One year after Los Angeles enacted a controversial “mansion tax” aimed at funding affordable housing and aid for the homeless, luxury home sales have plummeted by a staggering 68 percent.
The policy, known as Measure ULA, placed a four percent tax on property sales between $5 million and $10 million, with the rate increasing to 5.5 percent for properties exceeding $10 million.
Despite initial projections that the tax would generate between $600 million and $1.1 billion annually, the Housing Department has collected only $215 million in its first year – a mere 22 percent of its stated goal.
LA's luxury house sales plummet 70 PERCENT in the first year since its hated 'mansion tax' was brought in as millionaires chose to live outside the city in Beverly Hills, Malibu and Santa Monica instead https://t.co/vCuRXqGsFw pic.twitter.com/PvecN4R0sY
— Daily Mail Online (@MailOnline) April 2, 2024
Local real estate developer Hooman Ghaffari criticized the measure, calling it “a sham” that has failed to meet its objectives while rendering new developments “financially unworkable.”
The city, however, maintains that the policy will gain momentum over time, citing an increase in monthly revenue from an average of $15 million in the first quarter to roughly $25 million between July 2023 and February 2024.
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Greg Good, a senior advisor for the Housing Department, pointed out that around $28 million has been allocated to assist struggling tenants and landlords, while $56.8 million has been earmarked for loans to accelerate the construction of affordable housing. “None of that happens without ULA,” Good asserted.
Despite these claims, the mansion tax’s impact on the luxury housing market is undeniable.
Numerous high-end properties have seen significant price reductions, with some languishing on the market for extended periods.
A prime example is a gated estate in the affluent suburb of Tarzana, which has dropped $2.9 million from its initial asking price of $17.9 million in July 2023, now listed at $15 million after 270 days on the market.
Who could have guessed?
"LA's luxury house sales plummet 70 PERCENT in the first year since its hated 'mansion tax' was brought in"
Other than sentient adults, which excludes @LACityCouncil, clearly. https://t.co/hlMscziUvn
— Roxanne Hoge (@RoxanneHoge) April 2, 2024
The implementation of the mansion tax has also driven wealthy homeowners to seek alternatives, with many opting to purchase properties in neighboring cities or states to avoid the additional financial burden.
This exodus of affluent buyers has further compounded the challenges faced by the Los Angeles housing market, as the anticipated revenue from the tax has fallen short of expectations.
While proponents of the measure, including Mayor Karen Bass, touted it as a means to fund “real solutions” for affordable housing and homelessness, the unintended consequences have become increasingly apparent.
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The sharp decline in luxury home sales and the failure to meet revenue projections underscore the limitations of such progressive policies in addressing complex social issues.
