Study Finds Measure ULA May Be Hampering New Apartment Construction in Los Angeles
A new study from UCLA and Rand Corporation has sparked a significant debate regarding Los Angeles' real estate market, particularly the effects of Measure ULA, the city's controversial real estate transfer tax. The study, released on Friday, suggests a "causal link" between the implementation of Measure ULA and a decline in the construction of new apartments in the city. Specifically, the authors of the report argue that the measure has led to a reduction in property sales that are typically developed into multifamily projects, estimating that Measure ULA has resulted in at least 1,910 fewer units being built each year.
Measure ULA, which was passed by voters in 2022, imposes a transfer tax on real estate transactions valued at $5 million or more, with the aim of raising funds for affordable housing and homelessness initiatives. However, the UCLA and Rand study indicates that this new tax burden may have unintended consequences for the city's housing market. According to the study, the measure has made it more expensive for developers to acquire property, reducing the number of transactions that typically lead to new apartment complexes, thus stalling potential housing development in a city already facing a significant housing shortage.
The findings of the study are crucial given Los Angeles' ongoing struggle to address its housing crisis. The city has long been in need of more affordable housing options to accommodate its growing population, and many had hoped Measure ULA would help address this issue by generating substantial revenue for housing projects. However, the study raises concerns that the very tax designed to alleviate the housing crisis may be inadvertently exacerbating it by slowing down new apartment construction. As a result, local policymakers are now left with the challenging task of reassessing the impact of Measure ULA on the city's housing market and determining whether adjustments need to be made to the law to avoid further hindering new development.
The study’s authors recommend that city officials carefully monitor the impact of Measure ULA in the coming years and explore ways to balance the goals of increasing affordable housing funding while ensuring that the city's real estate market remains conducive to development. If left unaddressed, the negative impact on apartment construction could further exacerbate the housing affordability crisis in Los Angeles, making it even more difficult for residents to find affordable places to live. In the meantime, the findings of this study are likely to continue to shape debates around Measure ULA and its long-term effectiveness in achieving its intended goals.
As L.A. grapples with its housing challenges, the future of Measure ULA remains uncertain. It’s clear that any solution must strike a delicate balance between generating revenue for housing and homelessness programs while also fostering a real estate environment that encourages new apartment construction to meet the growing demand. With the study’s findings in mind, Los Angeles faces an urgent need for solutions that support both the creation of affordable housing and the sustainability of its housing market for the long term.