‘Mansion Tax’ Slaughters LA’s High-End Real Estate Market
The tax has been a spectacular failure, raising only 22 percent of its stated goal.
Legal Insurrection readers may recall that in the fall of 2022, Los Angeles voters passed a referendum in the city of Los Angeles for a “mansion tax” that would impose a new transaction tax on any real estate sale in excess of $5 million. The measure passed with nearly 58% of the vote, and owners of luxury homes were selling their properties as quickly as they could to avoid being hit with….a success penalty.
Now it is being reported that luxury house sales plummet have subsequently plummeted 70% in the first year since this tax was enacted.
Launched April 1, 2023, the policy levied a four percent tax on all $5 million to 10 million property sales, while funds were programs for the homeless.
But one year later, the Measure ULA strategy has seen luxury house sales drop by 68 percent, while raising only 22 percent of its stated goal.
Some 366 single-family homes were sold in the 12 months before April 1, 2023, versus 166 sold in the year since, according to the Los Angeles Times.
Local real estate developer Hooman Ghaffari blasted the policy as ‘a sham’ that has ‘yet to come close to meeting stated goals’ while making new developments ‘financially unworkable’.
Between rising mortgage interest rates and Bidenomics, the entire area is seeing a real estate slow-down, though not to the same degree as LA. One real estate expert wants the city officials to admit the mistake and make plans to current this quite foreseeable consequence.
Luxury sales in nearby cities have slowed, but not nearly at the same rate, according to data from the Multiple Listing Service.
In Beverly Hills, single-family sales dropped 24%.
In Santa Monica, single-family sales dropped 29%.
In Malibu, single-family sales dropped 28%.
“My clients are leaving L.A.,” said Jason Oppenheim, a luxury real estate agent who stars in the real estate reality show “Selling Sunset.” “We can’t keep pushing the wealthy out of our city.”
Oppenheim and his team spent much of the seventh season of the show speaking out against the tax, which they claim pushes prospective buyers out of L.A. and into other affluent areas.
“This tax has not had the effect that was promised, and it’s time for everyone to put aside their egos and realize this was a mistake,” Oppenheim said.
I doubt any of the Los Angeles politicians will admit any error related to this measure or their governance. More likely, they will double down.
Meanwhile, supporters are bitterly clinging to the $215 million brought in from approval of Measure ULA.
“ULA has already proven to be one of the greatest revenue sources for affordable housing that L.A. has ever seen,” says Joseph Donlin, the director of United to House LA, the coalition that backed the November 2022 local ballot measure that approved the new tax.
In August, the L.A. City Council passed a spending plan for the the first $150 million raised by the added tax, devoting the funds to tenant aid and affordable housing production.
According to the Los Angeles Times, the city has so far spent around $28 million to help distressed tenants and landlords, $23 million on eviction protection and tenant outreach, and $56.8 million on loans to accelerate the development of affordable multifamily housing projects.
“None of that happens without ULA,” Greg Good, a senior advisor on policy and external affairs for the L.A. Housing Department, told the Times.
However, the goose that laid the $215 million egg has been slaughtered and their will be a continuing homelessness problem anyway.
Meanwhile, enjoy the richly deserved mocking for this quite predictable failure.
The 'mansion tax' followed by the 'exit tax'
'You can check out any time you like, but you can never leave'— Jon Tveten (@jtveten) April 2, 2024
LA's luxury house sales plummet 70 PERCENT amid 'mansion tax' launch
– Thus cutting anticipated returns down to 22% of the original target. https://t.co/HwHqJayo00
— Federalist Musket🇺🇸 (@Patriot_Musket) April 2, 2024
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Comments
“We can’t keep pushing the wealthy out of our city.”
Sure you can! Progressives will not be happy until LaLa Land looks like Calcutta.
Since freedom of movement is guaranteed by The Constitution I’ve always wondered how an exit tax is legal.
NJ has an exit tax of 1% if you sell a house, as does NYC. There is no such tax if you are a renter – whether that makes a difference or not, I don’t know, but it is worth a challenge.
Ironically, an exit tax is what the old Soviet Union used to impose on emigrating Jews. Fitting that the People’s Democratic Socialist Republic of CA would do the same thing.
But that is not what I was actually talking about. I think Cali was planning to tax your earnings or something for 10yrs after you left the state. If they want to add a tax on selling the home then I guess they can do that.
If I remember correctly, SCOTUS put an end to so-called exit taxes when Ohio tried to tax the retirement of residents that went elsewhere for their golden years
That was California….
The wealthy in California are overwhelmingly leftist, so they deserve all the loss of wealth that befalls them.
Care to actually back that up with data? I’d be willing to bet they aren’t but what colors your perception is the vocal ones.
What planet are you living on, Comrade? The wealthy in California earn their money in entertainment and Silicon Valley. If you are not a Communist, you don’t make it there.
And you f**king know it.
Off the record, on the QT, and very hush-hush.
The right wing enclaves of Malibu, Brentwood and Beverly Hills.
They idiotically turned California into a state of haves and havenots. Soon, it will just be a state of have-nots.
When you import tens-of-millions of people from 3rd-world hellholes, you can’t be surprised when your country finally starts to resemble those same hellholes. Inflation, crime, imprisoned opposition party members & leaders, failing education and healthcare systems. It’s all happening, right in California.
Indeed. The great philosopher-sage, Victor Davis Hanson, a California resident whose family has deep roots in the state, has repeatedly underscored this very point.
The taxpayer base that California’s witless, fiscally illiterate and stupid Dhimmi-crats have created, is totally unhealthy and unsustainable. It consists of a relatively small (and diminishing) number of wealthy taxpayers at the top of the pyramid, shouldering a hugely disproportionate share of the state’s income tax receipts (much as occurs where federal tax receipts are concerned); a rapidly diminishing number of middle-class taxpayers, who are predictably fleeing California’s onerous, oppressive and crushing taxation and high cost-of-living expenses, and are moving to more tax-friendly, financially hospitable climes; and, a rapidly expanding number of illegal aliens and poor citizens, receiving an ever-expanding array of generous welfare benefits and entitlements.
This is simply a transparently unsustainable and foolish path leading inevitably to fiscal ruin.
I would argue it isn’t only the California taxpayer base facing this, but the entire nation¡s taxpayer base. Look at where we are since 2017.
Good point; this is true. The top 10% of earners are paying ~40% of federal tax receipts, while the bottom 25% are paying a share that is significantly below their proportion of earners, overall. When the Dhimmi-crats talk about paying one’s “fair share” of taxes, an honest appraisal would advocate for the bottom 25% of earners to pay more than they are, currently.
Looking at data from 2022 from the ST. Louis Fed, the bottom 20% pay about negative $2200 in income taxes. I doubt in this quintile pay anywhere near that amount in other federal taxes. So the bottom 20% pays less than zero federal taxes. When you add in state and local taxes, (Property, sales, etc.) I would guess the bottom 20% still are receivers, not payers.
I have seen about half of my net worth evaporate over that time evaporate, much of that is inflation.
guyjones:
There’s the old adage:
“If you subsidize something, you get more of it. If you tax something, you get less of it.”
The state of California in particular, and the federal government in general, have been HEAVILY subsidizing the parasites in this country. These parasites include the obvious ones like welfare/Section 8/Medicaid (et cetera ad nauseum) recipients and also the useless government worker drones/administrators, but also the non-obvious subsidies to the rent-seekers in corporations and companies getting government “aid”.
The governments have also been HEAVILY TAXING the productive in this country in order to have something to push through the government friction machine to hand out to the parasites. The endless “brrrrrrrr….” of the money-printing leading directly to inflation is yet another way to “tax” the productive by helping make saving money a pointless exercise.
This will not end well.
I wonder how much revenue they’ve lost from successful people who have looked at the taxes and said “Naw…not gonna move there.”
You credit them with thought capacity which simply doesn’t exist.
You mistakenly credit them with thinking like you and I do.
Before Y2K, Florida tried “compensating” for immigrating retirees’ lack of income to tax by establishing an assets tax instead. It didn’t take them that long to wise up and ditch it, and nobody had to twist their arm. I personally ruled out relocating there because of it (plus the humid climate that I just can’t stand).
In the early 70s I moved my business out of the city because of personal property tax, never to return.
Breaking news from the world of economics. When you take something (e.g., the sale of high value homes), you get less of it. And when you subsidize something (e.g., homelessness), you get more of it. Who would have guessed? Maybe policy makers should consider taxing sloth and subsidizing hard work. Just spitballing here!
“ULA has already proven to be one of the greatest revenue sources for affordable housing that L.A. has ever seen,” says Joseph Donlin, the director of United to House LA, the coalition that backed the November 2022 local ballot measure that approved the new tax.”
Democrats — turning delusion into public policy since [insert year here].
Long ago taxati0n ceased being solely about funding core governmental functions and became a mechanism for wealth redistribution, helping assuage a fundamental human trait, envy. Nationally, 6o% pay no inc0me tax, 1% pay 45% of it and 10% pay 75% of it. In general, increasing taxes on an activity or a thing reduces that activity or thing. It’s no surprise therefore that a majority of those envious Californians would support such a tax and that the activity would be reduced. It’ll be no surprise either to see targeted people leave the target area.
Worse still, many of those 60% make money on the deal on refundable tax credits. Yet another income transfer program.
“Los Angeles voters passed…” a “mansion tax…”
Suckers! Fell for the Social Justice bait and switch, AGAIN. A pesky little nuisance called ‘reality’ is waiting with your prize…
Referred to in the LA showbiz industry as “a lovely p[f]arting gift.”
Citizens voting to tax other citizens is a great evil, and was never the point of this nation. But here we are:
“ULA has already proven to be one of the greatest revenue sources for affordable housing that L.A. has ever seen,” says Joseph Donlin…”
California is $80 billion in debt. It’s bureaucrats care nothing for fiscal responsibility. Newsom’s goal in San Fran is to turn the city into a crime ridden poop map in order to drive out in disgust the decent people. The city will then ‘appropriate’ the abandoned property, convert to ‘affordable’ housing (run by govt. of course), and give to all those illegals who will forever vote democrat in gratitude. “You decent people abandoned it voluntarily!”
Same plan for LA’s high end real estate market. Crush it w/ taxes. No owners to maintain it, city takes over, and illegals move into renovated neighborhoods.
“Yes, comrade. It is more just that way.” – Dr. Zhivago
That is the ‘affordable’ housing scam.
“It is nevertheless certain, that there are various ways in which the rich may oppress the poor; in which property may oppress liberty; and that the world is filled with examples. It is necessary that the poor should have a defense against the danger. On the other hand, the danger to the holders of property cannot be disguised, if they be undefended against a majority without property.”
–James Madison
“Forced to choose, the poor, like the rich, love money more than political liberty; and the only political freedom capable of enduring is one that is so pruned as to keep the rich from denuding the poor by ability or subtlety and the poor from robbing the rich by violence or votes.”
–Will Durant
“Don’t expect to build up the weak by pulling down the strong.”
–Calvin Coolidge
More fun stuff. Blackrock, etal, who’ve bought up tons of SFHs. The government is paying private entities cash to rent to illegals. NY especially. I wonder where they could get rentals freed up, where the owner could make boat loads of cash, far in excess of what the could have rented them for?
Gee, that’s too bad (snicker snicker).
I can’t help but notice that their numbers of reported expenditure for the revenue don’t add up to anywhere close to the total. I wonder where the other money is going?
All the DEI hires required to run each “program”, who happen to be relatives of the pols.
Or at least, members of “oppressed groups”.
I’m willing to bet good money that there is not a single white male involved in administering these programs. I daresay few if any white males are hired for civil service in California for ANY job. Not even what some plain-speaking folks call “white man’s work”.
Oh no, this can’t be right. I have it on good authority that rich people don’t care about taxes because there are so many accounting tricks that they don’t even pay them. This weird shortfall in revenue must be Trump’s fault.
This mansion tax seems to be a variation on the theme of the really REALLY high tobacco taxes in places like New York City.
The taxes are driven so high that folks either stop smoking, or…
* they get cigarettes sent in from Indian reservations
* have retired or 100% disability vets get them at the PX/BX
* go out of the area to buy them in big quantities and bring them in, hoping they don’t get pulled over by one of the state’s Revenue Enhancement officers / highwaymen / “state patrol”.
In any case, the taxes, once raised to these levels, result in less actual revenue than was collected before the social engineers decided What Was Best For You.
My guess is that people who have luxury mansions have more than one in more than one state. If they want a different view they simply live in one of the others. The news media is constantly reminding us how many homes some particular wealthy persons own.
Like BLM hucksters’
And Al Gore.
And Barky.
Reminds me of the old luxury boat tax that almost killed the industry in this country before it died an quick death.
Maybe Californica should buy the houses, using the formula that NY used to calculate the alleged market value of Mar-a-lago, and put up the drug addicts and illegals.
The rich lefties are getting it good and hard now! LOLOLOL!
Me and my wife are from California born in the late 50s. Our sons were born in the 80s. My company moved me to the east coast in 96, which was good for us. Over time most of our family has moved out of state or died. We still have some in in SoCal, the Bay Area, NorCal, and Central Valley.
The way that California is run makes no sense both on local level to state level. Some of our family are Dems and some are Republicans so we do not talk politics with them.
Only 22% of the expected revenue? Gotta increase the rate by 4 or 5 times.
Remember the increased excise taxes on boat construction that killed the industry? California wealth envy translates into untaxable desert. Thatcherism is real.
As with all liberal programs, it is the intent, not the outcome they are measured by.
If they’re rich enough they could always donate the house to the city for some new section 8 housing the politicians so desire.