In the latest season of the popular reality show "Selling Sunset," the drama revolves around Los Angeles' new mansion tax, which affects homes sold for over $5 million. The tax, which aims to fund affordable housing, has raised concerns among luxury real estate agents and homeowners.
The "mansion tax" imposes an additional 4% tax on homes sold for more than $5 million and a 5.5% tax on those over $10 million. Real estate agents on the show expressed fear that the new tax would deter potential buyers and negatively impact their business.
While some critics argue that the tax is flawed, others see it as a reasonable and equitable way to generate revenue for affordable housing and homelessness prevention. California's housing affordability report indicates that only 16% of residents can afford to purchase a single-family home at the state-wide median price. In Los Angeles, one would need a minimum income of $198,000 to afford such a home.
Housing advocates argue that the affordable housing crisis is worsening, and the mansion tax could help address this issue. However, some proponents of the tax acknowledge that it has a key flaw. Critics argue that the tax may disincentivize the development of multi-family buildings, which are crucial for increasing the supply of affordable housing.
The mansion tax, known as United to House LA (Measure ULA), was passed in November 2022 with 58% support. It is expected to raise approximately $150 million this year. Other cities, such as New York, Washington, and Chicago, have also implemented similar taxes on high-end home sales.
Despite concerns about the short-term impact on the real estate market, experts believe that the chilling effect will likely be temporary. They argue that owners who want to sell their properties will eventually do so, and the market will stabilize.
If the mansion tax does prove to disincentivize development and reduce the supply of affordable housing, the city council has the option to revise the law. Experts suggest that exempting first-time sales could mitigate the negative consequences and allow the tax to have a positive impact on affordable housing initiatives.
Overall, the mansion tax has sparked debate and controversy among real estate agents, homeowners, and housing advocates. While some see it as a necessary step to address the affordable housing crisis, others argue that it may have unintended consequences on the real estate market and housing supply.