Neighborhood Silos and Real Costs
We see it all the time in New York, but it hits different in Los Angeles. People stay in their bubbles, avoiding parts of the city that feel foreign. As one local put it to a friend about crossing into West Hollywood, according to the New York Post, “That’s not really my scene.” This self-sorting shrinks our world, but the real damage comes when policy tries to fix housing by punishing it.
Los Angeles decided the cure for a shortage was to slap a tax on the very thing that’s missing. Instead of building up, they taxed up. The result? Fewer units, higher prices, and a city that feels smaller than it needs to be.
The Measure ULA Reality Check
Back in 2022, voters in Los Angeles approved Measure ULA. The pitch was simple: tax the rich to build homes for the poor. Proponents claimed this “mansion tax” would fund more than 26,000 affordable homes over the next decade. They said it would only hit millionaires and billionaires, leaving average folks alone.
But the reporting shows a different story. The tax isn’t just on mansions. It hits apartment buildings, commercial property, and development sites. A 4% levy now hits ULA sales exceeding $5.4 million, while transactions reaching $10.9 million or higher face a 5.5% charge. These numbers are on top of existing city transfer taxes.
The critical detail is that once a sale surpasses the threshold, the full price incurs the tax rather than only the excess over the limit. Sell a building for just over $5.4 million, and that tax alone can top $216,000. Critics argue this logic is backwards. As one observer noted, according to the New York Post, “You are taxing housing to pay for housing.”
Those dollar thresholds are also set to rise automatically with inflation, making the tax hit harder every year. The city hoped to solve a crisis by making it more expensive to build, and now the market is reacting.
Why This Approach Fails New York Too
As a New Yorker, I watch this from the other side of the country, but the lesson is clear. You cannot tax your way into prosperity. When you punish developers and sellers, they don’t build. They hold back. They wait for the rules to change.
We see the same dynamic in NYC with our own overzealous regulations. When you make it too hard to move, to build, or to sell, you freeze the city. Los Angeles thought they could tax the wealthy and magically get affordable housing. Instead, they got a transactional freeze.
The logic is flawed from the start. If you want more housing, you need more incentives, not more penalties. Taxing the supply side of the equation only reduces the supply. It’s basic economics that politicians in both LA and New York seem to ignore at their own peril.
The Bottom Line for Home Seekers
The data from Los Angeles shows that Measure ULA has not delivered the promised boom of new units. Instead, it has added a massive cost burden to any major real estate deal. The city is left with less housing and more expensive transactions.
For New Yorkers, this is a warning shot.
This is opinion and commentary from the RapForMayor team.
