LA voters approve mansion tax of up to 5.5% on property deals over $10million for affordable homes

Los Angeles voters have approved a tax on property deals worth over $10million to help raise more than $1billion for affordable homes.

The levy, known as Proposition ULA, will see property deals between $5million and $10million taxed 4 percent, and mega mansion deals worth over the $10million taxed 5.5 percent. This would represent $55,000 on a $10million property deal.

Currently, the rate of tax on all property sales is a low 0.45 percent. That will change on April 1 when the new measure takes effect.

Lawmakers expect the levy to raise between $600million and $1.1billion ever year, which will be put towards affordable housing and other measures designed to keep people off the streets in America's second largest city.

Los Angeles voters have approved a tax on property deals worth over $10million to help raise more than $1billion for affordable homes. Pictured: Houses are seen in Beverly Hills, LA

According to results released by LA County officials, the measure was supported by almost 58 percent of the 887,742 votes cast. The measure states that there would be 'exceptions', and that the it would only come to an end through another vote.

The 5.5 percent levy would have applied to the 628 property deals worth over $10million in Los Angeles in 2021 alone, according to Mansion Global.

At minimum (assuming all 628 of those property deals were valued at $10million), that would have raised over $345million. Some property deals in Los Angeles are worth more $100million, and so that number was actually far higher.

Mansion Global said in total, $10.6 billion worth of ultra-prime property deals were carried out in Los Angeles last year, which means the 5.5 percent levy would have raised $583million, not counting the 4 percent levy on the $5-10million deal bracket.

Of all the cities in the United States, Los Angeles sees the most property deals worth over $10million, with the 2021 figure of 628 representing 27.3 percent of such deals in the country that year. Manhattan came in second, with 326 deals over $10million.

The levy, known as Proposition ULA, will see property deals between $5million and $10million taxed 4 percent, and mega mansion deals worth over the $10million taxed 5.5 percent. This would represent $55,000 on a $10million property deal. Pictured: A Malibu beachfront

Pictured: Homes are seen in the hills of LA's Bel Air neighbourhood (file photo). Mansion Global said in total, $10.6 billion worth of ultra-prime property deals were carried out in Los Angeles last year, which means the 5.5 percent levy would have raised $583million, not counting the 4 percent levy on the $5-10million deal bracket

Los Angeles is facing an ever-widening wealth gap. As the ultra-rich do deals for properties in Beverly Hills, Malibu and Bel Air, more than 42,000 people sleep on the city's streets, in their cars, or inside homeless shelters each night.

This number rose by 2 percent when the pandemic hit the city, with Covid-19 being rife among the city's homeless population.

Many are forced onto the streets by the rental costs in the city, which has the highest rent-to-income ratio of any county in California. To rent a typical two-bedroom apartment, residents in LA County need 120 percent of the medium income.

Revenue raised by the tax will be put towards affordable housing, as well as measures to prevent homelessness - such a rent relief, income support and legal aid.

According to Bloomberg, 70 percent of funding will go towards affordable housing projects, while the rest will go towards the other preventative measures. 

According to analysis carried out by the UCLA Lewis Center for Regional Policy Studies, 'measure ULA would raise $923 million annually for affordable housing production and homelessness prevention in the form of rent relief, income support, and legal counsel for tenants.'

This, the Lewis Center said citing a coalition of 'affordable housing developers, homeless service providers, labor unions, hospitality workers, and community-based organizations', could have gone towards the creation of 26,000 affordable housing units, and 43,000 new construction jobs in 2021.

Los Angeles is facing an ever-widening wealth gap. As the ultra-rich do deals for properties in Beverly Hills, Malibu and Bel Air, more than 42,000 people sleep on the city's streets, in their cars, or inside homeless shelters each night. Pictured: Skid Row in Los Angeles, Nov. 24

Community volunteers get ready to serve food in a free Thanksgiving meal provided by the Union Rescue Mission as the Los Angeles Skid Row district annual feast hosts thousands of homeless and others in need in downtown Los Angeles, on Thursday, Nov. 24, 2022

The measure 'would have a positive impact on the city’s housing crisis, while having no effect on the average Angeleno,' it added.

The center's paper on the measure said 'Los Angeles has one of the most serious housing crises of any major American city,' and that polls 'repeatedly show' people living in LA consider homelessness as one of the city's most serious issues. 

The Lewis Center noted that around 72 percent of the revenue raised by the measure will come from the property deals worth more than $10million, and that just 3 percent of single-family homes or condos sold in a single year would be impacted.

Critics of the measure have said the transfer of tax could make housing - including rental units - less affordable due to the higher costs to landlords. The Lewis Center addressed this in its paper, noting that rents are set by the market.

'Landlords already set rents at the highest price they can without losing tenants in market-rate apartments,' the paper said. 'If landlords chose to raise rents above market rate, they would be faced with vacant apartments.'

LA County has previously taken measures in an attempt to tackle the issue of homelessness in the city. In 2016, voters approved Proposition HHH, which designated $1.2billion to building 10,000 housing units for the homeless.

So far, HHH has financed 3,420 completed units, with more than 5,400 still under construction, according to Bloomberg, citing the LA Housing Department.