How will SB 79 and Measure ULA affect multifamily apartment development in West LA?
How will SB 79 and Measure ULA affect multifamily apartment development in West LA? The short answer is that Los Angeles has increased theoretical housing capacity while leaving in place a transfer tax structure that directly suppresses the capital flows required to build new apartments. In a submarket where land pricing and exit values are already elevated, the friction between these two policies will determine which projects move from entitlement to vertical construction.
“SB 79 increases theoretical housing capacity, but Measure ULA directly taxes the capital stack that makes multifamily construction possible,” says Oron Maher, Broker-Director at Maher Commercial Realty. “When you upzone land while simultaneously taxing high-value transactions, you create a policy contradiction. In West Los Angeles, where land and exit values are already elevated, that tension will determine which projects actually break ground over the next 24 months.” Maher is a licensed real estate broker and California attorney who regularly advises owners and developers on structuring transactions in complex regulatory environments.
SB 79 has now taken effect, triggering zoning changes and upzoning across Los Angeles neighborhoods. The city has identified 57 neighborhoods for increased density as part of its implementation plan. In principle, this is a supply side reform. By expanding by right capacity and adjusting zoning envelopes, policymakers are attempting to reduce the structural shortage of housing units.
From a pure supply and demand perspective, expanding capacity should moderate long term rent growth and improve project feasibility by allowing more units on a given parcel. Increased density spreads land cost across a larger number of units. In high value areas such as West LA, that math is decisive. If a parcel that previously supported a limited number of units can now support a materially higher count, the land basis per unit declines. On paper, that improves residual land value calculations and makes acquisition underwriting more rational.
However, development feasibility does not exist in a vacuum. It depends on the entire capital stack and, critically, on exit assumptions. Measure ULA remains in place. The Los Angeles City Council recently shelved a ballot measure that would have canceled or reformed it as it applies to new apartments. The transfer tax on high value property sales in the City of Los Angeles therefore continues to apply to multifamily transactions that exceed its thresholds.
This is where the legal and structural framework becomes central. Measure ULA taxes the moment of liquidity. It applies when a property sells above certain price levels. In West LA, where stabilized multifamily assets routinely trade at valuations that can trigger the tax, the effect is not theoretical. It directly alters underwriting.
Developers price their projects based on a forward sale or refinance event. If the projected exit incurs a significant transfer tax, that cost is capitalized into the development pro forma from day one. It reduces the price a developer can pay for land. It can compress internal rates of return below institutional hurdles. It can also delay transactions, as buyers and sellers attempt to reallocate the tax burden through pricing adjustments.
Advocates for reform argue that Measure ULA is contributing to declines in new housing development. Even without introducing new data points, the mechanism is straightforward. If exit friction increases, transaction velocity declines. If transaction velocity declines, land comps reset lower or fail to reset at all because deals do not close. When land pricing becomes uncertain, development pipelines slow.
West LA is especially sensitive to this dynamic. It is a high demand coastal oriented submarket with strong rent fundamentals and constrained geography. SB 79 may unlock additional theoretical capacity in portions of the submarket. Yet the same elevated pricing that makes West LA attractive also increases the probability that a future sale will fall within the Measure ULA tax regime.
The result is a policy tension. On one side, the city signals that it wants more housing supply and is willing to upzone 57 neighborhoods to achieve it. On the other, it preserves a transfer tax that disproportionately affects the very transactions that recapitalize and recycle multifamily assets in prime areas.
Over the next 12 to 24 months, several indicators will clarify how this contradiction resolves in practice. First, land pricing in West LA will reveal whether sellers accept lower residual values that reflect Measure ULA friction. Second, deal velocity will indicate whether buyers are willing to underwrite exits that incorporate the tax. Third, the pipeline of submitted plans and issued permits will show whether expanded zoning envelopes are translating into shovel ready projects.
Political engagement around housing has intensified, with recent local elections in the City of Los Angeles seeing a 31 percent increase in voter turnout. That level of engagement suggests that housing policy will remain central to municipal decision making. For multifamily investors, this reinforces that regulatory risk and opportunity are now core underwriting variables, not peripheral considerations.
For owners in West LA, the practical question is whether to transact under the current regime or hold through potential future adjustments. For developers, the calculation is more granular. Does the additional unit count enabled by SB 79 offset the exit friction imposed by Measure ULA at projected stabilized values? The answer will vary by parcel, by basis, and by capital partner.
Maher Commercial Realty works with West LA multifamily owners to model these policy variables directly into acquisition and disposition strategies. That includes underwriting land acquisitions under new zoning parameters, stress testing exit values under existing transfer tax thresholds, and structuring transactions to reflect the current legal framework.
If SB 79 materially increases land supply but Measure ULA continues to suppress high value transaction liquidity, West LA could see a bifurcated market where only projects with exceptional basis or institutional balance sheet support advance to construction over the next 24 months.
This analysis is based on reporting originally published by Urbanize Los Angeles.
SB 79 takes effect, Measure ULA to remain, and more
