A tax on the sale of mansions and other multi-million dollar real estate deals was approved recently by voters in the city of Los Angeles. A primary goal of this new tax is to provide affordable housing in one of the largest cities in the United States.
Proposition ULA
The brand-new tax is referred to as, Proposition ULA, and it raises the one-time transfer tax to 4%. This only applies to property transactions between $5 and $10 million. For any real estate deals with transactions of $10 million or more, the rate will be 5.5%. The approved tax is set to take place on April 1st in LA and expects to make the city an additional $500 million.
Need for Affordable Housing in LA
For many natives of Los Angeles, this new tax will help provide affordable housing that will ultimately help solve the homeless problem the city faces. Los Angeles is still a hot spot for celebrities and wealthy people to purchase property, as some high-end homes sell for hundreds of millions of dollars.
However, a recent report revealed that LA has nearly 50,000 homeless people either sleeping in a shelter, in their car, or on the street. Overall homelessness in LA has increased by roughly 2% ever since the Covid-19 outbreak in 2020.
Real Estate Deals Affected By Tax
The tax increase expects to affect roughly 4% of real estate transactions in LA yearly. According to an analysis by the UCLA Lewis Center for Regional Policy Studies, 72% of the tax revenue coming from this increase would be from properties that sell for over $10 million.
Supporters of New Tax
Trade unions and housing advocacy groups throughout Los Angeles are in support of Proposition ULA. One of these advocacy groups is known as United to House LA. This group is the main Non-Profit Housing association in Southern California, and they are also supported by the Los Angeles County Federation of Labor.
Critics of New Tax
Like every new law or regulation, the transfer tax does have its critics. The critics argue that raising the prices for people who buy homes isn’t smart, as some homeowners rent their houses. If the purchasing price of a house goes up, so does rent for someone who rented from a landlord.
Wrap Up
While the increased transfer tax will not take place until the Spring, people can only hope that this is a step in the right direction for the California city to address its homelessness problem. If more affordable places to live were to be provided, then fewer people would have to live on the street.