One of the most urgent problems facing Los Angeles is the housing crisis. Rent costs have skyrocketed as a result of the shortage of affordable housing, and homelessness has been increasing. The city has suggested a new “mansion tax” measure to address this situation, with the intention of raising money for programs to provide affordable housing. Optima Tax Relief reviews the mansion tax, otherwise known as Measure ULA.
Beginning April 1, 2023, there is an additional 4% tax on properties that sell for over $5 million. The tax increases to 5.5% if a property sells for $10 million or more. This ULA tax will be applied on top of the current “Base Tax” of 0.45% that is in place. This means that properties that sell for $5 million or less will be taxed by the city of Los Angeles at 0.45%. Properties that sell for over $5 million, but less than $10 million, will be taxed by the city of Los Angeles at 4.45%. Properties that sell for $10 million or more will be taxed by the city of Los Angeles at 5.95%.
To put this into perspective, a property that sells for $1 million would owe a tax balance of $4,500. A property that sells for $5 million would owe a tax balance of $22,500. Ironically, a property that sells for just $1 over the threshold at $5,000,001 would owe a tax balance of $222,500, a difference of $200,000 in taxes owed. A property that sells for $10 million would owe a tax balance of $595,000.
The value thresholds under Measure ULA will be adjusted each year based on the Bureau of Labor Statistics Chained Consumer Price Index. However, changes are not expected until the 2024 calendar year. There are some exemptions for the ULA tax. Qualified affordable housing organizations are among those that are exempt.
The proposed tax has received mixed reactions from the community. Supporters of the measure argue that it is a necessary step towards addressing the city’s housing crisis, as it has the potential to raise about $900 mission each year. The raised funds would go towards subsidized housing, housing acquisition and rehabilitation, rent assistance and homeless-related programs. They argue that those who can afford to live in multi-million-dollar homes should contribute more towards providing affordable housing for those in need. The tax is also seen as a way to reduce income inequality in the city.
Opponents of the measure argue that it unfairly targets wealthy homeowners and could discourage investment in the city’s real estate market. Although it is nicknamed the “mansion tax,” the measure would apply to every real estate sale in Los Angeles, including apartment complexes, retail buildings, commercial buildings, and more. Opposers also argue that the tax would not generate enough revenue to make a significant impact on the city’s housing crisis. Additionally, they argue that the tax could drive high net worth individuals out of the city, leading to a loss of jobs and tax revenue.
