Developers Flee – Tax Backfire Guts LA Housing

Hand holding house keys with a wooden house keychain — Photo: shisu_ka / Shutterstock

Los Angeles taxed housing to fund housing—and credible data show it produced fewer homes, fewer jobs, and a weaker market instead.

Story Highlights

UCLA researchers link the tax to roughly 1,910 fewer new apartments each year.
City documents tie lost housing to about 16,650 full-time construction jobs gone by 2026.
Transaction activity plunged as sellers and builders avoided the levy on high-value sales.
Supporters tout over $1 billion raised for housing and tenant aid, but most funds remain unbuilt.

What Measure ULA Does And Why It Matters

Los Angeles voters approved Measure ULA in 2022. The law adds a real estate transfer tax on sales above about $5.3 million to fund housing and homelessness programs. The city’s housing department says most revenue flows to an affordable housing program, plus preservation and prevention efforts. Supporters say the measure raised more than $1 billion, which they hail as a major win for tenant aid and future construction. Those dollars, however, must still turn into homes people can live in.

UCLA’s Lewis Center examined market data since the tax began in April 2023. The researchers found a sharp decline in permitting for new multifamily homes and concluded the tax is reducing annual apartment production by at least 1,910 units. Their analysis compares activity inside Los Angeles with nearby areas without the tax. The result points to a clear pattern: when the city taxes large property transfers, fewer of those deals occur, and fewer sites move forward into actual housing projects.

How Fewer Deals Became Fewer Homes And Jobs

Developers and property owners often buy and sell land, older buildings, or large parcels before bringing new housing online. When a transfer tax increases the cost of those steps, some projects stall or move to other cities. The UCLA report ties that brake to fewer new homes each year. A communication filed with the Los Angeles City Clerk estimates the missing homes translated into roughly 16,650 full-time construction jobs lost between 2023 and 2026, a major hit to working families.

This is the core trade-off. The city designed ULA to gather money from high-end sales. But high-end sales are exactly the deals that set the table for new building. When those sales slow, builders do fewer rehabs, tear-downs, and ground-up projects. The city’s own dashboard tracks disbursements and programs funded by ULA dollars, but dashboards cannot fill the gap left by stalled private activity that typically supplies most new homes. The policy taxed the engine that produces housing, then wondered why output fell.

Supporters’ Case: Big Revenue And Tenant Aid

Backers argue that ULA is a needed funding stream in a city with severe housing needs. They note that seventy percent of the money backs affordable housing production, rehabilitation, and preservation, while the rest supports prevention and renter protections. Advocacy materials highlight more than $1 billion raised from a small share of high-value sales, pitched as “top four percent” deals paying more to help the vulnerable. Tenant defense and rent relief programs use some of these funds to keep people housed during tough times.

Yet even supporters concede the pipeline is slow. Reporting shows most funds earmarked for construction have not yet produced completed units, with permitting and delivery delays weighing on timelines. A prominent council member acknowledged there are no completed housing units funded with ULA dollars so far and pointed at the city’s drawn-out process as a cause of lagging results. Revenue without results does not shelter families. Voters expected roofs, not reports. That mismatch fuels the growing frustration across neighborhoods and job sites.

Policy Crossroads: Reform Or Relent?

City leaders have floated fixes to limit harm to new construction. Proposals include exempting new apartments, condos, commercial, and mixed-use projects from the transfer tax for a set period after they open, to reduce the penalty on building. That approach aims to protect the pipeline while keeping some revenue for aid programs. Whether reforms arrive soon enough to revive investment and permitting is the key question. Every quarter of delay risks more shelved deals and fewer paychecks for skilled trades.

For conservatives, the lesson is plain. Government cannot tax its way to prosperity, and it cannot punish the very transactions that create homes and jobs. The data show fewer apartments and lost construction work since ULA took effect. Supporters can celebrate large dollar totals, but money sitting in accounts does not cut rents or lower mortgage costs. Results matter. If Los Angeles wants housing, it must clear red tape, protect property rights, and stop kneecapping the marketplace that builds.