Encino's $5.4 Million Line, and Why a Bigger Offer Can Net a Seller Less
October 8, 2026
October 8, 2026
An Encino home that closes at $5,400,000 owes the City of Los Angeles about $24,300 in transfer tax. If the same home closes one dollar higher, the bill is roughly $240,300. Since July 1, 2026, Measure ULA has charged 4% on transfers within the city that go over $5.4 million. That 4% applies to the whole price, and it sits on top of the city's standing 0.45% base transfer tax.
Encino is inside the City of Los Angeles, so this cliff now shapes how the top of its market gets priced. Sellers with homes in the $5 million to $6 million range face a stretch of prices where a higher offer can leave them with less money. The research published this year suggests the whole market has adjusted around that fact.
The ULA tax works as a step. Below the line it adds nothing. Above the line it is charged on every dollar of the sale. Here is what the city's published rates mean for a seller. The table counts city transfer taxes only and leaves out commissions and other closing costs.
| Sale price | City base tax at 0.45% | ULA tax | Proceeds after city transfer taxes |
|---|---|---|---|
| $5,400,000 | $24,300 | $0 | $5,375,700 |
| $5,450,000 | $24,525 | $218,000 | $5,207,475 |
| $5,550,000 | $24,975 | $222,000 | $5,303,025 |
| $5,630,000 | $25,335 | $225,200 | $5,379,465 |
At a combined 4.45%, a sale has to reach about $5.63 million before the seller pulls ahead of a clean $5.4 million close. A seller weighing an offer at $5.5 million against one at $5.4 million would come out roughly $120,000 behind by taking the bigger number, before commissions. Commissions usually scale with price, so once they are included the break-even point moves a bit higher.
A second step sits further up. At $10.9 million and above, the ULA rate goes to 5.5%, which brings the combined city rate to 5.95%. In Encino the $5.4 million line is the one most sellers will actually run into.
The line also moves every year. The city indexes the thresholds to the Bureau of Labor Statistics Chained CPI. The earlier $5.3 million and $10.6 million figures were still showing up in reporting in January 2026, and a Daily News article from August 4, 2026 still used them. Any pricing math done before July should be rerun with the new numbers.
On September 10, The Real Deal reported that 4626 Encino Avenue in Rancho Estates had sold for $5.4 million. The house was custom-built in 1989 for Tom Petty on a lot of nearly an acre. It has since been expanded to six bedrooms and 10 bathrooms across roughly 11,400 square feet. Selena Gomez bought it in 2020 for $4.9 million and listed it in May at $6.5 million.
The reported price matches the new threshold exactly. The article gives a rounded figure, doesn't state the precise consideration, and doesn't mention ULA, so it can't tell us whether the tax applied or why the deal landed where it did. The calendar still matters, though. Under the thresholds that applied before July 1, any sale above $5.3 million was taxed. A September close at $5.4 million or below would now be on the untaxed side of the line.
Researchers have measured ULA's effects several ways, and each number answers a different question. Here is what each study looked at.
The Pepperdine authors are clear about the limits of their data. A "foregone" sale above the line might have been repriced below it, moved to another jurisdiction, delayed, or never completed, and their data can't tell those outcomes apart. None of these studies breaks out Encino. All three estimate fewer sales above the line, Pepperdine also documents sales bunching just below it, and every Encino home above $5.4 million is subject to the same cliff.
Some owners respond to the cliff by not selling at all. In July 2026, Gesh Group told The Real Deal that its business used to be about 80% new construction and 20% remodels, and is now about 60% remodels. Many of those projects are large renovations that strip a house to the studs, typically costing $1 million to $6 million on homes that would sell above the ULA threshold. Encino and Sherman Oaks are among the neighborhoods where much of that work is happening.
The trend appears in permit data too. A study using Attom data compared single-family remodel permits in the City of Los Angeles in 2018 and 2019 with the two years after the tax took effect. It found a 46% increase for high-priced homes and no statistically significant change for mid-priced ones.
The same story points to a pricing standoff. One broker who works in Sherman Oaks and Studio City told the publication that sellers want to price in the tax they will owe, while buyers generally don't value a home any higher because the seller has a large ULA bill. That gap helps explain the clustering. If buyers won't pay more to cover the tax and sellers net less just above the line, deals tend to land at or below it. Owners who can't make the numbers work often choose to stay. The same broker also warned that renovating isn't necessarily safer or cheaper, and that the market may not return the full investment.
Sellers waiting for ULA to go away should know what has happened over the past year. On December 15, 2025, California's Second District Court of Appeal upheld the measure and ruled that its passage as a majority-vote initiative was valid. In June 2026, the Howard Jarvis-sponsored statewide initiative that would have capped transfer taxes was withdrawn as part of a legislative deal, and existing transfer-tax rates stayed the same.
Two measures on the November 3, 2026 ballot touch this subject, and neither repeals ULA. Proposition 43, a statewide measure, would require two-thirds approval for certain voter-proposed local special taxes starting January 1, 2027. Los Angeles's Proposition TE would give a one-time exemption or refund only for qualifying residential properties damaged or destroyed in the Palisades Fire. The City Council also shelved a separate proposal to exempt new apartment buildings.
The rest of the Valley gives a sense of how few sales the cliff touches. The Southland Regional Association of Realtors counted 472 San Fernando Valley single-family closings in August 2026, with a median price of $1.105 million, down 3.1% from a year earlier, and an average of 38 days on market. At a median near $1.1 million, almost all Valley sales are nowhere near $5.4 million, which fits the Pepperdine finding of no measurable effect below the line. For an Encino estate, the relevant comparisons are the few nearby sales above the line and the larger group bunched just under it.
For a seller, the pricing decision really happens before listing. A home that can credibly sell well above roughly $5.63 million can be marketed on its merits. A home whose value falls between $5.4 million and that break-even point needs a plan for which side of the line it is meant to close on. A buyer who expects a seller to accept an offer slightly above the line is asking the seller to take home less. How the tax is handled in a specific contract is a question for a tax professional and a real estate attorney, ideally before the list price is set.
Does ULA apply to every Encino sale? It applies only to transfers inside the City of Los Angeles above the current threshold, which is over $5.4 million for closings after June 30, 2026. All city transfers pay the 0.45% base tax.
Is the 4% charged only on the amount over $5.4 million? No. According to the city's rate table, the 4% applies to the full value conveyed once it exceeds $5.4 million. That is why the cliff exists.
Will the threshold change next year? Probably. The city adjusts it each year using the Chained CPI, so check the City Office of Finance's figures before setting a price.
Does ULA cover condos and income property? Yes. It applies to real-property transfers of all types within the city, not just single-family homes.
If your Encino home could sell anywhere between $5 million and $6 million, it's worth running the break-even math before you choose a list price. Sally Greene can work through that calculation with you, along with the nearby sales on both sides of the line and whether selling or staying makes more sense for your plans. Let's Connect.
This article is general information, not legal, tax or financial advice. Consult a qualified professional about your situation.
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