New L.A. Mansion Tax collects less revenue than expected in 1st year

LOS ANGELES (KABC) -- After its first year of existence, Los Angeles' so-called Mansion Tax has collected $215 million to be used for affordable housing projects in the city, well short of the revenue that supporters pitched when it was on the ballot in 2022.

Measure ULA promised voters it would raise between $600 million to $1.1 billion each year by taxing sales of expensive homes. The measure hits properties sold for $5 million or more with an additional 4% tax. Properties sold for $10 million or more have to pay a 5.5% tax.

Voters approved the new tax and it went into effect April 1, 2023.

"Across Los Angeles, more than 11,000 people have benefited from the emergency rental relief that ULA has been able to provide," said LA City Councilmember Hugo Soto-Martinez at a rally Thursday celebrating the tax's one-year anniversary.

But while the Mansion Tax raised $215 million during that time, it is well short of its campaign promises. Supporters attribute the shortcoming to a drop in large home sales caused by rising mortgage rates and construction costs, as well as to property owners who scrambled to sell their expensive homes in the months before the tax kicked in.

"This rush to sell... eliminated $270 million of ULA taxes that would have gone into the pot," said Joan Ling, one of the authors of an economic evaluation of the tax.

That 34-page analysis found Mansion Tax revenues are expected to hit expectations in the upcoming years.

But in addition to recent court challenges, Mansion Tax supporters may also face an election challenge in the form of the Taxpayer Protection Act, which could appear on California ballots in November.