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# Los Angeles County Is Investable. The City of Los Angeles Is Not.
- URL: https://www.christopherrising.com/los-angeles-county-is-investable-the-city-of-los-angeles-is-not/
- Published: 2026-10-15T14:30:00.000Z
- Updated: 2026-10-15T14:29:59.000Z
- Description: Capital has drawn a line around the city limits, and the reasons are financial.
- Author: Christopher Rising

There is a line on the map that most people in Los Angeles never notice. It runs along the city limits, and institutional capital has learned to stop at it.

Ask an investment committee in New York whether it wants exposure to Los Angeles County and the answer is usually yes. The county has the ports, the population, a deep industrial tenant base and some of the tightest land constraints in the country. Ask the same committee about a building inside the City of Los Angeles and the conversation changes. A CBRE investment broker told Bisnow his clients are very much bullish on the county and not so much on the city. A developer told The Real Deal this spring that institutional capital has largely stepped away from the city while staying open to the cities next door.

Call it what it is: a redline, drawn by capital rather than by any agency. It has little to do with the buildings. A warehouse in Sun Valley and a warehouse in Burbank share the same freeways, the same labor pool and the same tenants. What they don't share is a city government. Three things put the line where it is.

## The exit is taxed before the deal is made

Measure ULA is now three and a half years old. For deals closing after June 30, a sale between $5.4 million and $10.9 million pays 4%, and anything above that pays 5.5%, on top of the base city and county transfer taxes of 0.56%. On a $20 million building, roughly $1.2 million leaves at closing. In Glendale, Burbank or unincorporated county, the same sale pays a fraction of that.

Every institutional investor underwrites the exit on day one. With county cap rates averaging about 5.7%, a 5.5% tax on the sale price consumes close to a full year of net operating income at the end of the hold. The market has responded the way the math says it would. UCLA's Lewis Center found the odds of a sale above the threshold fell by roughly half. In June, Rand estimated that local, county and state governments have lost about $452 million since 2023 from deals and development that never happened. A Harvard Business School paper put the cost at 63 cents of lost property tax growth for every ULA dollar collected. The tax has raised about $1.2 billion in three years, against original projections of $600 million to $1.1 billion a year.

## Crime is underwritten through the response, not the trend

The city's crime numbers have improved, and that deserves to be said. The Mayor reported burglaries down about 30% this year. Investors look past the trend line, though, to a narrower question: what happens when a tenant's building gets broken into?

LAPD counted about 8,677 sworn officers this spring, the lowest level in nearly a quarter century, and the Mayor has stepped back from her goal of rebuilding to 9,500\. LAPD data reported by NBC showed arrests in fewer than 7% of burglary cases. The department's own leadership has said staffing limits how quickly it can respond to lower-level crime, and budget proposals last year would have stopped fingerprint processing on burglaries.

For an owner, property crime is an operating cost. It shows up in security contracts, insurance, slower leasing and tenants who decide not to renew. A tenant who has been burglarized twice starts comparing the city with Burbank or the unincorporated county one exit down the freeway. Capital follows the tenant.

## The rules keep changing, and new costs arrive by ballot

The third piece is the hardest to model, which is why it may matter most. A statewide measure that could have capped ULA was withdrawn in June. The City Council is working through amendments of its own. An owner buying today cannot say what the transfer tax will be at exit five or seven years from now, only that it will likely be large and that politics, not the market, will set it.

The same pattern shows up in the sales tax. The county rate rose to 10.25% on October 1\. On November 3, city voters will decide Measure FD, another half cent for the fire department. It reached the ballot through a union petition after the department went underfunded in the city's own budget, and the Council began planning how to spend the money months before anyone voted. Whatever one thinks of the cause, the lesson for an investor is about process. When the city's budget doesn't balance, the answer tends to arrive as a new tax on transactions and commerce, and the businesses that lease buildings in the city carry it.

An investment committee can price a known tax. It has a much harder time pricing a city where the cost of owning a building gets renegotiated every election cycle.

## What the line means

Nothing here is a judgment on the people of Los Angeles or on the long-run value of its land. Put two buildings side by side: same freeways, same tenants, same labor. One carries a 6% exit tax, thinner police coverage and an open-ended political bill. The other doesn't. Capital chooses the second building every time, and it is choosing it now.

The fix isn't mysterious, which is what makes the failure so hard to accept. A transfer tax that doesn't punish the exit, a police force sized to the city it serves, and a budget that balances before it reaches for the ballot. None of it gets done, because no one in City Hall is willing to own the city's finances. Leaders across the board are quick to step forward on immigration and the social issues of the day, and slow to do the unglamorous work of living within the city's means. So every shortfall becomes a new tax, every new tax gives capital another reason to stop at the city line, and the shrinking base produces the next shortfall. That is a failure of leadership, and it belongs to City Hall as a whole rather than to any one person. Until someone is willing to balance the books, the City of Los Angeles will remain an impossible place to do business. We believe the city can earn its way back across that line, because the underlying real estate is too good not to. It will take leadership the city has not yet shown.