Los Angeles Approves Real Estate Transfer Tax
Los Angeles Approves Real Estate Transfer Tax
Los Angeles voters approved Proposition ULA, a ballot measure to impose a 4% tax on multimillion-dollar real estate transactions to provide funding for affordable housing. The Los Angeles County Registrar-Recorder/County Clerk certified the passage of Measure ULA with 58% of the vote on December 5, 2022. The measure is likely to face legal challenge.
Proposition ULA increases the city’s transfer tax from 0.45% on all real estate sales to 4% on sales of property between $5 million and $10 million and 5.5% on sales of property of $10 million or more. The property value is the gross sales price, which includes the value of any lien or encumbrance on the property at the time of the sale. The existing documentary transfer tax excludes these values.
One study estimated that the measure would raise $923 million a year to develop affordable housing and to provide rent relief, income support, and legal counsel for tenants. The higher tax takes effect on April 1.
Exemptions
The ordinance exempts certain sales from the tax. These include transfers to non-profit entities, community land trusts, limited-equity housing cooperatives, or a limited partnership or limited liability company in which only bona fide nonprofit corporations, community land trusts, and/or limited-equity housing cooperatives are the general partners or managing members. It is unclear whether existing exemptions provided by Los Angeles city ordinance or state exemptions, including foreclosures, would apply.
Other transfer taxes
The City of Santa Monica approved Measure GS, which increases the city’s real estate transfer tax from 0.6% to 5.6% on sales of properties valued at more than $8 million, beginning on March 1, 2023. Voters in the City and County of San Francisco approved Measure M, which imposes a vacancy tax on landlords that own three or more residential units. In Palo Alto, voters approved Measure K, which imposes a monthly tax of 7.5 cents for each square foot of real estate occupied by a business over 10,000 square feet.