Commercial Deals Bring in 56 percent of Mansion Tax Revenue

Three years, nearly 1,600 deals and $1.1 billion later, Measure ULA – sold to voters as a “mansion tax” – has gotten most of its revenue from commercial real estate transactions ranging from office buildings to apartment complexes.

The take from the tax on commercial properties since it went into effect within the City of Los Angeles in 2023 accounts for 55.5 percent of the total so far, according to recently updated data from the Los Angeles Housing Department. Through deals made in the commercial sector, spanning office, retail, industrial, multifamily and mixed-use residential properties, ULA brought in $635.2 million in revenue.

Single-family residential properties have poured $472.6 million into ULA, or 41.3 percent of its total revenue. While transfer tax funds from commercial transactions outpace residential overall, those funds come from trades across several asset types – none of which surpass single-family revenue on their own.

Meanwhile, vacant property purchases – presumably poised for new developments – have accounted for just 3.1 percent of ULA’s 10-figure revenue pot, according to LAHD data.

Given that the tax applies to every asset type, including land purchases, critics say it’s stifling development and pushing investment outside of the city at a time when Los Angeles desperately needs to pick up the pace on housing production.

ULA – which adds a 4 percent property transfer tax on all real estate that sells for more than $5.3 million and a 5.5 percent tax on sales over $10.6 million – began generating revenue in April 2023. The property transfer tax has been especially top of mind recently as the city considers amending the tax.

In terms of where these deals are happening, LAHD data shows significant concentration in West L.A. and Hollywood.

Three Westside neighborhoods accounted for more than half of the hundreds of millions of dollars brought in by the sales of single-family homes – the sort of “mansions” that backers of the tax focused on when campaigning to make ULA law through a citywide vote.

Luxury markets Brentwood, Bel Air and Pacific Palisades generated $105.4 million, $78.9 million and $58.8 million, respectively, across a combined total of 424 transactions. The parts of the famed 90210 ZIP code that remain under L.A. city jurisdiction also made a significant contribution with $48.5 million in revenue.

The commercial sector’s ULA revenue got a significant boost from deals done in Hollywood and Playa Vista – which brought in $71.2 million and $59.9 million, respectively.

In Playa Vista’s 90094 ZIP code, the average transfer tax per deal was $10.4 million – meaning the average transaction value was $189.1 million.

Within revenue generated from commercial, about two-thirds came from a mix of office, industrial and retail property, while the remainder came from multifamily and mixed-use transactions.

Commercial trades in and around downtown Los Angeles also made a dent in ULA’s fund. Thirteen transactions – none of which were multifamily trades – in the 90017 and 90015 ZIP codes, covering the Financial District and South Park, totaled $31.1 million in revenue. Between the two areas, the average transaction generated $2.6 million in ULA revenue, meaning the total dollar volume of each deal averages out to about $47.3 million.

This comes as several downtown office towers have been trading following defaults, including the Bank of America Plaza.

Within multifamily and mixed-use transactions, the Westside’s 11th Council District produced the most revenue overall, however, Hollywood and Sherman Oaks emerged as standout neighborhoods, generating $19.9 million and $13.4 million, respectively. That’s significantly higher than the 11th District’s leading neighborhood, Playa Vista, which generated $6.3 million in ULA revenue from multifamily and mixed-use transactions.