Luxury Sales Hit A Wall In L.A. Following Mansion Tax Implementation
Early numbers are in that show the new so-called mansion tax in L.A. may be having an unintended consequence: halting luxury sales. The L.A. Times is reporting that following 126 sales of homes priced $5 million and above in March, the city of L.A. saw just two such luxury sales in April.
As of April 1, the new law—approved by voters last year—imposes an extra tax on residential home sales of more than $5 million. The new law imposes a 4 percent “mansion tax” on property sales over $5 million, and a 5.5 percent tax on properties worth over $10 million.
The new tax, technically shouldered by the seller, does not apply to other cities beyond L.A. proper in Los Angeles County. The funds are earmarked for L.A. homelessness prevention programming.
Since April 1, many luxury properties have been removed from the market, while others got price adjustments (i.e. increases) to make up for the eventual tax the seller would pay. Some sellers are also said to be waiting on listing as two lawsuits against the city make their way through the system in hopes that the new tax law will be thrown out.
At one time projected to bring in $900 million a year in revenue a year for the city, those estimates have been revised down to $672 million. In her recent budget submission, however, Mayor Karen Bass projected the program will bring in $150 million in its first year.