{"id":5079,"date":"2024-04-03T18:49:44","date_gmt":"2024-04-03T18:49:44","guid":{"rendered":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/2024\/04\/03\/l-a-s-mansion-tax-put-a-damper-on-luxury-sales-but-raised-215m-for-housing-initiatives\/"},"modified":"2024-04-03T18:49:44","modified_gmt":"2024-04-03T18:49:44","slug":"l-a-s-mansion-tax-put-a-damper-on-luxury-sales-but-raised-215m-for-housing-initiatives","status":"publish","type":"post","link":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/2024\/04\/03\/l-a-s-mansion-tax-put-a-damper-on-luxury-sales-but-raised-215m-for-housing-initiatives\/","title":{"rendered":"L.A.\u2019s \u2018Mansion Tax\u2019 Put a Damper on Luxury Sales\u2014but Raised $215M for Housing Initiatives"},"content":{"rendered":"

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One year after it was implemented, a higher real estate transfer tax in Los Angeles<\/a> has raised millions to fund affordable housing\u2014but it appears to have chilled luxury home sales in the city.<\/p>\n

Dubbed a \u201cmansion tax\u201d by supporters, the policy adds a 4% tax on the total transaction for property sales over $5 million and a 5.5% rate for sales above $10 million. Those are on top of the 0.45% tax Los Angles already levied on all real estate deals\u2014a tax typically paid by the seller.<\/p>\n

Since taking effect April 1, 2023, the policy officially known as Measure ULA has raised roughly $215 million, according to the city\u2019s housing department. Those funds are intended to support affordable housing initiatives and help alleviate homelessness.<\/p>\n

But so far, the added revenue has fallen short of the $672 million the city projected the new tax would reap annually. Plus, local real estate agents say the initiative has put a damper on luxury home sales<\/a>, prompting wealthy prospective buyers to look elsewhere.<\/p>\n

\u201cIt\u2019s not bringing the money they thought it would bring,\u201d says Anne Russell<\/strong>, director of risk management at Rodeo Realty. \u201cThese measures simply stifled the transfer of property.\u201d<\/p>\n

Russell, who is also the current president of the Greater Los Angeles Realtors (GLAR), adds that the tax is \u201cjust another reason why people don\u2019t want to sell their homes, so that younger, new homebuyers can go in and buy them.\u201d<\/p>\n

Data from Realtor.com\u00ae reveals a flurry of home sales over $5 million in Los Angeles, just before the new tax took effect\u2014specifically, there were 138 such sales in March 2023, followed by just two sales the following month.<\/p>\n

\u201cI had a property I sold in Redwood Park that we were frantic to get it closed by March 31\u2013frantic,\u201d recalls Russell. \u201cThe buyers saw that they had an advantage, and so there was some negotiating going on at the 11th hour.\u201d<\/p>\n

Since the new tax took effect, single-family home sales above $5 million in L.A. have climbed back to double digits monthly\u2014but remain well below the levels seen in 2021 and 2022. The most recent available sales data from April 2023-January 2024 shows 150 such sales, a 68% decline from the 474 homes sold in the same 10-month period a year earlier.<\/p>\n

Higher mortgage rates and other market forces have also weighed on luxury sales in neighboring affluent cities, though not to the same extent. In Beverly Hills, home sales above $5 million are down 43 percent year-on-year since April 2023. Santa Monica saw a decline of 25 percent, while deals in Malibu were down 23 percent.<\/p>\n

\u201cWe\u2019re very supportive of efforts to end homelessness and create more housing opportunities,\u201d says Russell. \u201cBut I think our legislatures have a problem thinking five steps ahead.\u201d<\/p>\n

Supporters say \u2018mansion tax\u2019 crucial to tackle homelessness<\/h2>\n

Supporters of the new transfer tax say it is raising much-needed funding to alleviate homelessness in Los Angeles, a chronic issue for the city of nearly 4 million people.<\/p>\n

\u201cULA has already proven to be one of the greatest revenue sources for affordable housing that L.A. has ever seen,\u201d says Joseph Donlin<\/strong>, the director of United to House LA, the coalition that backed the November 2022 local ballot measure that approved the new tax.<\/p>\n

In August, the L.A. City Council passed a spending plan for the the first $150 million raised by the added tax, devoting the funds to tenant aid and affordable housing production.<\/p>\n

According to the Los Angeles Times<\/a>, the city has so far spent around $28 million to help distressed tenants and landlords, $23 million on eviction protection and tenant outreach, and $56.8 million on loans to accelerate the development of affordable multifamily housing projects.<\/p>\n

\u201cNone of that happens without ULA,\u201d Greg Good<\/strong>, a senior advisor on policy and external affairs for the L.A. Housing Department, told the Times.<\/p>\n

Donlin credits the new funds for direct rental assistance with helping keep about 11,000 Angelenos housed so far. He says the city is also poised to approve funding for 795 new affordable homes subsidized by the new tax revenue.<\/p>\n

The measure has so far survived an onslaught of challenges from the real estate industry. In October, a judge dismissed a lawsuit claiming the tax was unconstitutional, though that decision is under appeal.<\/p>\n

The next challenge comes in November, when California voters will consider a statewide ballot measure that would effectively strike down the tax.<\/p>\n

\u201cThe luxury real estate industry is doing everything they can to undermine it; but given all that, it\u2019s a big success,\u201d says Donelin. \u201cFrom an economic development perspective, it\u2019s a success. And from the perspective of keeping people housed in Los Angeles, which is a huge need, it\u2019s exactly what L.A. needs right now.\u201d<\/p>\n

Critics say tax hurts renters, consumers<\/h2>\n

Critics of the new tax say the term \u201cmansion tax\u201d is misleading, because the higher tax rate applies to all asset classes\u2014not just luxury homes.<\/p>\n

That means multifamily apartment buildings and commercial real estate, for which $5 million transactions could fall on the mid to low end, are also subject to the tax. Businesses could pass those costs to consumers, and landlords might respond by raising rents, critics warn.<\/p>\n

\u201cWe are seeing the tax impact a wide range of properties in markets across Los Angeles, beyond just large single-family homes,\u201d says Jerard Wright<\/strong>, government affairs director for GLAR, in a statement. \u201cWith the high real estate prices in the Los Angeles area, $5,000,000 threshold covers a lot of properties and property types in the region, and the extra costs at closing are going to have a lot of unintended impacts on multifamily and mixed-use properties.\u201d<\/p>\n

Wright believes these properties are \u201ccritical to providing the range of housing types needed to solve our housing availability and affordability crisis.\u201d<\/p>\n

Making them more expensive, he says, will negatively impact residential and small commercial tenants.<\/p>\n

Wright adds that GLAR is \u201cstrongly supportive of efforts to solve the homelessness and housing crisis across the region\u201d and has \u201csupported multiple funding measures since 2015 that have generated billions in resources and funding to address these issues that do not create new, and extra, costs at the closing table.\u201d<\/p>\n

Meanwhile, Russell notes that the tax \u201cis not just affecting rich people\u201d and has far broader implications.<\/p>\n

\u201cIsn\u2019t that the stepway to homelessness, if you can\u2019t find an apartment?\u201d she adds. \u201cWhen they put this additional tax on people trying to develop or build or fix up income property, in order to provide the units that we need to prevent homelessness, they\u2019re putting a wrench into that.\u201d<\/p>\n

Elsewhere in the U.S., similar tax proposals have faced resistance. Last month, Chicago voters rejected a ballot proposal<\/a> to raise the real estate transfer tax on transactions worth more than $1 million.<\/p>\n

The post L.A.\u2019s \u2018Mansion Tax\u2019 Put a Damper on Luxury Sales\u2014but Raised $215M for Housing Initiatives<\/a> appeared first on Real Estate News & Insights | realtor.com\u00ae<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"

Getty Images One year after it was implemented, a higher real estate transfer tax in Los Angeles has raised millions to fund affordable housing\u2014but it appears to have chilled luxury home sales in the city. Dubbed a \u201cmansion tax\u201d by supporters, the policy adds a 4% tax on the total transaction for property sales over…Read More→<\/a><\/p>\n","protected":false},"author":0,"featured_media":5080,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-5079","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"_links":{"self":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/posts\/5079","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/comments?post=5079"}],"version-history":[{"count":0,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/posts\/5079\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/media\/5080"}],"wp:attachment":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/media?parent=5079"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/categories?post=5079"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/tags?post=5079"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}