A ballot to drastically increase property transfer tax and sales over $5,000,000 just passed in the city of Los Angeles.

Measure ULA institutes an additional 4% tax on sales over $5M and an additional 5.5% on sales over $10M. This is a massive increase, which will be in addition to the existing .045% LA City tax and the .011% County tax on all real estate transactions. 

Sometimes referred to as the "Mansion Tax", it doesn't just apply to single family homes but also to multi-family and commercial properties.

This creates hundreds of thousands of dollars in additional tax expense for sellers regardless of whether they are making or LOSING money on the transaction.

The funds, at least in the near term, are to be applied to homeless services and affordable housing (although I believe they can be redirected in the future).

What will this mean for the market? Well, from my experience, wealthy people... people who own expensive properties in LA don't typically NEED to sell and are pretty savvy about avoiding taxes. And some homeowners may not even be able to afford to sell, since the tax liability applies even if they are taking a loss!

So this may tighten inventory in the luxury market, keeping upward pressure on prices. And if those $5M+ homes aren't available for purchase, the move-up buyers in the $2-3M range will have less homes to choose from and also be less likely to sell... and so it trickles down.

Measure ULA will also likely affect how much development and new building will occur in LA, as developers will be subject to this tax on their exit. 

It will be interesting to see how this plays out! Perhaps we'll see some deals in the luxury market over the next few months as sellers are incentivized to close a deal before the tax takes effect in April 2023.

Note, this is LA city only so it doesn't apply to Beverly Hills proper,  Santa Monica, Manhattan Beach, Malibu, etc... although Santa Monica had a similar proposal for homes over $8M on the ballot.