Los Angeles City Council created a new committee this week to explore changes to Measure ULA, the controversial "mansion tax" that voters approved in 2022. The committee's recommendations could go before voters as soon as November. The move signals that city leaders recognize something's broken with a tax they thought would generate hundreds of millions for affordable housing and homeless services. Instead, the high-end real estate market basically froze.

The tax adds 4% to properties sold for more than $5 million, jumping to 5.5% above $10 million. When it launched in April 2023, the Hoover Institution documented what happened next: carnage. In March 2023, before the tax kicked in, 126 homes above $5 million sold in LA—about four per day. In April, just two properties closed above that threshold. Sellers rushed to close deals early, slashed prices, and then the market dried up. Supporters had promised $875 million annually, and UCLA even raised that estimate to $923 million. But those numbers didn't account for what actually happened: people simply stopped selling.

Here's how these taxes backfire. When you slap a big one-time fee on a transaction, you don't just make it more expensive—you make people avoid the transaction altogether. It's like charging $100 to use the door: people will climb out the window instead. In LA's case, owners of expensive properties just held onto them rather than pay hundreds of thousands in extra taxes. The city found itself in what the Hoover analysis called a "fiscal mess," collecting far less than projected—$672 million instead of the promised haul. Less housing changes hands, which means fewer people can move into homes they need, and neighborhoods stay frozen. The very people the tax was supposed to help—those needing affordable housing—got caught in the crossfire of a policy that looked good on paper but ignored how markets actually work.

The new committee faces a tough choice: keep a politically popular tax that doesn't raise the money it promised, or admit the policy needs serious surgery. They could lower the rates, raise the thresholds, or add exemptions. But any changes will face the same political reality that created this mess in the first place—voters like the idea of taxing mansions, even when it doesn't work. What LA really needs is honest math about what the tax actually brings in versus what it costs the city in lost sales and economic activity. Until someone's willing to do that calculation and act on it, this committee risks just rearranging deck chairs on a very expensive yacht.