The goal of the tax is to generate revenue for the state, which could be used to fund affordable housing programs and other social services. Proponents of the tax argue that it would target the state's wealthiest residents and have minimal impact on middle-class homeowners
With the tax hit starting on April 1, Los Angeles may soon have hundreds of millions of new dollars available to use for affordable housing and homelessness programs. Some real-estate brokers and developers say the so-called "mansion tax" may actually slow the number of new apartment complexes being built in the city.
In recent weeks, multi-millionaires are taking a massive hit from the government. Whether you are a Hollywood celebrity or a tech mogul in that city, you will be forced to pay for a new 'mansion tax' that went into effect today in the entire Los Angeles area. This forces all millionaires to add 4% for sellers on houses that sell between $5 million and $10 million. In addition to that, any homes that sells above $10 million has to pay 5.5% of this mansion tax.
"So you add another 5% onto the equation - a lot of times the margins are very thin. If they don't have the incentive to build, and people aren't going to build for a loss, we're going to have less housing," said David Kramer, president of Hilton & Hyland, a real-estate broker that deals with homes that generally cost more than $10 million.
This change is destined to add hundreds of thousands and even millions of dollars in additional new transfer taxes for all sellers. The money that comes out of this will be destined to support a homeless housing measure Angelenos passed during the last month of November. As a result, many high profile celebrities have made the decision to dump their homes and flee the state of California in search for states with less strict tax laws. Some of them left homes that were in their possession for decades.
Amongst the names that are deciding to sell their homes, we have big ones like Mark Wahlberg, Jim Carrey, and Jennifer Lopez. All of them have homes in Los Angeles that are worth tenths of millions of dollars. In Carrey's case, he had to list his 12,700 square-foot mansion in Brentwood that had been his home for 30 years. Just like other homeowners, these celebrities had to take price cuts to sell before the deadline or risk being stuck.