Real Property Transfer Tax and Measure ULA: Sorting Fact from Fiction

Full Report: Major Research Flaws Undermine Authors' Bold Claims: Unpacking the Debate on Measure ULA [Press Release]

To begin, please introduce yourselves, sharing what prompted you and your colleagues to undertake this research on Measure ULA in response to the UCLA Lewis Center's Taxing Tomorrow report.

JL: Joan Ling, former Executive Director of Community Corporation of Santa Monica. For 20-plus years, I was an affordable housing developer working in financial analysis and development. I’ve also taught at a number of universities, including USC in the MRED program, Occidental, and then 10 years at UCLA in the Urban Planning Program as well as the Ziman Center for Real Estate. 

GB: Greg Bonett, I'm the Senior Policy Counsel for Public Counsel’s Community Development Project. I'm an attorney, but I am focused on policy work. I work on issues related to land use, tenant protections, and revenue sources for affordable housing, homelessness services, and assistance for low-income renters. We work in coalition with community groups and affordable housing providers. I've been at Public Counsel for 10 years. 

We believe the Ward and Phillips report overstated the strength of its findings and downplayed the limitations of the methods and data it relied on. ULA revenue has increased nearly every quarter since it went into effect. It’s too early to conclude long-run impacts on housing construction. And the authors made decisions in their analysis that could bias the results towards finding an impact. 

For example, the Ward and Phillips report excluded all ED1 projects, and the analysis of permit data didn’t control for other factors like changes in interest rates, construction costs, or the city’s rezoning program. It’s being used to justify hasty policy changes that would mean deep cuts to ULA funding for affordable housing and assistance for low-income renters. 

Frame for TPR readers, the central thesis of the UCLA Lewis Center reporting on ULA. The latter asserts that ULA is depressing the development market, and you're findings assert that ULA is not the fundamental issue impacting developer behavior. Is that a fair summary of the opposing views?

JL: We look at the report in two ways. Our concerns were primarily based on the data and assumptions made, as well as the analytical methodology used, and thereby the conclusions drawn as a result of those two factors. In short, we responded to UCLA’s claims that the tax is not working as intended and that the program should exempt all multifamily and commercial properties that are less than 15 years old.

Many factors in development are totally outside a developer’s control. What they can influence, they do try to influence, and that’s understandable. But I think there's a bigger issue here. Until we fix our tax system—particularly Prop 13 and how we treat property taxes—we’ll continue to have a system that disproportionately rewards landowners who sit on their land. Just like upzoning without community benefits accrues all the upside to the landowners, exempting the ULA tax does the same. 

Markets will adjust, but not within the time frame of Lewis Center analysis, with three legal challenges, threats of a counter initiative, and legal and realtor advice to hold on and wait until the tax goes away. This is within a historic period of runaway construction cost inflation and interest and capitalization rate increases. Further, CHIP was approved in February 2025, later than most cities in LA County. In the first six months of its enactment, over 17,000 units of pre-applications have been filed. So, zoning changes also affect development activities.

GB: Another part is their projected revenue loss, which seems lower than the revenue loss that would likely occur if their policy proposals were adopted. One reason is that it doesn’t seem like they’ve accounted for the possibility that, once there’s a forward-looking tax break, projects will try to squeeze into that tax break.

Projects that otherwise would have moved forward in one form might change slightly to qualify for the exemption. It really depends on how these things are structured. But you certainly wouldn’t want a situation where someone selling a $40 million mansion adds a pool house just to get a tax break.

Now, of course, that would depend on the details of the exemption, and I’m sure they wouldn’t support something like that. I think the details matter. I don’t think ULA is having a major impact on large-scale new development. But I also wouldn’t put it past someone selling a $40 million mansion to spend $50,000 on a pool house if it means getting a tax break.

My point is: once you introduce a forward-looking tax break, people will try to take advantage of it. So your future revenue loss will almost certainly be greater than what you'd expect if you're only looking at past behavior before the tax break existed.

And the response essentially is that they're findings are wrong—that ULA is working, and that there should not be any more exemptions added?

JL: I think that it's way too premature to conclude that there are flaws in the tax and the way it’s set up. Before ULA, there was a major sell-off in anticipation of tax avoidance. And then, afterwards, property owners and developers were holding off—at the advice of their realtors and attorneys—because three lawsuits had been filed against ULA. The opponents lost all three of them, but that took over a year, and some of the cases are still on appeal. In the meantime, the real estate interests just held off on making decisions until they saw what was happening in the courts.

There are also tax avoidance strategies—you don't have to buy or sell land necessarily. You can enter partnerships with owners to develop properties through joint ventures or limited partnerships. So that’s also going on. It’s very difficult to say, after just one year of data, that it’s not working and that things need to change.

GB: It’s too early to have reliable data. The conclusion that ULA has reduced multifamily housing production—there’s no solid data available to support that.

I don’t believe the analysis is reliable enough to inform policy decisions. So we’re saying: we haven’t seen clear evidence that ULA has reduced housing production. That’s the core of the dispute—they claim they’ve demonstrated that, and we’re saying, no, the Ward and Phillips paper doesn’t show what it claims to show.

So, one year in, is ULA working as intended? Do you or your co-authors have any second thoughts or tweaks to improve the measure?

GB: It’s raised over $800 million at this point for affordable housing and tenant protections. The City just announced a major NOFA. It always takes time to collect the money and put it to use. We've already seen some great benefits, and the biggest benefits are still to come. I think it’s something we have to stay engaged with and see how things play out, but it’s raising a lot of money—and that money is being put to use.

JL: As I said before, ULA revenues have been steadily increasing every quarter—except for the first quarter in 2025, when there were fires. The key thing to remember is: the real estate market adjusts. Land value adjusts. People aren’t going to hang on to land if they need to sell due to life or business circumstances. The problem with the report is that it's essentially a static report. It basically says everything has to do with the tax, and that “but for the tax,” X, Y, and Z would happen. But that’s just not how real estate works. Development happens in a multiverse where many forces affect each other and the outcome. 

And here’s the thing—LA City upzoned in February 2025. It was way behind other cities in LA County, but it finally did it. Within the first six months of CHIP being authorized, 17,000 units went through the pre-application process. I rest my case.

GB: Those CHIP applications are all multifamily units. I imagine only a fraction of them would fall below the ULA threshold in terms of final developed value. The CHIP program is only for multifamily—the vast majority of those projects would likely be subject to ULA if sold, and still, we’re seeing very strong interest in developing using the CHIP at the pre-application stage. It also seems likely that some developers waited for the CHIP to be adopted before submitting for entitlements. The CHIP offers significant incentives for mixed-income developers, so it would make sense that some developers were waiting for the CHIP to be adopted before moving forward with a project. 

Could you share what land transactions trigger the application of ULA?

GB: It’s the sale of real estate over approximately a $5 million threshold. That threshold is adjusted for inflation—it’s not the construction that triggers it, it’s the sale.

JL: To add on, the Lewis Center researchers say that ULA has a dampening effect on market-rate housing production and inclusionary units because developers—after they build—will have to sell, and that’s when they pay the ULA tax, which affects their profit margin. But if the developer builds and holds, ULA doesn’t apply.

Regarding ULA's impact on developer behavior, would you say there’s an unintended incentive here for the developer to hold and rent rather than sell, because ULA is only triggered by a sale? 

JL: It’s not necessarily an unintended consequence—it’s a desirable consequence. You want developers to have skin in the game and a long-term interest in the project. Otherwise, you get developers who build as quickly and cheaply as possible and then flip the properties to the next buyer or investor. We did some research using the County Assessor’s data, and we found that most multifamily housing developments are held for more than five or seven years.

Why do you believe the development community and academic economists, e.g., the Lewis Center, are so demonstrably negative about ULA as written?

JL: Well, it’s a tax. Let’s address the developers for a minute, and then we’ll go into the researchers. Real estate development is stressful. There are many things beyond a developer’s control—things like interest rates, construction costs, and capitalization rates. But what is within the reasonable influence of developers are local issues: local land use, local tax issues.

So, I understand the stress. I did it for over 20 years, and I’ve done my share of complaining about local planning departments and City Council policies—because I could. And you know, if you complain enough and have enough influence, you can actually do something about it. So why not? It’s money out of a developer’s pocket when they want to sell. The key thing to remember is: don’t listen to what they say, watch what they do…. Look at the pre-application activities with the CHIP since February 2025.

GB: Going back to your question—you asked, “What about developers and the Lewis Center?” For developers, it’s simple: who doesn’t like a tax break? Everyone wants a tax break, so that’s easy to understand.

But I would push back on your characterization of the Lewis Center. I don’t think they’ve been entirely negative. In fact, they seem generally positive about the importance of ULA. They’ve gone out of their way to make it clear that ULA funding is incredibly important and that they want to preserve it. Where we differ is that they’re pushing for certain reforms, which we think are very premature and could have more negative consequences than they’ve acknowledged. 

So yes, we would dispute their conclusions about the need for reform at this point, but I don’t see them as entirely negative—on the contrary, they seem to recognize and appreciate ULA’s value.

UCLA’s Planning and Policy departments have long been cited as leading voices on housing policy. Given that differences of opinion among UCLA scholars often exist—such as between Professors Storper and Manville—does UCLA, with this report, risk its scholarly integrity by publishing what you contend is flawed and premature research?

JL: First, research and analysis play a really important role in policy discussions. When done correctly, they inform and help shape better policies. Most of the time, this kind of research happens at a higher level of analysis.

But this report makes a very micro-level recommendation—exempting all commercial and multifamily properties less than 15 years old from ULA—based on a very short period of post-ULA data. They never explain why 15 years. Why all commercial properties? They didn’t look at other uses like retail, office, or industrial. The recommendation is premature, the data is thin, and the analysis isn’t specific enough to justify such a targeted policy suggestion.

I can’t speak to the Storper vs. Manville differences. But policy discussions need to remove ego from the room and come from a place of genuine curiosity, a desire to improve the human condition, and respect for different approaches and methods—even when the work is being criticized. When that happens, progress is possible. Without it, it’s just a free-for-all.

GB: I feel like I can’t really weigh in on campus culture. I went to law school and policy school at UCLA, but I don’t work there and haven’t spent time there in a while. My best guess is maybe it’s less about the researchers and more about how parts of research work get amplified by others…

For example, in the Ward and Phillips analysis, they looked at permit data, but they didn’t control for any confounding variables within the permit data. They compared pre- and post-ULA, but didn’t factor in things like interest rates, construction costs, or zoning reform. Now, they were totally upfront about that. They spelled it out as a limitation in the data, but when findings get echoed on social media, all the nuance is lost. They never claimed to control for everything in the permit data, but someone on Twitter will just say, “Researchers found this,” without mentioning the limitations or assumptions.

JL: To add to what Greg said: in their projection of how many inclusionary units and subsidized affordable units could be gained or lost, they discussed possible ranges of percentages of units and subsidies, but used unreasonable outlier percentages that amplified the inclusionary units that could be lost and underestimated the affordable units that could be gained. 

When read by the public and on social media, especially, the consequence is damning ULA’s impact, which it does not deserve. Then, these findings were used to justify their reform recommendation.

To conclude: What should readers keep in mind as they follow efforts by the California Legislature to modify Measure ULA?

JL: I just want to say: ULA is extremely important for affordable housing and tenant protection in Los Angeles. On the affordable housing side, every local dollar brings in four to five outside dollars for production. ULA funding is essentially the only reliable local funding we have right now. Once LACAHSA starts channeling some money into the city, we’ll get a bit more, but it’ll still be just a fraction of what ULA generates. $1 from ULA brings in $4 from other sources, and without ULA, we can’t compete for tax credits or state money. 

Generally, business and real estate interests have an outsized influence on the mayor. I loved her as my congressmember, but as mayor, she’s trying to balance a lot of competing forces. And ULA is one of those things. In trying to juggle those factions, she’s really disappointing the advocates who spent two years—blood, sweat, and tears—getting this passed with 58% voter support and, more importantly, hurting the people who depend on ULA to stay housed.

GB: Just last week, lawmakers put forward a last-minute trailer bill (SB 423) aimed at creating new tax breaks in Measure ULA. Applied only to the City of Los Angeles, it was intended to create a tax break for a very broad class of transactions. The intent here was to cut the tax rate on almost any sale of land where there had been new construction in the last 15 years. It wasn’t limited to mixed-income housing, including nearly all commercial and industrial sales with new construction. And it wasn’t aimed at encouraging new construction: projects built years ago would get the tax break if sold. 

If the bill had gone forward as the backers intended, it would have cut ULA revenue significantly, reducing the funding for affordable housing and programs to assist low-income tenants. This was an attempt at an end run around the city council and the voters of Los Angeles. And it failed precisely because it was done so hastily and without an open process involving those in Los Angeles who would be most impacted by this change.