Los Angeles Housing Transfer Tax: What the $5.15 Million Threshold Means for Sellers

Los Angeles homeowners and real estate investors are grappling with a significant new financial reality. Since April 1, 2023, when Measure ULA took effect, properties changing hands above a certain price point have triggered an additional levy—what’s commonly known as the California mansion tax. While the tax targets high-value transactions, its ripple effects extend far beyond luxury sellers, reshaping how the market functions across different price tiers.

Understanding Measure ULA’s Tax Structure

The measure imposes a real estate transfer tax on high-value property sales in Los Angeles, making it one of several California cities to adopt such a policy. The mechanics are straightforward: when a property sells at the point of transaction, a percentage of the sale price becomes due at closing—a departure from annual property taxes paid by owners.

The tax brackets are tiered based on sale price:

• 4% rate: Applied to properties sold between $5.15 million and $10.3 million
• 5.5% rate: Applied to properties exceeding $10.3 million

For context, a $6 million residential sale triggers a $240,000 tax obligation. For a $15 million commercial property, the burden reaches $825,000.

Where This Tax Applies—And Where It Doesn’t

Contrary to assumptions, California has no statewide mansion tax. Instead, individual municipalities have enacted their own versions. Los Angeles enforces Measure ULA citywide, but neighboring jurisdictions tell a different story. Wealthy enclaves like Beverly Hills, Malibu, and Calabasas remain exempt, creating a geographic disparity that savvy buyers and sellers increasingly factor into their decisions.

Beyond Los Angeles, other California cities including San Francisco, Oakland, San Jose, Berkeley, and Santa Monica have implemented comparable transfer taxes, though rates and thresholds vary. This patchwork of policies has become a critical variable in real estate strategy.

How the Tax Reshapes Market Dynamics

The introduction of this levy has produced measurable consequences across Los Angeles’s real estate landscape. In its first 10 months, the measure generated $192 million in revenue earmarked for affordable housing and homelessness initiatives—substantial funding for public priorities, though not without market trade-offs.

Slowdown in high-end transactions. Sellers accustomed to executing deals without significant friction now face a decision threshold. Some have postponed sales entirely, waiting for policy changes that may never come. Inventory in premium segments has tightened as a result.

The off-market migration. To minimize tax exposure, an increasing number of transactions occur privately or structurally—separating land from improvements, or dividing ownership interests—rather than through conventional channels. This trend reduces transparency in pricing and may obscure true market conditions.

Commercial property implications. Office buildings, retail properties, and apartment complexes valued above the threshold face identical tax consequences as residential estates. Investors absorb these costs by adjusting rental rates or reconsidering acquisitions, effectively passing the burden downstream.

Pricing negotiations below the threshold. Some sellers have recalibrated asking prices to keep transactions just under $5.15 million, creating artificial clustering around the tax boundary and distorting normal price discovery.

Who Gets Exemptions—And Why

Three categories of transactions receive relief from Measure ULA:

Government entities selling property—city, county, or federal agencies—are exempt. This protects municipalities from creating additional barriers to their own real estate activities.

Nonprofit organizations advancing charitable missions may qualify for exemptions, particularly when purchasing or developing affordable housing. This carve-out aligns the tax with its stated policy objective.

Properties explicitly being developed as affordable housing can qualify, contingent on buyer intent and structural compliance. However, the specifics matter significantly; not all nonprofit or affordable housing transactions automatically escape the tax.

Strategies for Managing Tax Exposure

For sellers confronting this obligation, three approaches merit exploration:

Structuring below the threshold. Negotiating sales that remain beneath $5.15 million eliminates the tax entirely, though this may compromise the seller’s desired price realization.

Transaction separation. Some deals divide components—selling land separately from structures, or splitting ownership percentages among multiple transactions. These approaches require careful legal structuring to comply with regulations; consultation with a tax professional is advisable to ensure legitimacy and avoid audit risk.

Ownership transfers through estate planning. Gifting property to heirs or transferring it via trusts before sale can, in specific circumstances, defer or eliminate certain tax consequences. The mechanics depend on individual situations and broader tax law considerations.

The Broader Picture

The California mansion tax represents a policy trade-off: funding for affordable housing weighed against friction in the high-value property market. Los Angeles’s version, now generating substantial public revenue, has fundamentally altered how sellers evaluate their options and structure transactions.

For investors and homeowners navigating this environment, understanding the tax’s mechanics, exemptions, and strategic responses is no longer optional—it’s integral to effective real estate decision-making. Those selling or acquiring property in affected California jurisdictions should carefully evaluate how this tax factors into their transaction structure and timeline.