As ‘Mansion Taxes’ Catch On in US Cities, Los Angeles Offers Lessons

As ‘Mansion Taxes’ Catch On in US Cities, Los Angeles Offers Lessons

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The Beverly Hills area of Los Angeles, where some of the homes for sale will be on the hook for the city’s new “mansion tax.”Photographer: pastorscott/iStockphoto via Getty Images

By Sarah Holder

January 11, 2024 at 9:30 AM PST

The new villain on the seventh season of the hit reality real estate show Selling Sunset wasn’t a sassy new luxury broker not there to make friends. It was a real estate tax.

“Makes me nauseous even thinking about it,” real estate agent Mary Bonnet said of the so-called mansion tax in the season’s first episode, as she surveyed the living room of a $26 million eight-bedroom home in Brentwood.

The tax, known as Measure ULA, was pitched in 2022 as a fix to Los Angeles’ dire housing crisis. Passed by ballot measure with 58% of voters in favor, the measure created a new land transfer fee on real estate transactions over $5 million, and directed the proceeds to affordable housing projects, tenant protections and homelessness prevention efforts.

Researchers projected it could earn the city upwards of $900 million annually, money that could start bringing people off the streets. But since Measure ULA went into effect in April, it has only raised about $142 million — far off track of reaching that estimate.

LA "Mansion Tax" Gets Slow Start

In anticipation of Measure ULA, high-dollar real estate deals spiked.

A mix of political and economic forces have helped to slow sales of high-value real estate. In the year after the mansion tax passed last November, national interest rates spiked and home sales slumped, while strikes shut down Hollywood. But resistance to the tax may have also influenced the market. In March, sellers rushed to push through sales before it went into effect. Landlords and an anti-tax lobbying group challenged the tax in court, delaying the disbursement of funds for affordable housing.

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