The “mansion tax” in Los Angeles is a year old, but is it working?
The tax has raised millions of dollars to help subsidize affordable housing and provide resources to address the homelessness crisis across the city. However, KNX News’ Chris Sedans reported that potential homebuyers are taking steps to get around the tax.
The transfer tax levies a 4% charge on all property sales that are above $5 million and a 5.5% charge on all property sales above $10 million. In its first year, the tax has raised roughly $215 million.
“What's interesting is when you set these fixed thresholds, you create these inefficiencies in the market,” real estate expert Joe Salerno said.
He said a problem with the tax is that it only applies to certain parts of L.A. County.
“If someone wants to buy this, you know, five or $10 million home and they can choose between buying in L.A. city or, you know, maybe a mile away or a block away and, you know, in Beverly Hills or Malibu, they don't have to pay that tax,” Salerno said.
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Critics of the tax claim that it’s hurting luxury home sales and the overall market, including multifamily developments and commercial properties.
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