The tax on property sales above $5 million has brought in less revenue last year than experts projected, but the measure could still become a significant contributor to affordable housing funds.
A so-called ‘mansion tax’ in Los Angeles that taxes land transactions over $5 million to raise funds for affordable housing and other housing programs has brought in less revenue than expected, reports Sarah Holder in Bloomberg CityLab.
According to Holder, Measure ULA has brought in just $142 million, short of the $900 million in annual projected revenue. “As the housing market stabilizes, the real estate industry adapts, and various lawsuits move through the appeals process, advocates say the tax will prove its worth. By November, monthly sales over $5 million had nearly tripled since cratering in April, bringing in nearly $14 million for Measure ULA.”
Holder notes that “Although single-family homes represent the largest share of its projected revenue at 38%, the tax also applies to most multifamily developments, office buildings and hotels.” Some developers say this will hamstring the construction of multifamily apartment buildings, including affordable housing. “A 2022 UCLA study somewhat assuaged concerns about affordable housing, suggesting that the tax would have little impact on multifamily construction, in part because developers rarely sell their properties right after building them.”
Despite the backlash, “Already, 19 affordable housing projects with a total of 1,500 units have applied for a piece of the $56.8 million in Measure ULA funding available. Short-term rental assistance has started going out to tenants and landlords.” And other cities are proposing their own mansion taxes, including Santa Fe, Chicago, and Seattle.
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