Washington Post, How Sellers of L.A. Mansions are Dodging a Tax to Help the Homeless:
A tax on mansion sales in Los Angeles was intended to raise millions to fight homelessness. It hasn’t quite worked out that way.
Instead, wealthy Angelenos rebelled, putting the brakes on sales of homes priced at $5 million and above — those targeted by the initiative — with the result that the tax has raised far less money than expected since taking effect April 1. …
Los Angeles has long been a land of extremes, but homelessness may be the ultimate test of whether the liberal dream factory that makes entertainment for the globe can resolve a crisis of humanity in its own backyard. …
The measure imposes a 4 percent tax on properties listed between $5 million and $10 million; at $10 million and above, the tax bumps up to 5.5 percent. …
In the months before the tax took effect, high-end real estate sales exploded in L.A., as homeowners maneuvered to unload costly properties ahead of the new levy. The Los Angeles Times reported that celebrities including Brad Pitt and Mark Wahlberg were among those selling homes in the days leading up to April 1. … In the final days of March, some real estate agents even threw in free luxury cars to get clients to close sales before April 1. …
[Danielle Revelins, an agent with Compass real estate,] has a home listed in the Venice Beach neighborhood of L.A. for $4,999,000 — a price tag she freely admits is aimed at avoiding the $5 million trigger for the new tax. … “That property is worth a little bit more,” Revelins said. “But if we listed it at $5.2, they would have to pay $200,000″ in taxes, money that Revelins says the city would squander.
Multiple homes around Los Angeles are listed just below $5 million, and that’s just one strategy sellers are using to avoid the “mansion tax,” formally called ULA, or “United to House L.A.” Other tricks include separating properties into lots, or dividing a property between two spouses as “tenants in common” who can then sell their shares separately.
Those are among the ideas proposed in an April blog post by law firm Ervin Cohen and Jessup titled “Nine Ideas to Avoid the Effect of Measure ULA — The New Mansion Tax.”
In the first quarter of the year, there were 248 sales of commercial and residential properties priced at $5 million and above in Los Angeles, according to Nathan Stark, an account executive at Chicago Title. Since April 1 through mid-June, there were only 34 sales.
Stark and others argue the tax is counterproductive, since the city is losing out on transfer tax revenue it would be collecting if sellers weren’t holding back.
