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.

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.

“Many people that voted for [the ULA Tax] I think had no idea what they were voting for,” Carswell said. “And so I think it was an unfair voting result because I think there was a good percentage of people that had no idea how it would impact the city.”

Initially, proponents of Measure ULA said that the tax would generate about $900 million per year. However, by mid-March 2023, an analysis from the City Administrative Office revised that estimate downwards, stating the tax was instead expected to generate $672 million in revenue during its first year, which would require bringing in $56 million per month, to go towards affordable housing and homeless programs.

The failure for the tax to hit targets during its first month did not come as a surprise, said Executive Director of Move L.A. Eli Lipmen, given that many sellers rushed to offload their over $5 million properties before the tax went into effect, and a subsequent lull was expected. He maintained that the tax’s supporters were “in this for the long haul.”

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.

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.