Revenue From L.A.’s Measure ULA Transfer Tax Increased Despite Slower CRE Sales
Majority of revenue comes from single-family home sales, continuing trend from 2023.
By Nick Trombola October 22, 2024 1:10 pm
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Revenue gained so far this fiscal year from Los Angeles’ “Mansion Tax” is still a far cry from the figures originally projected by proponents and city officials, but the controversial tax has made gains on last year’s monthly numbers.
Tax dollars gleaned from July through September were each higher than their respective months during the previous fiscal year, according to the latest data on Measure ULA from the L.A. Housing Department. The measure pulled in about $91.2 million in the previous three months, compared to the $66.5 million seen in the same period last year.
The improvements are a welcome change of pace for Measure ULA — which imposes a tax rate of 4 percent on all real estate deals above $5.15 million and a 5.5 percent rate on deals above $10.3 million — which has walked a tough road since going into effect in April 2023. Aside from pulling in significantly less money than was expected last fiscal year — about 55 percent below the $604.6 million projected in the city’s budget — the tax was also narrowly saved by the California Supreme Court in June from reappearing as a ballot referendum this November.
Still, the “Mansion Tax” is living up to its nickname on the single-family side. The majority of the revenue so far this fiscal year, about 57 percent, came from single-family home sales, while only about 21 percent has come from commercial sales — roughly the same breakdown as the previous year’s revenue.
The measure arrived amid a stark decline in commercial real estate investment activity in L.A. over the past two years due to declining property values, sinking demand, and high interest rates. After three quarters this year, the city had experienced a roughly 40 percent drop in commercial property sales year-over-year, equivalent to $1.9 billion less than was spent at the same point in 2023, according to a recent market outlook by NAI Capital.
Analysts point to Measure ULA for exacerbating that chilling effect. Commercial sales have brought in just about $112.4 million in Measure ULA revenue to date since the tax went into effect last April.
Nick Trombola can be reached at ntrombola@commercialobserver.com.
