Los Angeles' 'Mansion Tax' Slows Construction, Study Finds

New analysis shows the tax has led to a decline in housing permits, potentially exacerbating the city's affordable housing crisis.

Published on Feb. 23, 2026

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A new study has found that Los Angeles' 'mansion tax,' a levy on properties valued over $5 million, has led to a significant decline in new construction permits in the city. Researchers link the tax to a 40% drop in overall construction filings between 2023 and 2024, as well as a 27% decrease in multifamily permits and a 45% drop in single-family home permits. The study suggests the tax has discouraged developers from pursuing even moderately priced projects due to financial risks and uncertainty, potentially worsening the city's affordable housing shortage.

Why it matters

Los Angeles already faces a severe shortage of affordable housing, with a deficit of nearly 500,000 units as of 2021. The 'mansion tax' was intended to generate funds for affordable housing and homelessness prevention, but the new research indicates it may be backfiring by slowing overall construction activity in the city.

The details

The 'mansion tax,' officially known as Measure ULA, imposes a 4% levy on the sale of properties valued between $5.3 million and $10.6 million, and a 5.5% levy on sales exceeding $10.6 million. The tax, which was introduced in 2023, was meant to help address the city's housing affordability crisis. However, the new study by a UCLA researcher found that the tax has broadly suppressed construction activity rather than shifting development toward more affordable housing. Developers appear to be hesitant to pursue even moderately priced multifamily projects due to the financial risks and uncertainty created by the tax.

  • The 'mansion tax' was introduced in April 2023.
  • Between 2023 and 2024, overall filing for new construction in Los Angeles plummeted by an average 40% compared to 2018-2019 levels.

The players

Measure ULA

Los Angeles' 'mansion tax,' which imposes higher levies on properties valued over $5 million.

Yingru Pan

A Ph.D. student at UCLA Anderson School of Management who authored a study on the unintended consequences of the 'mansion tax' on construction in Los Angeles.

Nithya Raman

A Los Angeles City Councilmember who introduced a measure in January to reform the 'mansion tax' by adding targeted exemptions to spur development while preserving revenue for homelessness prevention and affordable housing programs.

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What they’re saying

“Measure ULA appears to drive down housing and commercial property development, and does not generate enough revenue to make up for the lack of production.”

— Joey Waldinger, Researcher at UCLA Lewis Center for Regional Policy Studies (UCLA)

“The tax's primary effect was to broadly suppress construction activity rather than shift development toward affordability or multifamily housing.”

— Yingru Pan, Ph.D. student at UCLA Anderson School of Management (Working paper)

“Introducing tax penalties might reduce incentives for such projects, potentially slowing construction activity. This could tighten the overall supply of housing, worsening existing affordability challenges, particularly for middle-income buyers facing increasingly competitive markets.”

— Yingru Pan, Ph.D. student at UCLA Anderson School of Management (Working paper)

What’s next

Los Angeles City Councilmember Nithya Raman has introduced a measure to reform the 'mansion tax' by adding targeted exemptions, such as a 15-year carve-out for newly built or substantially rehabilitated multifamily and mixed-use projects. The goal is to spur development while preserving revenue for homelessness prevention and affordable housing programs.

The takeaway

Los Angeles' 'mansion tax,' intended to fund affordable housing and homelessness prevention, appears to have had the unintended consequence of slowing overall construction activity in the city. This could further exacerbate the city's severe affordable housing shortage, highlighting the need for policymakers to carefully balance the trade-offs between revenue generation and housing production when designing such taxes.