Speaking of taxes….
What has been the result of Measure ULA since it took affect 12 months ago?
Recall UCLA and proponents advertised that the taxes would raise $900+ million for affordable housing. The Measure passed with a simple majority 57.7% in November 2022. Then the City of LA revised their forecast in March 2023 to $672 million (about 5% of City revenue) due to interest rates. ULA is the additional transfer property taxes levied on all properties in the City of LA (over the existing 1.1% tax) selling for $5 million+ which took effect April 1, 2023. The ULA adds another 4% on all sales prices $5 million and higher or 5.5% for sales $10 million+.
The city brought in $173.6 million, 25% of its own revised estimate.
Behavior changed.
Commercial and residential real estate transactions stalled. Developers went elsewhere for the promise of higher returns. Fewer spec homes have been started. Unless they have to move Sellers have been on the sidelines.
Commercial has been hit hardest with rising interest rates, ULA and fewer people back at work.
Residential volume in the city dropped 70%. Areas such as Beverly Hills and Malibu, not in the City of LA and subject to the tax, have been more desirable in residential. Residential lease prices decreased in the high end with more lease inventory available.
Hancock Park sales volume dropped 73%. For the 12 months prior to ULA there were 30 sales, averaging $7.2 million. The highest was $16 million. In the 12 months since there have only been 8 sales. Imagine paying an additional $880,000 for that $16 million last year! Most motivated sellers either made their move prior to April 1, 2023 to avoid the tax or have sat on the sidelines awaiting to see if the results of court challenges materialized which they have not thus far. In November we will all have the opportunity to vote on the “Taxpayer Protection and Government Accountability Act”.
Today there are 8 active listings on the MLS over $5 million, 4 of which are over $10 million. 3 sales are pending.
Stay tuned. The story is still being written….