In November 2022, Los Angeles voters approved a so-called 'mansion tax,' which slaps a 4% sales tax on properties sold for over $5 million, and 5.5% for those over $10 million.
The scheme (Measure ULA), put forward by Democrats, was projected to raise roughly $672 million in its first year, to be used for affordable housing.
Not only did the plan fall short by hundreds of millions of dollars (raising just $215 million), the measure caused residential building construction to plummet, raising housing prices even further, the Washington Examiner writes, noting that the tax doesn't just apply to large homes in Bel Air, "but also gas stations, commercial real estate, condominiums, and apartment complexes."
Los Angeles real estate brokers say the $5 million threshold means the new ULA tax will hit just about any apartment complex with over 15 housing units. This has discouraged lenders from offering mortgages on, and developers from building, the very multifamily projects the city needs more of to reduce housing costs. Since nearly two-thirds of homes in Los Angeles have asking prices of at least $1 million, working-class families must often rent multifamily homes to live in. CoStar analyst Ryan Patap noted that developers are further discouraged by the city’s “broader political shift in the city that’s more supportive of restrictions on landlords and more supportive of protections for tenants.”
Around the state as a whole, multifamily housing has trended above the national average. Whereas new multifamily housing permit authorization fell nationally by nearly 19% from 2022 to 2023, California’s only decreased by 5%. But in Los Angeles County, authorizations dropped by 19%, and in LA city, they slumped by a staggering 24%. The mansion tax appears to be to blame. -Washington Examiner
City officials are still slapping themselves on the back, bragging that $150 million from Measure ULA revenues have helped fund programs for short-term emergency rental assistance (for whom?), as well as tenant outreach and education, tenant protections, defense against evictions (squatter defense?), direct cash assistance for low-income seniors and people with disabilities.
"The pace at which ULA is generating revenue, especially over the last quarter, is impressive," reads a statement from Joan Ling, a real estate adviser and policy analyst in urban planning who is also the lead author of a report from UCLA, USC, and Occidental College recapping ULA's first year.
"ULA is enabling Los Angeles to finally meet the big structural challenges driving our housing crisis—like the skyrocketing costs of land and construction—so that we can build more homes more quickly."
That said, as the Examiner concludes:
Supporters have bragged that the legislation has already funded $23 million on eviction protection and tenant outreach and $28 million on aid to distressed tenants and landlords, but neither of these programs do anything actually to lower rents for working families.
The real protection Angeleno tenants need is from a Democratic Party that is constantly passing new regulations and higher taxes that make new home and apartment construction more expensive. Until Los Angeles voters start electing leaders whose motto is “Build baby build,” they can only expect their existing housing crisis to get worse.
Indeed.
https://www.zerohedge.com/political/la-mansion-tax-yet-another-democrat-debacle
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