Update on California’s “Mansion Tax”

But the numbers from the tax’s first month have come in and fallen well short of their expected mark, with it bringing in a mere $3.6 million from five qualifying transactions in April 2023, according to Bisnow.

Also known as the “mansion tax” for its impact on transactions at higher price points, the measure adds a 4 percent tax to real estate transactions above $5 million and a 5.5 percent tax on transactions over $10 million.

Ernie Carswell | Douglas Elliman

When Inman spoke with L.A.-area agents in advance of the tax going into effect, many expressed their displeasure at how it was handled at the ballot and the misconceptions that were allowed to spread around it.

However, Mayor Karen Bass has proposed using $150 million in federal funds the city expects to receive to offset any necessary reimbursements of the tax.

This year’s L.A. city budget proposed spending $150 million from the ULA Tax on programs to combat housing insecurity, including $62 million to buy and renovate homes, $25 million to help rent-burdened seniors and individuals with disabilities and $25 million for eviction defense services.

Aaron Kirman | AKG | Christie’s International Real Estate

In a recent conversation with Inman, Aaron Kirman of AKG | Christie’s International Real Estate expressed his distaste for what he called an “incredibly ill-written idea” that’s “caused turmoil in the L.A. marketplace,” adding that labeling it a “mansion tax” is also a misnomer because the tax is negatively impacting far more than just mansion owners.

“In a city where you can’t even buy dirt in the urban centers for, theoretically, an apartment building — just the land costs $2.5 million. By the time you’re done, you’re in over the cost of that ‘mansion tax,’” Kirman said. “So people need to stop saying it’s a ‘mansion tax.’ It’s a real estate tax on anything real estate-related over $5 million … I think it’s just ill-advised because, in a city that needs development, in a city that needs housing, it certainly doesn’t incentivize people to do so.”