The Measure ULA Lock-In Effect: Should LA Apartment Owners Hold or Sell in 2026?

Measure ULA cut sales of $5 million-plus Los Angeles properties roughly in half, and about 80% of the money it raises is erased by the property tax revenue those blocked sales would have generated. That is not an advocacy talking point. It is the finding of a peer-reviewed study published this year in the Journal of Public Economics by researchers at Harvard Business School, UC Irvine, and UC San Diego.

I have spent the last three years selling apartment buildings inside this freeze. What follows is what the research actually says, and more importantly, the part almost no owner has worked out: the reason holding feels safe is the same reason your building gets harder to sell every year you wait.

Source study: Green, D., Jambulapati, V., Liebersohn, J., & Velayudhan, T. (2026). Fiscal externalities of transaction taxes: Evidence from the Los Angeles mansion tax. Journal of Public Economics, 260, 105678. Working paper: SSRN 5273034. Plain-English summary from HBS Working Knowledge.

What did the study actually find?

Four economists compared parcels inside the City of Los Angeles against parcels elsewhere in LA County after April 1, 2023. Because the city border cuts through neighborhoods that are otherwise economically identical, and because Glendale, West Hollywood, and huge stretches of unincorporated county sit right outside it, you get an unusually clean natural experiment. Same interest rates, same submarkets, same buyers. One side pays the tax, the other does not.

Three findings matter to owners:

• Volume collapsed by about half. The headline estimate is a 49.5% drop in the annual sale hazard for $5M+ parcels.
• It was not just retiming. There was a real surge of sales between the November 2022 vote and the April 2023 start date, as people rushed to close ahead of it. But when the researchers threw out the first four months after implementation to test whether the drop was just a hangover from that rush, the decline got larger, to 56%. Commercial data running through the end of 2024 shows the same thing. No rebound.
• Prices moved too. Top-tier LA home values fell about 2% relative to neighboring cities right after implementation. The researchers call this suggestive rather than proven, because there are too few high-value trades left to measure it precisely. That is its own kind of answer.

Why does a transfer tax freeze a market?

Because of Proposition 13, and this is the mechanism that makes Los Angeles different from almost anywhere else.

In California your assessed value only resets when the property changes hands. Between sales it creeps up at a capped rate. The researchers measured what that looks like in practice across LA County:

Now stack a 4% to 5.5% exit toll on top of that. Selling triggers a reassessment that permanently raises the tax bill on the property, and it costs the seller hundreds of thousands of dollars to pull the trigger. So owners do the rational thing. They wait. Sales that would have happened do not happen, and the reassessments that would have followed do not happen either.

How hard did apartment buildings get hit?

It is called a mansion tax. In practice it is a broad levy on high-value commercial real estate, and apartment buildings are a large share of that. Roughly half of ULA revenue comes from commercial property, much of it multifamily.

Here is the breakdown by property type, with an important caveat I will get to.

*Read this one carefully. The multifamily-only estimate of -21% is not statistically significant. There simply are not enough $5M+ apartment trades left to measure the multifamily category precisely on its own, which is itself telling. The pooled commercial real estate figure of -63% is significant at the 1% level, and the raw transfer counts are unambiguous: ULA-bracket multifamily transfers fell from 214 in the nine months before the measure to 48 in the nine months after. I would rather show you the messy version than a clean number that overstates what the data supports. Separate work from the UCLA Lewis Center puts the decline across commercial, industrial, and multifamily at 30% to 50%.

Raw counts are not a causal estimate, and the researchers are careful about that distinction. But if you are an owner trying to understand why your broker cannot find you five recent comps in your submarket, 214 to 48 is the number that explains it.

The part owners get backwards: your Prop 13 basis does not transfer

This is the section I would read twice.

Say you own a 16-unit in Silver Lake your family bought in 1998 for $1.4 million. Prop 13 has been compounding your assessed value at roughly 2% a year for 28 years. You are assessed around $2.4 million and paying roughly $24,000 a year in property tax. Your T-12 looks great.

The building is worth about $6.8 million today. The moment it sells, the assessment resets to the purchase price. Your buyer's property tax bill is not $24,000. It is roughly $68,000. That is a permanent $44,000 annual reduction in the NOI your buyer will actually receive, starting in year one.

Capitalize $44,000 at a 5% cap rate and it is about $880,000 of value. On a $6.8 million building, that is nearly 13%.

Here is the trap. That reassessment gap does not shrink while you wait. It grows at roughly two percentage points a year, compounding. The longer you hold, the larger the step-up your buyer absorbs, and the wider the spread you have to negotiate across when you finally sell. Owners who inherited a building, or who have held since the nineties, face the widest version of this. If that is you, my guide on selling an inherited or trust-held LA apartment building covers the basis mechanics in more detail.

And waiting does not shrink your ULA exposure either. The thresholds index to inflation each July, currently $5.4 million and $10.9 million. Inflation indexing runs around 2%. LA property values grew about 5% a year over the period the researchers studied. If that spread holds, the tax quietly reaches further into the market every year. Buildings comfortably under the threshold today get pulled into the 4% bracket tomorrow.

Did Measure ULA raise the money it was supposed to?

The City projected about $672 million in the first year. Actual receipts came in around half that.

The deeper finding is what economists call a fiscal externality: one tax shrinking the base of another. Because blocked sales mean blocked reassessments, every deal that does not happen also means the county never captures the higher property tax it would have collected in every year afterward.

Running that math in present value terms, the researchers estimate:

Under different but still reasonable assumptions the offset ranges from 30% to about 159%. At the high end the tax loses the city money on net. And because ULA revenue goes to the City while property tax is apportioned across the whole county to schools, special districts, and the county itself, jurisdictions outside Los Angeles absorb part of the loss without collecting any of the gain.

The finding I find most striking as a practitioner: the researchers calculate the revenue-maximizing transfer tax rate at roughly 1.5%, against a statutory 4%. Independently, the City Council in 2026 directed staff to study a 1.5% rate for qualifying prevailing-wage affordable projects. Two very different processes landed on the same number.

I have written a fuller policy autopsy of these questions, including the housing production numbers, the newer RAND findings, and the strongest case in ULA's favor, here: Did Measure ULA work?

So should you hold or sell?

Measure ULA is a real cost and I am not going to talk you out of taking it seriously. But I have watched a lot of owners let a 4% line item make a decision that a full analysis would have made differently. Five questions I walk clients through:

1. What is your actual reassessment gap? Pull your assessed value from the LA County Assessor and put it next to a real market valuation. The ratio tells you how much of your reported NOI is a Prop 13 artifact that will not survive the sale. If you want that number without a sales conversation attached, my apartment building valuation guide walks through the method.

2. What does the buyer's tax line do to your headline cap rate? Re-run your NOI with the buyer's reassessed property tax instead of yours, then apply a market cap rate. That is the number a serious buyer is working from. See current LA multifamily cap rates by submarket for the right denominator.

3. Is your hold financed by a thesis, or by inertia? A loan maturing in 2028, deferred capital expenditure, a rent roll capped by RSO, and an owner who wants to retire in five years is not a hold strategy. It is a deadline you have not scheduled yet. Rent control adds its own constraints at sale.

4. Are you selling into a thin market, or a scarce one? Both are true. Fewer comps means harder appraisals, wider bid-ask, and longer marketing periods. It also means dramatically less competing supply for whoever actually runs a real process. Scarcity is a liability if you list passively and an asset if you market properly. The specific friction points in LA sales are worth understanding before you decide.

5. Are you counting on repeal? See the next section. Do not.

One more thing worth modeling: if the plan is to reinvest, ULA reduces the equity available for your replacement property, which changes what you can realistically trade into. Work that through before you commit to a target. My 1031 exchange guide for LA apartment owners covers the sequencing, and the ULA cost breakdown at $6M, $10M, and $20M has the exact dollar figures. If you are exchanging rather than cashing out, the replacement side has its own problem worth understanding early: what buying into this market actually looks like, and why the 45-day clock is the binding constraint.

What about repeal?

Nothing currently on the table repeals Measure ULA.

Through 2026 the City Council declined to send a broad new-construction exemption to voters, and instead directed staff to study narrower changes including the reduced rate for qualifying affordable projects mentioned above. A five-year exemption for Palisades Fire-affected owners is headed to the November 2026 ballot. A statewide effort to cap local transfer taxes was resolved in Sacramento without disturbing existing measures like ULA.

Research like this study does change the conversation. When a peer-reviewed journal concludes a tax may be net-negative for public revenue, that becomes an argument reform advocates can use, and I expect it to show up in the next round of debate. But an argument is not an ordinance. I have never once seen a client come out ahead by timing a disposition around a hypothetical ballot measure, and the compounding reassessment gap means waiting has a carrying cost that most owners never put a number on.

Run your own numbers

If you own an LA apartment building and you have been sitting on the decision, the single most useful thing you can do this month is calculate two numbers: your reassessment gap, and your NOI restated at a buyer's tax basis. Most owners have never seen the second one. It usually explains every offer they have quietly declined.

I will run both for your building, along with a current valuation and what ULA would actually cost at your price point. No obligation, and I will tell you if the answer is to hold.

Get My Free Property Valuation

Or reach me directly at 916-996-4421 or taylor@lyonstahl.com. More owner resources in the LA Landlord Hub.

This article summarizes published economic research and public policy for general information. It is not tax or legal advice. Consult your CPA and attorney before acting on any transaction decision.