UCLA Report: Measure ULA Has Curbed CRE Deals By Up To 50%
Though commercial real estate professionals in Los Angeles have shouted from the rooftops that commercial sales and development were hit hard by Measure ULA, a new report from UCLA paints a clear picture of the impact.
The report, published last week by UCLA's Lewis Center for Regional Policy Studies and written by UCLA's Michael Manville and Mott Smith of the USC Sol Price School of Public Policy, found that commercial transactions in Los Angeles ZIP codes have dropped between 30% and 50% in the two years since Measure ULA went into effect.
The report also suggests a set of amendments to ULA, including a change that would apply the tax only to single-family residential properties.
Measure ULA began imposing a 4% charge on LA property sales over $5M and a 5.5% charge to sales above $10M in April 2023.
The study looked at 338,000 property sales over the last five years. The decline found in commercial transactions harms the city by decreasing tax revenue from those transactions, many of which happen for higher price points than home sales do, the report's authors wrote.
The measure has also translated into a decrease in multifamily housing production, which the city and region badly needs, the authors wrote.
"While Measure ULA has generated visible, substantial and much-needed revenues for affordable housing in Los Angeles, it has also, less visibly, had consequences that reduce both housing affordability and fiscal health," according to the report.
It doesn't have to be this way, the report's authors wrote. They propose keeping the measure in place but amending it to sidestep what they term "unintended consequences". Among the five amendments they propose is one that would exempt anything that isn't single-family residential property from Measure ULA — in other words, making it a real "mansion tax."
The ideal outcome, the report's authors write, "is one that preserve’s ULA’s ability to raise revenue for affordable housing without jeopardizing new development or property tax growth."
Supporters refute assertions that the measure is doing anything except what it set out to do.
The measure's “initial dip in revenue owes more to developers and the real estate lobby hoping to overturn it in court or at the ballot box — and losing," Joe Donlin, the director of United to House LA, told the Los Angeles Times. UHLA is the organization that put ULA on the ballot.
Amending the measure is "legally and politically difficult," the report's authors acknowledge. They do not go into detail about how those amendments would take place.
Last month, Mayor Karen Bass told CRE professionals she was no longer exploring avenues to pause the real estate transfer tax. It is unclear if she was pursuing a path toward amending the measure.
