It turns out most of LA’s ‘mansion tax’ money is not coming from mansions

Measure ULA was pitched to Los Angeles voters two years ago under a much more catchy moniker — the "mansion tax." More than a year since it took effect, most of the money raised so far is not coming from pricey single-family homes.

The measure voters passed in 2022 funds housing and homelessness efforts in the city through a new tax on real estate selling for more than $5 million.

From the start, despite being widely described as a “mansion tax,” the measure has applied to most real estate transactions that meet the $5 million threshold. That includes apartment buildings, offices and retail centers. Recent data show most of the measure’s revenue so far is coming from buildings that are not mansions.

A report last month from the L.A. Office of Finance estimated that since the tax took effect in April 2023, about 46% of revenue has come from the sale of pricey single-family homes. About 54% has come from the sale of other types of real estate, such as offices, retail and apartment buildings.

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Is “mansion tax” a misnomer?

Critics say the tax has broad effects beyond real estate deals involving millionaires and billionaires buying and selling lavish estates in the Hollywood Hills.

“Calling it a mansion tax is a misnomer, given the true economics involved,” said Eric Sussman, an adjunct professor in accounting and real estate at UCLA’s Anderson School of Management.

Some have argued the measure could be deterring the development of new apartment buildings, which are also subject to the tax.

“When you already have a sort of slowdown in the economy and in real estate transactions, layering on taxes is just probably the last thing that you want to do,” Sussman said. “It's going to further exacerbate the slowdown and result in fewer transactions.”

Proponents say the tax is doing what it promised

Proponents defend the “mansion tax” moniker, arguing a large chunk of revenue does come from mansions, and it’s a pithy way to underscore the goal of requiring wealthy households to pay more to address the region’s housing and homelessness crisis.

“Mansion sales far and away are the single largest portion of the revenues that Measure ULA directs towards making housing affordable and protecting Angelenos from eviction,” said Joe Donlin, director of United to House L.A., the coalition that backed the measure.

Commercial and multi-family properties are the second and third largest money-raisers.

“The nickname captures the importance of putting the overheated market for the wealthiest Angelenos in service of those who are experiencing homelessness or living on its edge,” Donlin said.

Where’s the money going?

City finance officials say the tax has now raised more than $375 million. That’s far lower than the original revenue projections of up to $1.1 billion annually.

The money is being allocated to new rent relief efforts to compensate landlords with tenants behind on payments, an expansion of eviction defense programs, stronger enforcement of the city’s anti-harassment rules and the production of new affordable housing.