Measure ULA Shuts Down New Apartment Construction in L.A.

New apartment construction in Los Angeles has all but shut down, thanks in part to Measure ULA, the so-called “mansion tax” that applies to all buildings, including apartments, that sell for $5.3 million or more.

Voters in Los Angeles passed Measure ULA in 2022, and were told that taxing the sales of “mansions” would fund the construction of low-income housing. But the tax took only a third of anticipated revenue, as sellers — responsible for paying the tax — took homes and other buildings off the market. One realtor said Measure ULA had lowered luxury home sales in L.A. by 40%. Commercial real estate deals fell by a similar amount.

Worse yet, Measure ULA has slowed the rebuilding effort after the Palisades Fire, because it discouarages sales of real estate, as well as investment in new high-end projects.

Now, the Los Angeles Times reports, Measure ULA is being blamed for a slowdown in apartment building:

Under 19,000 apartments were under construction in the three months through September. That’s 30% fewer than three years earlier, according to CoStar’s count.
…

Among investors’ concerns are public policies such as the United to House Los Angeles [ULA] transfer tax on large real estate sales, and also temporary limits on evicting tenants that were enacted during the pandemic.

“They’re fearful of what policies might come down later,” said Goldstein, a co-founder of GPI Cos.

Ironically, Measure ULA has made housing more expensive, not less, by restricting new supply, artificially.

Other causes of the slowdown include tariffs on building materials, and immigration enforcement that some say will cut the supply of illegal immigrant labor for construction projects, forcing labor costs to rise.