Los Angeles’ controversial “mansion tax,” enacted a year ago to fund affordable housing and aid for the homeless, has led to a staggering 68% drop in luxury home sales.
The policy, known as Measure ULA, placed a 4% tax on properties sold between $5 million and $10 million, and a 5.5% tax on those exceeding $10 million.
Despite projections of generating up to $1.1 billion annually, the Housing Department has collected only $215 million – just 22% of its goal.
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Real estate developer Hooman Ghaffari slammed the measure, calling it “a sham” that has failed to meet objectives while making new developments “financially unworkable.”
The city argues that the policy will gain momentum, citing an increase in monthly revenue from $15 million in the first quarter to $25 million between July 2023 and February 2024. Greg Good, a senior advisor for the Housing Department, noted that $28 million has been allocated to assist tenants and landlords, with $56.8 million earmarked for loans to accelerate affordable housing construction.
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
However, the mansion tax’s impact on the luxury housing market is undeniable.
High-end properties have seen significant price reductions and extended time on the market.
A gated estate in Tarzana, initially listed at $17.9 million in July 2023, has dropped to $15 million after 270 days.
The tax has also driven wealthy homeowners to seek alternatives, purchasing 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, with anticipated tax revenue falling short of expectations.
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
While Mayor Karen Bass touted the measure as a means to fund “real solutions” for affordable housing and homelessness, the unintended consequences have become increasingly apparent.
The sharp decline in luxury home sales and failure to meet revenue projections illustrate the limitations of such progressive policies in addressing complex social issues.
Los Angeles’ experience serves as a cautionary tale for other cities considering similar measures.
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Policymakers must carefully consider the potential ramifications of such initiatives and seek more comprehensive, data-driven solutions that balance social responsibility and economic viability. The pursuit of well-intentioned goals through misguided policies can often lead to unintended consequences that exacerbate existing problems rather than solve them.
