Tom Petty and his first wife, Jane Benyo, had the house at 4626 Encino Avenue custom-built in 1989 on a nearly one-acre lot in the Rancho Estates neighborhood. Selena Gomez bought it in 2020 for nearly $4.9 million, listed it in May 2026 at $6.5 million, and Robb Report reported on September 9, 2026 that it sold for $5.399 million.
That price is $1,000 below $5,400,000, the Measure ULA threshold for City of Los Angeles sales closing after June 30, 2026. The reporting doesn't say the price was set with the tax in mind, and it doesn't give a closing date. Still, the number lands on the one line in Encino's luxury market where a single dollar can be worth more than $200,000 to the seller.
The line is a cliff, and it moved this summer
Encino is inside the City of Los Angeles, so every sale there pays the city's real property transfer tax. The City of Los Angeles' Office of Finance lists the base rate at 0.45%. Measure ULA adds a special tax on top of it: 4% on transfers above $5,400,000 and below $10,900,000, and 5.5% on transfers of $10,900,000 or more, for transactions closing after June 30, 2026. The earlier thresholds were $5.3 million and $10.6 million, and they adjust each year with the chained consumer price index.
What matters for pricing is that the ULA rate applies to the whole price, not just the part above the threshold. A $5.4 million sale owes no ULA. One dollar more and the seller owes 4% of the full $5,400,001, which comes to about $216,000.
Here is how the city's transfer taxes change what a seller keeps at prices around the line. The figures cover only the city's 0.45% base tax and the ULA surcharge. Commissions, county tax and other closing costs are left out.
| Sale price | City base tax at 0.45% | ULA surcharge | Seller keeps after city transfer taxes |
|---|---|---|---|
| $5,300,000 | $23,850 | $0 | $5,276,150 |
| $5,400,000 | $24,300 | $0 | $5,375,700 |
| $5,450,000 | $24,525 | $218,000 | $5,207,475 |
| $5,500,000 | $24,750 | $220,000 | $5,255,250 |
| $5,626,000 | $25,317 | $225,040 | $5,375,643 |
At $5.5 million, the seller keeps roughly $120,000 less than at $5.4 million. A buyer has to pay about $5.63 million before the seller comes out even with a sale right at the threshold. Every price between those two points leaves the seller worse off than if they had taken $5.4 million.
The dead zone sets the list price
For an Encino estate that could reasonably appraise anywhere from about $5.3 million to $5.7 million, the table changes the conversation. A $5.5 million offer looks $100,000 better than a $5.4 million offer on paper. After city transfer taxes, it is about $120,000 worse.
That gap shows up across the city's data. A July 2026 report from Pepperdine's School of Public Policy and Beacon Economics found that the share of Los Angeles sales above the ULA thresholds dropped noticeably after the tax took effect, and that sales visibly clustered just below the thresholds. The authors read that as buyers and sellers adjusting price and deal terms to avoid the tax where they could. The same report estimates that monthly high-value sales in the city fell about 41% compared with surrounding jurisdictions, with no statistically significant effect below the threshold. For single-family homes at $5 million and up, it estimates that Los Angeles sale prices fell behind surrounding areas by roughly 11% to 12% after ULA. The Greater Los Angeles Association of Realtors and the Arthur N. Rupe Foundation supported the research, and the report says the authors set its design and conclusions independently.
The authors also say their count of lost transactions can't tell apart a deal that was repriced below the line from one that was delayed, moved elsewhere or canceled. That limit matters for anyone pricing a single home. The citywide pattern points to the threshold. It doesn't tell you which side of the threshold your house should land on.
For a seller, that makes the threshold a strategy question to settle before the house goes on the market. A list price that invites offers in the dead zone can leave you negotiating over numbers that are all worse than $5.4 million. For a buyer, it means a house listed just above the line may have more room to move than the asking price suggests.
Hayvenhurst shows what happens well past the line
When a home's value is clearly above about $5.63 million, the cliff stops shaping the deal and becomes a cost the seller carries. Meghan Trainor's home at 4322 Hayvenhurst Avenue shows how that plays out. She listed it in June 2024 at nearly $12 million and most recently cut the price to just under $7 million in March 2026. The Real Deal reported on April 16, 2026 that it sold for $6.8 million. The deal was taxed at the 4% ULA rate, a bill of $273,400.
The house is more than 14,000 square feet on just over an acre, with a recording studio, tennis court and guest house. No amount of fine-tuning would have brought a property like that under $5.4 million. The tax still mattered. It came out of the seller's proceeds instead of shaping the final price.
Put the two Encino sales side by side and the split is clear. Near the threshold, ULA works on price. Far above it, ULA works on net proceeds. The homes that face the toughest pricing decisions are the ones whose realistic value sits close to the line.
The cliff also keeps houses off the market
The tax affects more than the deals that happen. It also affects whether owners sell at all. The Real Deal reported on July 26, 2026 that Oren Levy, founder of the luxury builder Gesh Group, says owners' reluctance to pay ULA has flipped his business. Before ULA, his work was 80% new construction and 20% remodels. Now it is about 60% remodels and 40% new builds. The same report cites ATTOM Data Solutions, which counted a 46% increase in remodel permits for high-priced homes in the City of Los Angeles when comparing 2018 and 2019 with the two years after ULA took effect.
"In my experience, it has unquestionably caused some owners to delay selling — but it has also led others to conclude that tying up additional money and years of their lives in a renovation may carry even greater uncertainty than selling today." Emil Hartoonian of The Agency, quoted by The Real Deal
There is also a geographic factor. The Los Angeles County Recorder lists just five cities with special transfer-tax rates: Culver City, Los Angeles, Pomona, Redondo Beach and Santa Monica. Calabasas and Hidden Hills aren't on that list, so sales there pay the standard documentary transfer tax of $0.55 per $500. On a $5.5 million sale, that tax comes to $6,050. None of the sources reviewed for this post track Encino buyers or sellers actually moving to those cities. The difference is structural, and a seller pricing an Encino estate is pricing against it whether or not any particular buyer is weighing both.
What the November 3 ballot does and doesn't change
Two measures on the November 3, 2026 ballot mention transfer taxes. Neither changes the math for a typical Encino sale. State Proposition 43 would raise the vote needed to pass citizen-proposed local special taxes from a simple majority to two-thirds, and it applies only to measures approved after January 1, 2027. Its text doesn't repeal ULA.
City Proposition TE would give a one-time ULA exemption or refund for qualifying residential properties damaged or destroyed in the Palisades Fire, if the person who owned the property on January 7, 2025 sells it by January 6, 2030. It isn't a general exemption, and it wouldn't apply to an Encino home that wasn't damaged in that fire.
FAQ
Does Measure ULA apply to homes in Encino? Yes. Encino is inside the City of Los Angeles, so qualifying sales there are subject to the ULA tax.
Will the $5.4 million threshold change again? The thresholds adjust each year with the chained consumer price index. The $5.4 million and $10.9 million figures apply to transactions closing after June 30, 2026. Check the current figures with the city's Office of Finance before you set a price.
Is there a second cliff at the top tier? Yes, and it works the same way. At $10,900,000 and above, the ULA rate rises to 5.5% of the entire price. This post describes how the tax works and what has been reported. It isn't tax or legal advice, so review your own numbers with a qualified tax professional.
If your Encino home's realistic value is close to $5.4 million, the threshold should be part of your pricing plan before the first showing. Brandon Kaufman can run your comparable sales against the ULA break-even and help you choose a list price that keeps your offers out of the dead zone. Request a free home valuation or schedule a consultation to see where your number falls.
