Los Angeles ‘mansion tax’ has frozen luxury home sales: Only TWO homes over $5 million sold
Los Angeles’ recently introduced “gentlemen’s tax” has frozen luxury home sales with just two properties over $5 million sold in April, down from 126 in March.
The policy, which took effect April 1, requires the city to cut four percent of all home sales between $5 million and $10 million.
And for megamansions that cross the $10 million threshold, homeowners lose 5.5 percent of their sale price if they decide to cash in on their estate.
Only two homes sold for more than $5 million when the new policy went into effect in April. according to the Los Angeles Times.
These sales provided the city with $528,000 to spend on affordable housing and homelessness prevention programs.
Los Angeles’ recently introduced ‘gentlemen tax’ has frozen luxury home sales with this $5.7 million Brentwood home, just one of two properties over $5 million sold in April
The policy, which took effect April 1, requires the city to cut four percent of all home sales between $5 million and $10 million
This five-bedroom, $7.5 million Venice home was bought two weeks ago and the sellers had to forfeit four percent of the sale to the city
These sales provided the city with $528,000 to spend on affordable housing and homelessness prevention programs.
House prices were slashed and frightened sellers offered luxury cars and lucrative bonuses to anyone who could complete the purchase of their property by the end of March.
Now that prices have shot up again and there are no longer any incentives to buy the homes, a market slowdown was expected.
But the difference between March and April sales is unprecedented with only two properties sold in LA last month worth more than $5 million, according to the Multiple Listing Service.
A gorgeous five-bedroom, five-bathroom property in Brentwood sold for $5.7 million last week, while another five-bedroom, six-bathroom home in Venice was bought two weeks ago for $7.5 million.
The Brentwood home features a private pool, vaulted ceilings, and a large flowing indoor/outdoor entertaining space for the ultimate in California living.
It includes a living room, family room and game room with a full bar, two fireplaces and French doors leading to a private covered deck.
And the Venice mansion offers ample space for entertaining with a soaring two-story foyer and expansive living, dining, and great rooms, all framed by artful walls of sliding glass doors.
The luxurious property contains a fully equipped home theater/media room, wine room, billiards room, gym, swim up pool and spa.
The sale of both homes raised $528,000 for the city to use for affordable housing and homelessness prevention programs in the fight against a housing crisis.
Measure ULA was once projected to generate about $900 million a year, based on real estate sales data from 2021 to 2022, when it was on the ballot in November.
The five-bedroom, $7.5 million Venice mansion offers ample space for entertaining with a soaring two-story foyer and expansive living, dining and great rooms, all framed by artful walls of sliding glass doors.
The luxury property contains a fully equipped 4K home theater/media room, wine room, billiards room, gym, swim pool and spa
One of six bathrooms in the property
One of five bedrooms in the $5.7 million Brentwood home
But by March, a city government report significantly reduced estimates to $672 million from July 2023 to June 2024 in response to the slowdown in the real estate market due to rising interest rates.
And Mayor Karen Bass unveiled her first budget proposal last month with a $13.1 billion plan, including $1.3 billion to tackle homelessness, though only $150 million was attributed to revenue from the new “mansion tax.”
California courts will rule on two lawsuits claiming the policy is unconstitutional and if found to be the case, the city will have to pay back all the money it generated from taxes.
Greg Good, a senior policy and external affairs advisor for the Los Angeles Department of Housing, said: “The $150 million figure takes into account the risk of litigation loss, but it also reflects the urgency of the situation in terms of housing and homelessness.
“This is an amount we feel comfortable repaying if necessary.
“We had anticipated a slowdown in the market. It is logical economic behavior. But it’s still real estate in LA. Eventually, transactions will return to normal.”
He added that the money it raises can only be spent if it yields and the city cannot spend projected money.
Those waiting to sell their multi-million dollar homes are hoping the tax rule will be dropped.
The Howard Jarvis Taxpayers Association, one of the groups that has filed a lawsuit against the “unconstitutional” tax, shared instructions on its website on how to request a refund if the lawsuit is successful.
Compass agent Sally Forster Jones helped a client sell a 1930s mansion in Brentwood for $16.2 million before April 1, saving the seller $891,000.
Oron Maher, who runs Maher Commercial Realty, said most of the people selling real estate despite the tax are the ones who have no choice.
He said, ‘These are mom-and-pop property owners. People who die, divorce, dissolve or retire and are forced to sell as soon as possible.
“If you don’t have to sell in ULA, you don’t. This will be a burden on people who are already in difficult situations.’
It features a private pool, vaulted ceilings and a large flowing indoor/outdoor entertaining space for the ultimate in California living
It includes a living room, family room and game room with a full bar, two fireplaces and French doors leading to a private covered deck.
The sale comes after millionaire LA homeowners rushed to sell in March to avoid the new real estate transfer tax called Measure ULA and sold 126 homes over $5 million
Oron Maher, who runs Maher Commercial Realty, said most of the people selling real estate despite the tax are the ones who have no choice
And he says sellers are raising house prices to cover the tax that “leads to fewer transactions.”
Wealthy sellers are reportedly looking for ways to avoid paying the tax at all, including breaking up properties below the $5 million threshold and selling them separately.
While Los Angeles officials are hiring six new staff members to effectively manage ULA’s spending.
The City Council has confirmed that 15 people will serve on the Citizens Oversight Committee, a volunteer group that will oversee spending and make program recommendations.
LA Community Action Network deputy director Steve Diaz, USC Gould School of Law professor Deepika Sharma and Southern California Association of Nonprofit Housing executive director Alan Greenlee, who worked on the coalition that drafted the policy, are all on the committee.
And the group will meet for the first time in early May.
Greenlee said, “I’m excited about the prospect of ULA. It creates significant and ongoing resources that the city can use not only to protect low-income residents so they can stay in their homes, but also creates assurance that resources will be available. for developers to build affordable homes.’