Mansion Tax - Real Cap Daily #26
On November 8 Angeleno’s voted yes to Measure ULA also known as the Mansion Tax. Of course, tax the rich! But who really pays and how will this impact Los Angeles?
Hello, my name is Dennis Maynard. I am a real estate broker in Los Angeles. Please don’t forget to like, subscribe, and follow.
“Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” President Reagan was correct in his assessment. Every time there is a real estate transaction in Los Angeles, there are taxes levied by the city and county. There is a fee of $5.60 per thousand or $560 per every $100,000. The tax goes to the general fund for the city. As of November 8, Voters passed a measure to tax the rich! This includes commercial real estate, not just mansions as the measure is so aptly named. The measure issues a 4% tax on valuations from $5 - $10 million, and a 5.5% tax on valuations over $10 million. Los Angeles politicians sneakily exempted certain ‘qualified’ housing organizations who have shown a history of developing affordable housing. Meaning, if you wanted to get into the business of developing affordable housing, you are SOL. The claim is that it will raise up to $1.1 billion annually with 92% going towards affordable housing. If it is anything like the measure JJJ disaster, most of the funds will get soaked up by the city and county government bureaucracy.
Who is going to pay for this tax? Most would say the rich, but that is not the truth. This will curtail investment in commercial real estate, curtail higher turnover of real estate that could be potentially developed, and raise asking prices. After all, if you were selling something and you could raise your price, you would. So who pays? The renters and the tax payer. The renters will face higher rents in the long run. The tax payer as they are subsidizing government housing which means, they will need more taxes to cover the bill.
But are you aware that development costs are 30% higher in California than other parts of the country due to regulation, lawsuits, political favors, and long planning timelines by the government. Unfortunately, the voters have had another one pulled over them. Sneaky politicians at it again when all they need to do is make it easier to build more housing. This measure takes affect in April 2023.
If you are thinking about buying, selling, or developing real estate, please call, text, or email today. I would be happy to help.