Measure ULA is a ballot initiative that increases real estate transfer taxes on sales of high-value properties in the City of Los Angeles. Revenues are dedicated to subsidized housing development and preservation, rent assistance, and similar efforts. Permitting for new multifamily housing has fallen sharply since Measure ULA went into effect in April 2023. Many blame the tax for this decline, but it could be caused by other changes to the housing market and macroeconomic conditions over the past two years. In this report we establish a robust causal linkage between Measure ULA and housing development, providing empirical evidence that the transfer tax is reducing multifamily production in Los Angeles.
We present evidence suggesting that Measure ULA has reduced higher-end real estate transactions in Los Angeles. Since Measure ULA was enacted, the odds of a Los Angeles property selling at a price above its tax threshold have fallen by as much as 50%. In raw terms, this sharp decline occurred across all types of properties, but our strongest evidence suggests it was particularly pronounced for non-single family transactions, which fell by 30-50%. Together the evidence suggests that Measure ULA is neither a true “Mansion Tax,” nor a tax that falls solely on unearned property wealth. The tax does fall on mansions, but it also impedes the trade in commercial, industrial and multifamily property. In doing so it jeopardizes L.A.’s ability to build new housing, revitalize struggling commercial and industrial properties, and raise property tax revenue. All these processes rely on property turnover, and in particular the turnover of higher-priced, non-single family parcels. A tax that reduces this turnover will undermine property tax revenues inside and outside L.A., obstruct local and regional housing production, and slow local revitalization efforts. Thus 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. These consequences, fortunately, do not need to be part of the measure. We propose some simple amendments that could make Measure ULA fairer, more efficient, and more in line with the spirit in which it was advertised.
Most local governments in California have finalized their 2021–2029/2022–2030 housing plans. These plans must identify parcels with capacity to add new housing, and unlike previous plans, state law now mandates that they affirmatively further fair housing. State guidelines suggest that local governments identify or create capacity for new housing, especially for low-income households, in high-opportunity neighborhoods. In this report, we assess whether local governments followed these guidelines by analyzing the site inventories adopted by 199 California cities before April 2024. We do this using the Fair Housing Land Use Score (FHLUS), which measures the distribution of housing sites by neighborhood opportunity, using metrics such as household incomes and environmental quality. We can thereby answer the question, are cities meeting their fair housing obligations? The answer is no. Most cities (roughly 80%) disproportionately plan for new housing in their least affluent neighborhoods and those with worse environmental quality, and sites designated for low-income housing are less likely to be in high-opportunity neighborhoods than sites for above moderate-income households. One positive finding is that sites proposed in rezoning plans are better located than non-rezoned sites, even though they are a minority of sites. In addition to reporting the FHLUS, we provide preliminary evidence of whether certain kinds of cities — e.g., bigger, more affluent, or more equal cities — did better at planning for housing in their high-opportunity neighborhoods. We find no significant correlations between cities’ socioeconomic or other characteristics and their FHLUS. The one factor associated with the FHLUS is the spatial distribution of existing zoning: Cities mostly identify sites for new multifamily housing near existing multifamily housing, suggesting an important role for inertia in housing plans. Our findings illustrate how rules for site selection maintain the status quo and demonstrate that unless the state requires new housing sites be created in high-opportunity neighborhoods, California cities will not affirmatively further fair housing.
California’s housing crisis is not just one thing. There are myriad crises, and they are interconnected: housing cost burdens, household instability and homelessness, racial segregation, economic inequality, health disparities, and climate change are all exacerbated by California’s inability to build sufficient housing (especially for lower-income households) and ensure that new supply is fairly distributed across communities and in ways that reduce greenhouse gas emissions. Every day, there’s a news story of people leaving the state for cheaper places, of a renter doing their best to stave off an eviction, or of a community struggling with gentrification and displacement. The politics of housing in the state also sometimes feel intractable: cities continue to rely on exclusionary zoning tactics to thwart new supply, while developers, labor unions, NIMBYs, YIMBYs, and tenant advocates all stake out opposing views of what is needed to solve the crisis. All of this contributes to California’s future housing trajectory feeling grim.
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