Everything You Should Know About the LA Mansion Tax
Voters in the city of Los Angeles recently approved Initiative Ordinance ULA, also known as the “ULA tax” or “Mansion Tax.” There are several things this new tax implies so we will share with you what you need to know about it.
This Ordinance will go in effect April 1st of 2023 and what this Ordinance puts into effect is a tax on properties valued or priced at over $5 million. For those properties between $5 -10 million the tax applied is that of 4%, for properties over $10 million it will be 5.5%. This tax will be levied on top of the already existing city and county tax. If you are wondering if there are any exemptions, there are a few. Those exempt from the ULA tax are non-profit entities, Community Land Trusts, and Limited-Equity Housing Cooperatives.
Although this Ordinance may disincentivize certain transactions it is possible that certain new developments may be profitable. It is reported that proceeds from the ULA tax may be used by the Los Angeles Housing Department to provide up to $50 million dollars per project. It is estimated that this Ordinance will result in the collection of $600 million - $1.1 billion dollars that are intended for various projects. Although the Apartment Association of Greater Los Angeles challenged the validity of this new tax stating the revenue is to be intended for specific purposes, the litigation is still pending.