L.A.'s Rich Are Finding Ways to Avoid the New "Mansion Tax"
The richest of the rich in one of the world’s wealthiest cities are doing all they can to figure out how to skip paying what fans and opponents alike are calling the new “mansion tax.” A new real-estate transfer tax is set to kick in across Los Angeles on April 1, and the city’s high-rolling realtors are apparently using the deadline to juice sales. As The Hollywood Reporter first reported, one listing for a $27 million megamansion that spills down a Bel Air hillside promises a $1 million bonus to the “broker who brings a successful buyer who closes escrow before April 1, 2023.” Measure ULA — also known as the “mansion tax” — was passed by L.A. voters in November to establish the city’s first dedicated stream of affordable housing revenue, funding both the development of public housing and tenant-protection programs.
According to L.A. Times, Measure ULA — for United to House LA — the ordinance marketed as a “mansion tax” will impose a 4% tax on property sales above $5 million, rising to 5.5% on sales above $10 million. So a $5-million sale would include a $200,000 tax, and a $10-million sale would include a $550,000 tax, which is typically paid by the seller.
It’s set to take effect on April 1, and it’s already generating anxiety in the L.A. housing market. While some critics say high-end transactions will remain highly beneficial, others fear the tax will not only drive high-end developers elsewhere but also discourage the construction of multifamily housing that it was meant to foster. Now, just under the gun, blue chip sellers are using the looming deadline to try to milk sales. The undeveloped 260-acre Senderos Canyon in Bel Air is being auctioned off by Paramount Realty USA. In an attempt to woo buyers quickly, owner Giro Properties has announced a $2 million discount if the deal is closed before April 1.
Botched star surgeon, Dr. Paul Nassif is still hoping to say farewell to his one-of-a-kind mansion. The Bel Air, California, property is currently listed for $27,995,000, a $4 million discount from when it was first put on the market two years ago. Nassif has also added another real estate agent (his fourth) to the listing, Jade Mills of Jade Mills Estates. Coldwell Banker’s Jade Mills, who holds the listing along with Josh and Matt Altman, Mauricio Umansky, and Tomer Fridman, says that Nassif came up with the idea because “he would have to pay 5.5 percent more if he sells after April 1."
Across the board, brokers have seen buyers scurrying to avoid the steep tax. Many people, says Mills, “are rushing to close escrow before April 1, so they can purchase the properties for 5.5 percent less.” As for Nassif’s listing, Mills says the bonus offer has brought massive online interest. “We have received more views in the past month for 1035 Stradella than I have ever seen on any of my other listings,” Mills says. “There have been more than 35,000 views.”
Adds Douglas Elliman agent Lisa Optican, “There is incentive upon sellers to try to initiate a deal and close a sale before the April 1 deadline. At this point, it’s becoming a total numbers game.” The measure hasn’t gone into effect yet, so the legality of such a move remains unclear, and the city will probably take measures to stop such maneuvers. But homeowners are exploring every avenue. “Rich people are very clever. They know how to manage cash, and they have time to look for loopholes,” said Bret Parsons, an agent at the Compass real estate company. Jason Oppenheim of the Oppenheim Group called the tax a travesty. He says sales will skyrocket for the next three months, but once the tax kicks in, the market will freeze. Sellers will hang on to their properties, and buyers won’t buy unless they plan to own them for multiple decades.