Los Angeles Property Owners Face Huge Tax Bill After Selling High-Value Real Estate

Selling a high-value property in Los Angeles has become a cautionary tale for homeowners and investors alike, as recent examples show that unexpected taxes can dramatically cut into profits, even for wealthy individuals like Los Angeles Dodgers star Freddie Freeman.

Freeman, the Dodgers’ first baseman, recently sold his Los Angeles home and reportedly lost $2 million due to fees and taxes, highlighting the financial impact of a tax known locally as Measure ULA, which was approved by voters in 2022 and continues to draw controversy.

Measure ULA, described by critics as a so-called mansion tax, applies to a wide range of properties, not just mansions, and includes commercial buildings, apartment complexes, shopping centers, hotels, and other high-value real estate with a threshold currently set at $5.3 million.

Susan Shelley, vice president of communications at the Howard Jarvis Taxpayers Association, explained that the measure was intended to fund homelessness initiatives and housing services, but in practice, the tax hits both individuals and developers in ways that many argue were never fully anticipated.

“This is a transfer tax, a real estate transfer tax, to benefit homelessness and other kinds of services regarding housing or anti-eviction measures,” Shelley told The Center Square, emphasizing that the groups receiving the funds were often those who sponsored the initiative.

She continued, “They called it a mansion tax, but it’s not just on mansions. It applies to anything in the price range of about $5 million or more, adjusting annually for inflation, including commercial real estate and multi-family apartment buildings.”

The tax rate itself is steep, currently 4% for properties valued between $5.3 million and $10.6 million, and increasing to 5.5% for properties above $10.6 million, meaning sellers can face hundreds of thousands or even millions in taxes regardless of whether they realize a profit.

Freeman’s case illustrates the perverse effect of the tax: he sold his home for less than he purchased it but was still obligated to pay the 4% transfer tax based on the sale price, resulting in a $2 million loss despite an actual capital loss on the property.

Shelley argued that the measure has broader consequences for the Los Angeles real estate market, particularly for apartment buildings, because the tax reduces the feasibility of sales, restricts financing options, and in some cases pushes owners to hold properties rather than sell.

“It impacts housing development, which is what it really affects, especially apartment buildings, because developers can’t get financing on the terms they would otherwise be able to obtain,” Shelley said, noting that many projects are stalled or abandoned due to the additional tax burden.

Properties in high-value areas, including Pacific Palisades and other upscale neighborhoods, are particularly affected, leaving homeowners to shoulder large transfer taxes even when their homes are damaged or selling at a loss, according to Shelley.

The tax’s design and implementation have drawn criticism from many experts who call it an “awful, ill-conceived tax” that benefits special interest groups while harming ordinary property owners and the housing market as a whole.

“This is a new trend in California, where courts have allowed special interest groups to write their own taxes and collect signatures to place them on the ballot without meeting the traditional two-thirds approval requirement,” Shelley said.

She explained that under the state constitution, special taxes typically require a two-thirds vote at the local level, but Measure ULA exploited a loophole by qualifying as a citizen initiative, allowing it to pass with only a simple majority of 57.7%.

The consequences extend beyond wealthy homeowners. Local media and researchers have noted a chilling effect on housing development, particularly for non-single-family transactions, as commercial and multi-family properties have become increasingly costly to sell or develop due to the tax.

Steven Greenhut, senior fellow at the Pacific Research Institute, described Measure ULA as a law of unintended consequences, intended to fund homeless programs but inadvertently freezing the real estate market and slowing the construction of desperately needed housing units in Los Angeles.

“Los Angeles desperately needs more housing supply,” Greenhut told The Center Square, emphasizing that developers and property owners are reconsidering projects because the 4% to 5.5% tax makes many transactions financially unviable.

A report published in April 2025 by UCLA’s Lewis Center for Regional Policy Studies confirmed that the tax’s impact was particularly pronounced on non-single-family transactions, including apartment complexes and commercial properties, directly affecting housing supply and affordability.

According to the report, the combination of high transfer taxes and market uncertainty has led many developers to halt construction or postpone sales, creating a bottleneck in the housing market that worsens Los Angeles’ ongoing affordability crisis.

The financial burden of the tax also discourages mobility among homeowners, as selling a property in the high-value range triggers large, unavoidable taxes, leaving many to remain in homes longer than they might otherwise prefer, further constraining the market.

While the tax funds programs aimed at alleviating homelessness and other housing-related services, critics argue that much of the money is redirected to nonprofit organizations with high administrative costs, rather than directly helping residents in need.

Shelley noted that these Minnesota-style nonprofit organizations, which receive significant funding from the measure, often acquire luxury assets themselves, raising questions about the efficiency and fairness of the tax’s implementation.

Freeman’s situation underscores the human impact of the tax, even for individuals with substantial wealth. While reports note that Freeman has a six-year, $162 million contract with the Dodgers, the $2 million hit from Measure ULA demonstrates that the tax affects anyone in the applicable property value range, regardless of income.

Lawyers and tax experts advise property owners in Los Angeles to exercise caution when selling high-value real estate, accounting not only for capital gains but also for transfer taxes like Measure ULA, which can significantly reduce net proceeds from a sale.

Shelley and other advocates, including the Howard Jarvis Taxpayers Association, have filed lawsuits challenging the tax, arguing that it circumvents constitutional safeguards and unfairly burdens property owners, although courts have so far upheld the measure.

The controversy has sparked broader debate over California’s approach to local taxation, special interest influence, and the balance between generating revenue for social programs and maintaining a healthy, functioning real estate market.

Critics argue that while funding homelessness and housing services is a worthy goal, the method employed by Measure ULA has created perverse incentives, discouraging development and investment in Los Angeles’ housing infrastructure.

Media coverage and public commentary suggest that unless modifications or repeals occur, high-value property owners, developers, and investors will continue to face significant hurdles, limiting both sales and construction projects in the city for the foreseeable future.

Ultimately, the case of Freddie Freeman and his $2 million loss serves as a cautionary example for property owners, emphasizing the need for careful financial planning, expert tax consultation, and awareness of evolving local laws that can materially affect real estate transactions.

Measure ULA may achieve its stated goals in terms of revenue collection, but its unintended consequences—frozen development, reduced market mobility, and financial strain on property owners—have created a significant debate over whether the policy is sustainable or fair.

With housing affordability already a critical issue in Los Angeles, experts warn that taxing high-value properties at 4% to 5.5% without mitigating negative effects on development could exacerbate shortages, driving prices even higher and discouraging long-term investment.

Property owners, investors, and potential buyers are now watching closely, weighing the cost of entering the Los Angeles real estate market against potential gains, aware that taxes like Measure ULA can dramatically alter the financial equation.