New housing permits fell sharply for both single-family homes and multifamily buildings after the city enacted a tax on property sales over $5 million.
A research brief from UCLA’s Anderson Review asserts that a 2023 “mansion tax” designed to bring in revenue for affordable housing has likely backfired.
According to an analysis of the tax’s effects, development of alternative dwelling units fell by 70 percent, while multifamily construction permits dropped by 27 percent. “Overall construction permits in the city fell 40%, a decline that includes a 45% drop in permits for single-family homes of any value.”
The study accounted for factors other than the tax by comparing data for the city of Los Angeles with other L.A. County cities, where permitting did not decline as precipitously. The analysis thus suggests that “the tax itself, rather than a broad decline in the real estate market, is responsible for the city’s construction drop-off.”
The tax, formally known as the United to House L.A. Real Property Transfer Tax, applies to all real estate sales of $5 million or more. Developers seem to have adopted strategies to skirt the tax such as lowering prices to just below $5 million or moving projects just outside the city of L.A.
Read the full story: LA’s Mansion Tax, Intended to Aid Affordable Housing, May Have Backfired
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Rutgers University, Edward J. Bloustein School of Planning and Public Policy
One Hundred Miles
Hunter College, City University of New York (CUNY)
The Architects Foundation
University of Cincinnati Online
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