Ellen Murphy SVP, Deputy General Counsel | realtors.com
The Los Angeles "mansion tax," a transfer tax on high-end properties sold within the city, has generated over $439 million from 670 sales. The funds are earmarked for affordable housing and homeless initiatives, according to the Los Angeles Housing Department. However, this has impacted the city's luxury real estate market.
Los Angeles faces significant challenges with homelessness, as reported in the 2024 census, which counted over 75,000 unhoused individuals. To address this issue and a shortage of approximately 500,000 affordable housing units, voters approved United to House LA in 2022. This initiative introduced a "mansion tax" on property transactions exceeding $5 million. The tax imposes a 4% rate on sales between $5,150,000 and $10,300,000 and a 5.5% rate on sales above $10,300,000. These rates are additional to an existing .45% real estate tax applicable to all home sales.
The measure took effect on April 1, 2023. In anticipation of the deadline, some homeowners rushed to finalize deals or offered significant discounts to avoid the new taxes. For example, Paul Nassif offered buyers' agents $1 million for closing deals before the deadline; his mansion eventually sold for $18.4 million in June 2023.
Brad Pitt managed to sell his compound for $39 million just before the deadline in March 2023. Mark Wahlberg also completed his sale under similar circumstances at Beverly Park for $55 million after initially listing it at over $87 million.
Before the mansion tax was implemented in April 2023, there were 366 single-family home sales priced at or above $5 million annually; this number dropped by about two-thirds in the following year.
The introduction of this tax led many celebrities like Rashida Jones and Maria Bello to rent out their homes instead of selling them due to market conditions.
While Los Angeles is not alone—New York City has had a similar tax since 1989—the impact varies based on local real estate prices and conditions.
The areas most affected by L.A.'s mansion tax include affluent neighborhoods such as Bel-Air and Beverly Crest within Council Districts like CD5 (contributing $83.3 million), CD11 (Brentwood/Pacific Palisades contributing $73.9 million), and CD4 (Hollywood Hills/Silver Lake/Los Feliz contributing $59.4 million).
Some upscale areas outside city limits like Beverly Hills are exempt from this taxation policy altogether due simply because they lie beyond municipal boundaries defined under law governing these assessments today."
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