During one week in November, developers broke ground on two affordable housing complexes in the city of Los Angeles, a rare sign of momentum in one of the nation’s most expensive rental markets.
The projects — a 303-unit building downtown called Alveare and the 48-unit Grace Villas complex in the Lincoln Heights neighborhood — stood out in another way: They both used funding from the city’s Measure ULA tax.
They are two of nine previously stalled developments restarted with $54 million from Measure ULA’s accelerator fund. The tax contributed $11 million toward Alveare’s $72 million budget and $7 million toward Grace Villas’ $47 million construction cost.
Hundreds of other affordable units across the city have moved forward with support from the tax in recent months, even as critics intensify calls to scale back the levy, among the largest of its kind in the country. Other cities seeking to raise their own property sales taxes could look at the Los Angeles tax — and the ways the funds are getting used, affordable housing advocates say.
Several states, including Maine, Rhode Island and New Jersey, are raising transfer taxes on high-value sales to help fund affordable housing and homelessness programs. Chicago voters last year rejected a similar tax on properties over $1 million, but Seattle voters approved a property tax aimed at helping low-income renters. New York and San Francisco also raised property transfer taxes for affordable housing, and Boston is considering a similar levy.
Los Angeles has opened applications for its largest affordable housing funding round yet, a $376 million pool fueled heavily by collections from the tax. A typical year's fund would be roughly $50 million.
Still, critics argue that the tax has chilled investment in a market already struggling with high interest rates and cautious lenders.
“Developers are hesitant to build in Los Angeles because of the ULA tax on the back end,” Kitty Wallace, a vice chair at Colliers who has sold hundreds of apartment buildings across Los Angeles during her career, told CoStar News. “That tax significantly impacts returns, and as a result, many projects aren’t moving forward.”
Adding affordable housing
The tax that took effect in April 2023 places a 4% levy, up from 0.45%, on property sales topping $5.15 million, and a 5.5% charge on deals exceeding $10.3 million.
The tax has limited investment interest in Los Angeles when compared to cities without such a property levy, according to researchers at the UCLA Lewis Center. The group said the measure cost the city $25 million per year in taxes in the first two years of its implementation due to a falloff in volume of transactions.
Backers of the tax, however, say it has generated more than $830 million for housing and homelessness programs and helped restart nine housing projects totaling 795 units. More is on the way in 2026, according to Joe Donlin, director of United to House LA.
Projects like Grace Villas and Alveare demonstrate how the tax is translating into on-the-ground construction, showing "what it looks like to use every public tool we have — every piece of land, every policy, every dollar — to fight displacement and make this city work,” Councilmember Eunisses Hernandez said at the Grace Villas groundbreaking. “Everyone deserves an affordable place to call home.”
Grace Villas offers a look at how funds from the tax can contribute to the financing stack required for many affordable developments.
The developers behind Grace Villas — WORKS, Linc Housing and GTM Holdings — combined Measure ULA dollars with 9% tax credits, project-based vouchers and a long-term ground lease from underused public land to push the development forward.
The project will reserve its 48 units for households earning 30% to 60% of the area median income for at least 55 years, to combat climbing housing costs in Los Angeles where average rents are roughly 35% above the nation's average.
Allocating tax funds
Of the funds that have been generated by Measure ULA, about $163 million has come from residential deals of between $5.3 million and $10.6 million, and nearly $350 million has stemmed from sales above that threshold. The remainder has come from commercial and land transactions.
Supporters say the tax is now one of the city’s most important sources of funding for affordable housing and renter protections.
The tax has supported eviction defense, homelessness prevention and new construction efforts reaching more than 11,000 households. It has also helped create or preserve nearly 800 affordable homes so far, officials say.
In 2024, the city of Los Angeles recorded its first drop in the homeless count in years, a trend supporters credit in part to the effectiveness of Measure ULA funds.
The funds from the taxes are also helping boost the financing pool for housing projects in Los Angeles. The Housing Department will now issue funding rounds annually rather than every two years, with awards covering 30% to 100% of costs depending on project type. Adaptive reuse proposals generally qualify for higher support.
The current $376.7 million housing funding round — the largest in city history — is open to nonprofit builders, for-profit affordable developers and community development corporations.
Political uncertainty
Even as the city begins deploying Measure ULA funds, political efforts to weaken or dismantle the tax have gained traction heading into 2026.
Mayor Karen Bass has proposed exempting wildfire-damaged homes in Pacific Palisades, and has also backed requests from state lawmakers to exempt certain multifamily properties next year.
Meanwhile, a statewide ballot measure backed by the Howard Jarvis Taxpayers Association poses the most significant legal challenge to Measure ULA. The amendment proposes a cap on transfer taxes below Measure ULA’s level and restoring a two-thirds voter approval threshold for citizen-driven tax measures.
If passed, the amendment would effectively dismantle the tax and limit the ability of any California city to impose similar levies.
Legal analysts say that even if voters eliminate Measure ULA, refunds aren't likely, because funds raised under a validly enacted measure are generally retained unless a court orders otherwise.