The Effect of the Los Angeles Mansion Tax on Property Tax Revenue

Measure ULA interacts with California’s Proposition 13, which mandates that county assessors can only revalue a property after a change in ownership. In the absence of such a change, a property’s assessed value may rise by no more than 2 percent per year. However, real estate values in California have increased significantly faster than this cap, leaving many properties significantly underassessed. Thus, the growth of the property tax base heavily relies on property transactions. But if Measure ULA reduces the frequency of these transactions, then more properties will remain underassessed for longer periods, leading to decreased future property tax revenue.

Our research estimates the effect of Measure ULA on the frequency of property transactions, the property tax base, and property tax revenue using detailed property records from 2020 to 2025. We compared properties in the City of Los Angeles with properties in Los Angeles County, which are not subject to Measure ULA. Our estimates suggest that Measure ULA reduced the transaction rate of eligible properties by 38 percent and that between 63 and 138 percent of the revenue raised by Measure ULA was offset by lower future property tax revenue. The precise reduction rate depends on assumptions about the probability of transactions without the tax, the future growth rate of property prices, and the extent to which the tax affects various property types differently.

More than 30 states tax property transactions. Globally, governments have introduced taxes on high-value transactions in some of the world’s largest markets, including London, Tokyo, and Toronto. Research has also shown that these taxes reduce both the frequency and values of transactions. Nevertheless, they remain popular partly due to their perceived progressivity, especially in places like California, where governments have limited options for taxing property. In Los Angeles, the discussion surrounding the introduction of Measure ULA centered on the revenue it was projected to generate for affordable housing projects, rather than its effect on property value reassessments.

Our research documents an unintended consequence of Measure ULA, which may also be a byproduct of Proposition 13, since this law limits the use of ordinary property taxes. Proposition 13 mandates local governments to seek other, less efficient means of raising revenue instead of relying on annual property taxes. In 2020, a California ballot measure proposed to remove Proposition 13 restrictions on commercial properties valued over $3 million. Although the measure failed, a majority of Los Angeles County voters supported it, indicating a popular desire to tax high-value properties. Measure ULA allows policymakers to respond to the majority’s wish to increase taxes on high-value commercial properties, but at the cost of reduced property tax revenue. Easing Proposition 13 restrictions could mitigate the negative effect Measure ULA has on property tax revenue.

Our findings have broad relevance because tax assessments often lag behind changes in market prices throughout the United States and the world. Less than half of US states require properties to be assessed annually, and 19 states limit local assessment increases. Simultaneously, all but five of these states mandate that assessments be reset at the time of sale. Such property tax systems can diminish the frequency of transactions, though to a lesser extent than a transaction tax. Additionally, taxes, fees, and regulatory barriers that discourage transactions further reduce property tax revenue by limiting the frequency of reassessments.

NOTE
This research brief is based on Daniel Green et al., “Fiscal Externalities of Transaction Taxes: Evidence from the Los Angeles Mansion Tax,” Social Science Research Network, June 3, 2025.