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.
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