Wealthy Los Angeles residents are selling off more and more $4.999 million of properties to avoid a loathed new ‘mansion tax’ aimed at alleviating homelessness in the city.
The 4 percent levy, which went into effect April 1, applies to homes with a value between $5 million and $10 million. Anything more expensive is subject to a 5.5 percent tax.
It was expected to raise between $600 million and $1.1 billion annually to fund a variety of affordable housing projects to support the city’s homeless community of 40,000.
Crafty sellers are finding ways around the tax, however, after many celebrities, including Mark Wahlberg, rushed to sell their homes in March before it went into effect. One owner reportedly even offered a supercar for free to get an above-the-line deal.
Now, sellers are reportedly valuing their properties just below the $5 million mark to avoid the policy.
In mid-April, the Brentwood estate belonging to the late actress Angela Lansbury sold for $4.999 million. In the photo
If it had exceeded the threshold, the family would have owed an additional $200,000 in sales tax.
Danielle Revelins, a real estate agent for Compass, told the Washington Post had a house for sale in the Venice Beach neighborhood for $4,999,000.
The three-story, 3,961-square-foot property features a floating staircase and hardwood floors.
‘The property is worth a little more but if we put it up for sale we would have to pay $200,000 [in tax].’ she added.
Revelins also told the outlet: ‘It’s a completely ridiculous tax. First of all, five million dollars in Los Angeles is not a mansion.
In mid-April, the Brentwood estate belonging to the late actress Angela Lansbury sold for $1 less than $5 million.
It was $400,000 above the family’s sale price and just shy of being stung by the new tax.
If it had exceeded the threshold, the family would have owed an additional $200,000 in sales tax, real estate magazine reports. Dirt.
Other sellers are implementing different strategies to avoid the tax, formally known as United to House LA (ULA).
A house in Coldwater Canyon, Beverly Hills, is listed for $4,949,000 on Zillow
The property has an estimated market value of $5.1 million, according to Zillow.
These include separating property into lots or dividing a property between two spouses who are ‘tenants in common’.
In fact, the law firm Ervin Cohen and Jessup even captioned a blog post in April: ‘Nine ideas to avoid the effect of the ULA Measure – The Tax on New Mansions.’
It comes after earlier reports suggested the unpopular tax had “frozen” luxury home sales.
In April, just two properties in the city sold for $5 million, up from 126 in March.
These sales earned the city $528,000 to spend on affordable housing and homelessness prevention programs.
Funds raised from the policy are reserved for eviction prevention, tenant outreach, emergency assistance, affordable home acquisition, and more.
The tax was backed by a ballot initiative with 58 percent of the vote last year, after homelessness in Los Angeles skyrocketed 32 percent between 2018 and 2020.
Another Sherman Canal property is listed for $4,999,000 by real estate broker Danielle Revlins
Property features a living room, dining room, office, study, walk-in closet and fire pit.
Records show the property sold for just over $5 million in 2018
But the measure started a race for homeowners to sell their properties before it took effect.
Some buyers reportedly took as much as $19 million in recent days.
Among those traded before the deadline was Hollywood superstar Mark Wahlberg, who sold his 30,500-square-foot mega-mansion in Beverly Park for $55 million in February.
It marked a sharp drop from the original asking price of $87.5 million last year.
However, by closing in February it avoided a tax bill of $3,025 million.
The determination of wealthy residents to avoid the tax has drawn the ire of critics.
The project was expected to generate approximately $900 million per year, based on real estate sales data from 2021 to 2022, when it was on the ballot in November.
But in March, a City Management Office report significantly lowered estimates to $672 million from July 2023 to June 2024 in response to a slowdown in the housing market due to rising interest rates.
The policy was expected to raise between $600 million and $1.1 billion annually to fund a variety of affordable housing projects to support the city’s strong homeless community of 40,000.
For March, a report from the City Management Office significantly lowered the estimates to $672 million from July 2023 to June 2024
Mayor Karen Bass unveiled her first budget proposal last month with a $13.1 billion plan that included $1.3 billion to address homelessness, though only $150 million was attributed to new ‘mansion tax’ revenue.
A study by Peter Dreier, a professor of urban and environmental policy at Occidental College, found that less than 3 percent of single-family properties sold in Los Angeles in the 2021-22 fiscal year cost more than $5 million.
He told the Washington Post: ‘Ninety-eight percent of homeowners in Los Angeles won’t feel this at all, and those who do can afford it.
‘This is the blow of the rich against the poor.’