Los Angeles’ high-end realtors on why the mansion tax is fundamentally wrong

A $5 million house “could be a mansion in Minnesota,” he added, “that’s not a mansion in LA” For those unfamiliar with Los Angeles’ highly stratified housing market, Altman explained that if what will you get for $5 million in most of Los Angeles “will be a four-bedroom, 4,000-square-foot regular house that you can find anywhere in America, but it happens to be more expensive because it is in LA”

Altman and others like him are talking luck about Measure ULA, which is essentially an additional 4% tax on property sales in Los Angeles over $5 million and 5.5% on those over $10 million—with the tax paid by the seller. it passed with almost 58% on the vote in November but went into effect starting April 1, and added more pain to a pandemic house price correction that was sharper in the west than anywhere else, because the region is hypersensitive to the increase of interest and have home prices that are not typically far from the average local income. At the high end, LA’s luxury segment fell 55.5% in terms of home sales in the three months ended January 31, per Redfin. And mega-realtors and brokers in LA are apocalyptic about what the new tax will do. “I think it’s the worst thing [to] happening in the Los Angeles real estate market since 2007, 2008,” said Altman Good luck.

The city says the tax will create a new revenue stream to combat the homelessness crisis through affordable housing projects and prevention efforts. Last year, 41,980 people experienced homelessness in the City of Los Angeles. And this tax, the city says, could generate up to $672 million this year.

Altman described the foolishness of many high-income home sellers to beat the deadline, adding that it was a bit “crazy” to see what was lost before the April 1 deadline, with everything from cars to vacation homes are being thrown into deals only to close before the mansion tax goes into effect. During our call, Altman said he negotiated two G-Wagons (the Mercedes-Benz G-Class) as a throw-in for a house that sold days before the deadline. He calculated that he closed 25 deals in the 72 hours before April 1. In a separate case, he and Jade Mills, a Coldwell Banker Global Luxury Ambassador, offered by any real-estate agent a $1 million bonus on top of the closing commission on a nearly $28 million home in Bel Air before the first of the month. Altman knows it doesn’t make sense, but he says “it was completely forced on us.”

Others in the industry also say this tax is not the ideal way to solve the city’s homelessness problem. Altman said lucke to think of it like this: let’s say you bought your house for $5.2 million a few years ago, but with rising interest rates and a declining market, your house is only worth a little more than $5 million today. If you sell, with this new tax, you will lose your property while paying an additional tax of almost $200,000. This is exactly the point, proponents of the measure say, Claims it will “reduce homelessness, make housing more affordable, and protect low-income seniors from losing their homes.”

An analysis of Measure ULA, published in September of last year and written by UCLA researchers, among others, found that the tax affects only approximately 4% of real-estate transactions in a year, and 72% of income this will come from properties sold for more than $10 million. (The median home value in Los Angeles is $891,820, according to Zillow.) The researchers argue that the measure “represents a holistic approach to the city’s housing affordability and homelessness crises.” In other words, these luxury real-estate professionals are playing a little fiddle.

Altman said there’s no point: It’s likely to affect everyone and trickle down to owners of $2 million and $3 million homes, “because everyone’s values ​​will be lowered.”

Juliette Hohnen, a Beverly Hills-based realtor with Douglas Elliman, said luck that voters probably look at this measure and think “the rich should pay for it,” but it will affect developers on the commercial side, too, and he’s worried about them leaving the state permanently. It can be repeated: “We need more houses here. We don’t need people holding on to their houses and turning them into high-end rental opportunities.

Hohnen said that when he bought his own house, it wasn’t worth $5 million, but now it is and he can’t sell because of this tax. “My house is my biggest asset,” he said.

Jason Oppenheim, founder and president of The Oppenheim Group—the setting of Netflix’s “Selling Sunset,” has been an opponent of the move from the start, calling it “bad.” Before diving into the scale of our call, he paused a few times, seeming to command his team while on the line. He told luck that before it took effect, Measure ULA already “severely restricted development” in Los Angeles.

“Developers create microeconomies when they develop properties,” Oppenheim said, injecting millions of dollars into the economy. He said he sees development almost completely shut down because of Measure ULA, because it’s not profitable for developers.

Oppenheim says it’s “no longer possible for people to make enough money to want to grow.” As such, it also reduces sales volume, lowers transactions, and reduces property tax revenue. These developers will develop in Beverly Hills, Newport Beach, or other cities where there is no tax like this, Oppenheim said: “We lose all the money injected into these microeconomies .”

“Tax avoidance is very easy, and guess who benefits? Beverly Hills does, LA loses,” Oppenheim said, adding that he would not consider selling any of his properties now because of the tax. With the real-estate sector already heading in a “very difficult direction” with transaction volume slowing, “now the mansion tax will significantly slow sales in the luxury market, and almost crush any demand from developers, and prices will go down. .”

Emil Hartoonian, managing partner of The Agency, agrees that once people understand the tax, buyers and sellers who don’t want to pay it will head to nearby, tax-free areas like Calabasas and Beverly Hills because “It’s a big pill to swallow,” he said luck.

Altman’s alternative, or at least what he considers a “fair tax?” A 1% tax across the board, from a $500,000 condo to a $50 million house, on income. Oppenheim shared a similar sentiment, saying he was not “against, possibly, a 1% tax on all property,” to reduce homelessness. But at this point, Altman thinks “there’s a lot of inventory and that affects the market,” a mansion glut, if you will.