The year of the 'mansion tax': Hundreds of millions raised, but a chill to LA's luxury market

One year ago, Los Angeles' "mansion tax" took effect. It has either been a godsend or an absolute disaster, depending on who you ask.

The transfer tax, formally known as Measure ULA, levies a 4% charge on all property sales above $5 million and a 5.5% charge on sales above $10 million, with proceeds funding affordable housing and homelessness initiatives.

When L.A. voters approved the measure in November 2022, it quickly became the dominating storyline in L.A. real estate.

Proponents say the tax generates crucial funding to address L.A.'s housing crisis, and they're right. In its first year, Measure ULA has raised roughly $215 million, according to the L.A. Housing Department.

The L.A. City Council passed a $150-million spending plan for ULA funds in August, and the money has been flowing into six programs: short-term emergency rental assistance, eviction defense, tenant outreach and education, direct cash assistance for low-income seniors and people with disabilities, tenant protections and affordable housing production.

Critics, including many L.A. real estate professionals, claim the tax has hampered the market — not just luxury home sales, but also multifamily developments and commercial properties, since the tax applies to all property sales above $5 million.

They're also right.

When the tax first took effect on April 1, 2023, it all but froze L.A.'s luxury real estate market, with many sellers pulling their homes off the market at the prospect of paying an extra few hundred thousand in taxes if they sold.

A year later, the market is still just as icy.

The striking slowdown is partly due to chilled buying across Southern California, as soaring interest rates keep many prospective buyers out of the house hunt altogether. But in L.A. — the only city affected by the tax — home sales above $5 million have plummeted at twice the rate of other affluent cities, as buyers opt for homes in neighboring areas that aren't subject to the tax.

...continued

swipe to next page