Also referred to as the “Mansion Tax”, this ballot aims to fund affordable housing by implementing a transfer tax on real estate transactions over $5 million in the city of Los Angeles. An additional 4% tax will be tacked on to properties valued between $5 million and $9.99 million, while properties valued over $10 million are subject to an increased tax of 5.5%. This new tax goes into effect for sales occurring on or after April 1, 2023.
For example - After April 1st, a property sale valued at $5 million in the city of Los Angeles would have an additional $200,000 tax whereas a $10 million dollar sale would see an additional $550,000 tax.
I know what you’re thinking, why does this tax even deserve a place on the ballot? The ballot initiative is an attempt at combating Los Angeles' crippling homelessness issue. If you have ever gone for a walk in Venice, Santa Monica, or ventured inland - you would understand why this issue is crucial to the infrastructure and safety of our beloved Los Angeles. On any given night, Los Angeles averages around 69,000 unhoused people sleeping on the street. To put that in perspective - that's the maximum capacity of Sofi Stadium.
Wrongly referred to as “The Mansion Tax”, Measure ULA supersedes far beyond exclusively residential real estate. Commercial and multi-family construction transactions are also heavily affected by the increase in tax percentage.
Those of us who aren’t regularly conducting multi-million-dollar transactions will be elated to have our streets clean of homeless encampments. There will be a 54% decrease in fires reported in Los Angeles, seeing as there are about 24 fire reports a day that are directly correlated to the unhoused. It breaks our hearts to see those who have fallen on hard times, and this tax gives them the opportunity to go to sleep with a roof over their head.
Nobody likes to pay more than what they bargained for. This tax will cut deep into the pockets of those in the real estate business, especially developers. New developments will be few and far between in the city of Los Angeles while developers are forced to take their new builds elsewhere. Forcing residents to deal with depleting infrastructure and outdated housing for years to come.
Will This Affect the South Bay?Luckily for us, property transactions in the South Bay will be safe from the tax - for now. Seeing as the tax only affects the city of Los Angeles, not the county. Measure ULA has promising benefits for the South Bay! Developers will migrate to our clean beaches and build stunning new homes for generations to enjoy. New development means the most advanced home technology and safety for our families. If you are a homeowner in the South Bay, there will be more demand for housing that falls within the affected bracket. If you are a $5+ million buyer, we suggest buying sooner rather than later to prevent competitive bidding wars with all-cash developers.
With April 1st looming right around the corner, agents and developers alike are rushing to close transactions before the tax goes into effect. Like any bill, there are always positive and negative impacts that will change the traditional way we once conducted business. What we can always be grateful for is the right to vote and the privilege our voices have to impact our community.
Looking for more information on Measure ULA or other Real Estate Laws in the South Bay? Get in touch with us today, by clicking here.