Measure ULA, officially the "Homelessness and Housing Solutions Tax," took effect April 1, 2023 and fundamentally changed the economics of selling apartment buildings in the City of Los Angeles valued above $5,400,000 (CPI-adjusted; originally $5M at inception). As the most significant transfer tax in California history, ULA has reshaped buyer behavior, compressed deal volume, and created new structuring considerations that every apartment building owner must understand before listing.
This analysis is based on the LAAA Team's proprietary data from 495+ closed transactions, including our direct analysis of every $10M+ apartment sale in LA City from 2021 through 2024.
What Is Measure ULA?
Measure ULA imposes an additional real property transfer tax on sales within the City of Los Angeles. The thresholds are indexed to CPI and adjusted annually. As of July 1, 2026, the current thresholds are:
| Sale Price | ULA Tax Rate | Tax Amount Example |
|---|---|---|
| $5,400,000 or below | 0% (existing 0.45% city tax only) | $5M sale: $0 ULA |
| Over $5,400,000 and under $10,900,000 | 4% | $7M sale: $280,000 |
| $10,900,000 or more | 5.5% | $15M sale: $825,000 |
The tax applies to the entire sale price, not just the amount above the threshold. A $5,500,000 sale triggers a $220,000 ULA tax; a sale at exactly $5,400,000 owes no ULA. The original thresholds when ULA took effect in April 2023 were $5M and $10M; they are adjusted upward each July based on the Bureau of Labor Statistics Chained CPI.
ULA is customarily paid by the seller and is collected when the deed records, in addition to the existing City of LA documentary transfer tax of $4.50 per $1,000 of value and the County transfer tax of $1.10 per $1,000. Who pays is a contract term and can be negotiated: the code makes everyone who signs or benefits from the deed liable, and a buyer can agree to take on the tax, for example in exchange for a lower price.
The Market Impact: LAAA Team Data
We analyzed every apartment building transaction above $10M in the City of Los Angeles for two years before and two years after ULA took effect. The results are stark:
| Metric | Pre-ULA (2021-2022) | Post-ULA (2023-2024) | Change |
|---|---|---|---|
| Number of sales | 215 | 115 | -47% |
| Total sales volume | $7.67B | $3.83B | -50% |
| Avg price per unit | $398,754 | $325,909 | -18% |
| Avg price per SF | $406 | $327 | -19% |
| Avg cap rate | 3.86% | 4.82% | +96 bps |
To be clear: interest rate increases also contributed to these changes. But ULA's impact is distinct and additive. The tax directly reduces seller proceeds, which either compresses sale prices or removes properties from the market entirely as owners hold rather than sell at reduced net proceeds.
Year-by-Year Breakdown
| Year | Sales | Volume | Avg $/Unit | Avg Cap |
|---|---|---|---|---|
| 2021 | 94 | $2.75B | $355,553 | 3.87% |
| 2022 | 121 | $4.92B | $427,803 | 3.86% |
| 2023 | 67 | $1.78B | $327,792 | 4.51% |
| 2024 | 48 | $2.05B | $324,293 | 5.13% |
2024 was the weakest year: only 48 sales at the lowest per-unit pricing ($324,293) and highest cap rate (5.13%) of all four years. Meanwhile, 2022 saw 121 sales at $4.92B, likely inflated by a rush of pre-ULA closings.
How ULA Affects Different Sale Price Tiers
Over $5,400,000 and Under $10,900,000: The Value-Add Dead Zone
The 4% ULA tax on sales over $5,400,000 and under $10,900,000 creates a particularly painful dynamic for value-add investors. A buyer who purchases at $6M, invests $500,000 in renovations, and plans to sell at $8M in five years now faces a $320,000 ULA bill on exit. That eats directly into the return on investment and makes many value-add business plans unpencilable.
As we saw firsthand with our listing at 11616 Burbank Blvd in North Hollywood (21 units, listed at $9.9M): "Due to ULA, we had to find a buyer who was looking to buy and hold the property long term. For any buyer looking to increase value and sell in 5 or 10 years, they would need to account for the 5.5% ULA Transfer Tax on the future sale. That massive closing cost on the exit eats into any underwritten profits and kills their expected IRR, making any deal of this size nearly impossible to pencil."
The solution was finding a long-term hold buyer who had no plans to resell.
At $10,900,000 and Above: Institutional Impact
At the 5.5% rate, ULA becomes a six- or seven-figure line item. On a $15M apartment building, ULA is $825,000. On a $25M building, it is $1,375,000. For context, that is often more than the entire brokerage commission on the transaction.
The data confirms the impact: $10M+ apartment sales dropped from 215 in the two pre-ULA years to 115 in the two post-ULA years, a 47% decline.
Near the $5,400,000 Threshold: Structuring Opportunities
Properties valued near the $5,400,000 threshold create structuring opportunities. A sale at $5,400,000 owes zero ULA. A sale at $5,400,001 owes $216,000. This cliff effect incentivizes creative deal structuring for properties in the $5,400,000 to $5,900,000 range.
ULA and 1031 Exchanges: A Critical Distinction
This is the single most important ULA fact for apartment building sellers considering a 1031 exchange: ULA is NOT deferred in a 1031 exchange.
When you execute a 1031 exchange, federal capital gains tax, California state income tax, depreciation recapture, and NIIT are all deferred. But ULA is a transfer tax, not an income tax, and it is due at the close of escrow regardless of whether you exchange.
However, the taxes that a 1031 does defer typically dwarf ULA. On a $7M sale with $3M in capital gains:
- ULA (4%): $280,000
- Federal capital gains (20%): $600,000
- California state tax (13.3%): $399,000
- Depreciation recapture (25%): varies, often $200,000-$400,000
- NIIT (3.8%): $114,000
Total deferred via 1031: $1.1M+. ULA paid regardless: $280,000. The 1031 exchange still saves four to five times more than ULA costs. This is why exchanging remains the optimal strategy for most sellers, even with ULA.
For a deeper dive, see our 1031 Exchange Guide for LA Apartment Owners.
Deal Structuring: How We Navigate ULA
Commission Restructuring
In our sale of 11616 Burbank Blvd (21 units, North Hollywood), we restructured the transaction after contingency removal to benefit both buyer and seller. The buyer agreed to pay the brokerage commissions directly, and the purchase price was reduced by the same amount. This lowered the recorded sale price, reducing the ULA tax owed by the seller without changing the economics of the deal for either party.
Exempt Buyer Structure
In our sale of 1536 N Serrano Ave (42 units, East Hollywood), which closed in February 2026 at $7,600,000, the buyer took title through a limited partnership whose managing general partner was an experienced affordable housing non-profit. LAHD approved the partnership as an exempt transferee, so the sale recorded with no ULA. The contract put the transfer tax on the seller, so the exemption saved the seller $304,000 at the 4% rate. The City base and County transfer taxes still applied. An exemption like this depends on the buyer's structure and LAHD's review, so the filing belongs in the contract early.
Threshold-Aware Pricing
For properties valued near $5,400,000 or $10,900,000, we analyze whether pricing just below the threshold produces higher net proceeds for the seller than pricing above it. A property that might list at $5,500,000 could net the seller more at $5.25M after accounting for the $200,000+ ULA cliff.
Timing Considerations
Properties in the City of LA near the thresholds may benefit from listing at a price point that avoids ULA, then allowing the buyer to negotiate down naturally rather than starting above the threshold and absorbing the tax.
Who Is Exempt from ULA?
ULA exemptions follow the buyer, the entity that takes title. The seller's status and the property's rent restrictions do not matter, and there is no seller exemption, even for a non-profit seller.
The Los Angeles Housing Department (LAHD) approves affordable housing buyers under LAMC 21.9.14:
- Non-profit 501(c)(3) organizations with affordable housing development or management experience
- Community Land Trusts organized as non-profits, with experience
- Limited Equity Housing Cooperatives, with experience
- Limited partnerships and LLCs whose general partners or managing members are only qualifying non-profits, Community Land Trusts or cooperatives, with at least one of them experienced
- Community Land Trusts or cooperatives without experience that partner with an experienced 501(c)(3) as managing general partner
- Community Land Trusts or cooperatives without experience or a partner that record a permanent affordability covenant at acquisition
The City's Office of Finance approves a second group under LAMC 21.9.15:
- Established 501(c)(3)s with under $1B in assets whose initial IRS determination letter is at least 10 years old, with no housing experience required; title must vest in the non-profit itself
- Governmental entities
- Buyers exempt under the state or federal constitution
A for-profit investor can still be part of an exempt purchase. LAHD allows for-profit entities to invest as limited partners or non-managing members, as long as every managing partner of the entity on title is a qualifying, experienced non-profit. Our sale of 1536 N Serrano Ave closed this way. A for-profit buyer taking title in its own name, or in an entity it manages, pays ULA.
LAHD's experience test can be met three ways: an LAHD award within the prior 24 months, development of at least 2 affordable housing projects within the prior 6 years, or ownership or management of at least 2 affordable housing properties within the prior 6 years.
These exemptions remove only ULA. The City base tax and the County tax still apply, except for a government buyer, which is exempt from all three. Separately, a deed that is exempt from the base City transfer tax by the kind of transaction, such as a bankruptcy reorganization, also escapes ULA.
Sell vs. Hold: The ULA Decision Framework
ULA has changed the sell-vs-hold calculus for many LA apartment owners. Here is how to think through it:
Reasons to Sell Despite ULA
- Return on equity is low: If your equity is earning 3% and could earn 6-8% redeployed, ULA is a one-time cost against permanent improvement in returns
- 1031 exchange offsets: Deferred capital gains (typically 30-40% of gain) far exceed ULA (4-5.5% of sale price)
- Management fatigue: Quality-of-life factors and regulatory burden in LA (RSO, LAHD, habitability) may outweigh holding for ULA savings
- Interest rate environment: If rates drop, buyer demand increases and you can potentially sell at a higher price that absorbs the ULA impact
Reasons to Hold
- Property value near a threshold: If your building is worth $5,500,000, the $220,000 ULA is disproportionate; waiting for appreciation above $6M or refinancing may make more sense
- ULA may change: The courts have upheld the tax, but voters could still amend it
- Strong cash flow: If current returns are satisfactory, there is no urgency to trigger a taxable event
LA City vs. Outside LA City
ULA applies only within the City of Los Angeles. Properties in Glendale, Burbank, Pasadena, Santa Monica, Culver City, and unincorporated LA County are not subject to ULA.
This has created a notable bifurcation in the market. Investors looking for $5M+ apartment buildings (above the $5,400,000 ULA threshold) increasingly favor independent cities where ULA does not apply. Our data shows transaction velocity in cities like Burbank, Pasadena, and Glendale has held up better than comparable LA City submarkets in the $5M-$15M range.
Revenue and Policy Context
ULA was projected to generate $923M annually based on FY 2021-22 transaction data. In practice, revenue has fallen significantly short of projections because the tax itself reduced the volume of transactions it was designed to tax.
The funds are earmarked for affordable housing production (70%) and homelessness prevention (30%). The policy trade-off is real: ULA raises revenue for housing programs but simultaneously reduces transaction velocity, which reduces future tax revenue and constrains the market for existing apartment building owners.
Frequently Asked Questions
What is Measure ULA and when did it take effect?
Measure ULA is an additional real property transfer tax on sales within the City of Los Angeles, effective April 1, 2023. Thresholds are CPI-indexed: as of July 1, 2026, the rate is 4% on sales over $5,400,000 and under $10,900,000, and 5.5% on sales of $10,900,000 or more. It applies to the entire sale price, not just the amount above the threshold.
How much is the ULA tax on a $7 million apartment building?
A $7M sale within the City of LA triggers a ULA tax of $280,000 (4% of $7M), customarily paid by the seller at closing. This is in addition to the existing City and County transfer taxes of approximately $39,900.
Is ULA deferred in a 1031 exchange?
No. ULA is a transfer tax, not an income tax, and is due at closing regardless of whether the seller executes a 1031 exchange. However, the federal and state income taxes deferred by a 1031 (typically $1M+ on a $7M sale) far exceed the ULA amount, making exchanges still highly beneficial.
How has ULA affected the LA apartment market?
Based on our analysis of every $10M+ apartment sale in LA City, transactions dropped 47% (from 215 to 115) and total volume dropped 50% (from $7.67B to $3.83B) comparing the two years before ULA to the two years after. Average per-unit pricing fell 18% and cap rates expanded 96 basis points.
Does ULA apply to properties outside the City of LA?
No. ULA applies only within the City of Los Angeles. Glendale, Burbank, Pasadena, Santa Monica, Culver City, Beverly Hills, and unincorporated LA County are not subject to ULA. This has made non-LA-City markets more attractive for $5M+ transactions.
Can I structure my sale to avoid or reduce ULA?
For properties near the $5,400,000 threshold, pricing at or below the threshold eliminates ULA entirely. Commission restructuring (shifting broker fees to the buyer to reduce the recorded sale price) can also reduce ULA exposure. When the buyer is a qualifying non-profit, or a partnership managed only by qualifying non-profits, the sale can be exempt from ULA, as on our 1536 N Serrano Ave sale. We analyze every listing's ULA exposure and recommend the optimal structure.
Who is exempt from Measure ULA?
Exemptions follow the buyer, not the seller or the property. LAHD approves experienced 501(c)(3) affordable housing non-profits, community land trusts and limited equity housing cooperatives, and limited partnerships or LLCs managed only by them; for-profit investors can join such a partnership as limited partners or non-managing members. The Office of Finance approves established 501(c)(3)s with under $1B in assets and an IRS determination letter at least 10 years old, and government buyers. A for-profit buyer taking title in its own name or in an entity it manages pays ULA, and there is no seller exemption.
Should I sell my apartment building now or wait for ULA to change?
The decision depends on your return on equity, tax situation, and hold timeline. The court challenges are over: the California Supreme Court declined to review the case in March 2026, so waiting for repeal is speculative. If your equity is underperforming, a 1031 exchange still produces significant net tax savings even after ULA. Call Glen Scher at (818) 212-2808 to model your specific scenario.
How do Glen Scher and Filip Niculete handle ULA in their listings?
We model ULA exposure on every listing above $4.5M in the City of LA. For properties near the $5,400,000 and $10,900,000 thresholds, we analyze whether pricing below the threshold produces higher net proceeds. We have executed commission restructuring and creative deal structures to minimize ULA impact on multiple transactions. Our sellers receive a detailed net proceeds analysis that accounts for ULA, closing costs, and 1031 exchange savings.