affairs urban planning professor Michael Manville argues that Los Angeles’ Measure ULA, commonly known as the “mansion tax,” has generated far less revenue than expected while discouraging housing production, illustrating how policy design can produce unintended consequences.

Writing in The Washington Post, Manville examined the 2022 ballot measure, which imposed a 4% tax on property sales above $5 million and a 5.5% tax on sales exceeding $10 million. The measure was intended to generate funding for affordable housing, tenant protections and homelessness prevention programs.

Manville does not dispute the need for those goals. Instead, he argues that the measure demonstrates how the structure of a policy can undermine the objectives it was intended to achieve.

“The devil is in the details,” Manville wrote, arguing that while policy goals may be widely shared, successful implementation depends on careful attention to how legislation is written.

He noted that Measure ULA emerged amid Los Angeles’ worsening housing affordability crisis, where rents and home prices have continued to rise while housing construction has lagged behind demand. Supporters argued that taxing high-value real estate transactions would generate funding for affordable housing without affecting most residents.

According to Manville, the measure’s political appeal rested largely on its limited reach.

“For one, most people would never pay it,” he wrote. “It was, its proponents said, ‘a tiny tax on mega mansions’ aimed only at ‘millionaires and billionaires.’”

He acknowledged that Los Angeles has legitimate reasons to redistribute some of the enormous gains produced by rising property values. He pointed to a long-standing principle in public finance that land can be taxed efficiently because it cannot be moved or hidden and because much of its appreciation reflects broader economic conditions rather than the actions of individual property owners.

“Suppose you bought a home in Los Angeles in 2000,” Manville wrote. “By 2025, its value probably quadrupled — but not because of anything you did.”

While homeowners may renovate or improve their properties, Manville argued that much of the increase in land values results from regional economic growth combined with a failure to build sufficient housing.

“You got lucky,” he wrote, concluding that “it can make sense for the government to tax and redistribute a portion of your windfall gain.”

According to Manville, however, the specific design of Measure ULA prevented it from functioning as an effective revenue source.

He explained that every tax produces two primary effects: generating revenue and changing behavior.

“Any tax will create some combination of two outcomes: new revenue and changed behavior,” he wrote. “Which of these results is stronger depends on how the tax is designed.”

In Manville’s view, Measure ULA was written more like a tax intended to discourage transactions than one designed to generate stable public revenue.

He argued that taxes intended to maximize revenue generally feature relatively low rates applied across broad tax bases. Measure ULA instead imposed unusually high transfer tax rates while applying only to a narrow slice of real estate transactions.

According to Manville, only about 4% of property sales in Los Angeles exceed the $5 million threshold.

“This is where things went wrong,” he wrote.

Because the tax affects a relatively small number of transactions, Manville argued that many property owners simply chose not to sell.

“The narrow base was a political advantage but a fiscal liability,” he wrote. “It made ULA’s revenue reliant on a small group of people who, precisely because they weren’t everyday owner-occupants, could avoid the tax by choosing not to sell.”

According to Manville, that behavioral response dramatically reduced the revenue generated by the measure.

“When the tax took effect, higher-end sales plunged, and stayed down,” he wrote.

He noted that Measure ULA had originally been projected to generate as much as $1.1 billion annually. Instead, he wrote, the tax has averaged roughly one-third of that amount.

Manville also argued that the decline in property sales has created secondary fiscal consequences for local government.

Under California law, many properties are reassessed for tax purposes only when ownership changes hands. Because fewer transactions occur under Measure ULA, he wrote, fewer reassessments take place, reducing property tax revenue that supports schools and other local public services.

Manville contended that the measure’s greatest unintended consequence may be its effect on housing production itself.

Although popularly described as a tax on luxury homes, he noted that Measure ULA applies to all qualifying transactions above the specified thresholds, including commercial, industrial and multifamily properties.

Those properties, he argued, are central to residential development.

“Constructing an apartment building often means buying a parcel to build on and selling it once complete,” Manville wrote. “ULA takes a bite out of both.”

He cited a RAND study published in May estimating that Measure ULA has reduced construction of large apartment buildings by approximately 30%.

“If that’s right,” he wrote, “the tax is aggravating the crisis it was written to remedy.”

Rather than concluding that cities should abandon affordable housing programs, Manville argued that policymakers should pay greater attention to the details of tax design.

“Though good intentions matter, boring details matter more,” he wrote. “A carelessly written statute can easily convert bold visions into unintended consequences.”

He also questioned whether taxes narrowly targeting wealthy property owners provide the most reliable way to finance broad social programs.

“Taxing the rich has its place,” Manville wrote, “but social programs are expensive, and they require stable revenue.”

He argued that broader tax bases generally produce more predictable funding while reducing economic distortions associated with concentrating taxes on relatively few transactions.

According to Manville, Measure ULA leaves many real estate gains untaxed because homeowners whose properties appreciate substantially—but remain below the $5 million threshold—pay nothing under the measure.

“The city could raise more money, with fewer unwanted side effects, with a lighter tax on many transactions,” he wrote.

Ultimately, Manville argued that Los Angeles cannot solve its affordability crisis through subsidies alone because the underlying problem remains an insufficient housing supply.

He described housing scarcity as the root cause of high rents and home prices throughout Los Angeles and other high-cost metropolitan areas.

“A safety net is crucial, but programs like Measure ULA need to complement, not compete with or cannibalize, efforts to build,” Manville wrote.

He concluded that while housing assistance programs can help households struggling with current rents, long-term affordability depends on increasing the number of homes available.

“Subsidies can help people cope with high rents,” he wrote, “but rents won’t come down until housing comes up.”

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