Many of Hollywood’s prominent figures are in a rush to offload their multi-million dollar properties in Los Angeles before the impending “mansion tax” takes effect on April 1.
Last November, the ULA (United to House LA) measure was approved by voters, which seeks to generate up to $1 billion from luxury home sales to finance affordable housing initiatives. Beginning April 1, individuals who sell homes valued between $5 million (£4 million) and $10 million (£8 million) will be subject to a 4% surcharge imposed by the city.
For those selling homes exceeding $10 million, the tax rate will increase to 5.5%. The objective of the tax’s implementation in Los Angeles is to “finance affordable housing projects and furnish resources to tenants who face the risk of homelessness.”
The situation has arisen as the homelessness crisis in the city continues to deteriorate. In 2022, the Los Angeles Homeless Services Authority estimated that the number of homeless individuals had risen to 42,000, up from 28,000 in 2016. California presently has the highest poverty rate in the United States.
The implementation of the tax triggered a frenzied rush by estate agents to lower prices and rapidly offload mansions. According to reports, a real estate broker offered a $1 million bonus to any agent who could find a buyer for a $28 million Bel-Air mansion before the deadline.
Celebrities who have recently sold their properties include Mark Wahlberg, who sold his 12-bedroom, 20-bathroom mansion for $55 million. It’s worth noting, however, that the mansion had been on the market for nearly a year before the introduction of the ULA measure. Jim Carrey’s two-acre, 12,700 square foot property was put up for sale last month for $29 million.
A mansion boasting seven bedrooms, eleven bathrooms, a basketball court, and a 70-foot infinity pool, previously listed at $6 million, has had its asking price reduced to $38 million by its owner in hopes of selling it within the next week.
According to Josh Altman, a broker and TV personality, he has witnessed deals being made that should have never happened.
In Los Angeles, a tax on selling prices rather than profits means that sellers are required to pay, even if they suffer a loss.
As a result, amidst the soaring costs of real estate, the tax is now imposed on 4% of all real estate sales, leading to significant price cuts on numerous properties. Wealthy cash buyers have taken advantage of this situation, purchasing mansions at discounted rates, as per a statement made by a luxury real estate broker to a media house.