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The Left tends to manufacture and exploit social problems like the so-called ‘homeless crisis’ (actually a crisis caused by enabling and funding the lifestyles of drug addicts and the mentally ill) to fund its organizations, which have made hundreds of millions from ‘fixing it’ while making the crisis worse.
And it also sells its solutions as only affecting the rich.
LA’s so-called ‘mansion tax’ brought the two together. Here’s how it worked out.
Measure ULA was sold to voters as a tax on the sale of mansions to provide programs for homelessness and the prevention of homelessness. Voters were told it would raise $600 million to $1.1 billion annually. Most voters probably thought they’d never have to pay any part of that.
Wrong on all counts.
Measure ULA is a real estate transfer tax on properties valued over $5 million. The tax rate is 4% of the sale price (or value at time of transfer) up to $10 million. Above that, the tax rate jumps to 5.5%. Even properties in foreclosure are subject to the tax on the sale price.
The luxury home market in Los Angeles saw a sharp decline in the number of sales during Measure ULA’s first year. Many owners rushed to sell before the tax took effect, but even so, the steep drop of nearly 70% in the 12 months since the tax took effect may have taken city officials by surprise. Only 125 homes priced over $5 million sold in L.A. since April 1, 2023, compared to 416 in the previous 12-month period.
As of March 8, according to the city controller’s office, Measure ULA has brought in just $173.6 million, about a quarter of what the city had estimated.
6 months later the effects are even worse on housing across the board.
But the actual result of the measure, according to multiple sources, is that ULA has put a damper on all real estate development, resulting in less development of both market-rate and affordable projects…
According to a February, 2023 article in the Real Deal, ULA has dried up multifamily financing in L.A because “The transfer tax makes it difficult to estimate what a property’s value will look like over the next three, five or 10 years — typical hold periods for a multifamily developer and owner. And for construction loans specifically, lenders may not want to convert the loan into a traditional commercial loan when construction is finished, given the uncertainty around how much the asset will be able to sell for once it’s finished.”
An April, 2024 study from Hilgard Zenith Economics examining residential building permits shows a 19% year over year decrease in residential housing starts between 2023 and 2024. The difference in production between 2022 and 2024 is even more pronounced; two years ago, the city issued three times as many housing permits. The only overall increase in building permits was for so-called ED1 projects – defined as 100% affordable. But these developments only constitute 11% of total output…
According to the L.A. Business Journal, “Sales are down across all asset types. In quarters two and three of this year, multifamily properties priced above $5 million sold for a total of $320 million. That’s far below the combined $2 billion sold in those same quarters last year.”
The ‘Mansion tax’ crippled housing development and sales, and created a $400 million deficit.
The local budgetary impacts of ULA’s revenue shortfall might also be dire. The L.A. City budget for fiscal year 2024-2025, apparently drafted before the actual numbers were in, “allocates over $400 million in funding anticipated to be generated by Measure ULA to the formula categories in the measure and enables the city to spend receipts collected by the measure.” It’s worth noting that this city’s latest budget already has a potential $400 million deficit.
Socialism. It always works.
But no actual lessons will be learned from this and the other fiscal disasters of the California political class now aspiring to run America.
The homeless crisis is also a consequence of densely populated slums in large Democrat cities. That’s my latest insight from the book on the Spanish Armada I was reading. When a crisis in the Armada battles forced the English to hurriedly acquire more manpower for the next day or so, the only place they could get it was in the London slums, the only really large city in England at the time. The degraded slums and degraded inhabitants led to all kinds of problems on the ships, including crime and disease.
The healthy population was in the sparsely populated countryside.
The Democrat powerbase is in the densely populated Democrat cities, where it is easy to cheat at election time. That is why they cram so many derelicts in there, drug use, alcoholism, crime, disease, no matter, in works in their favor electionwise.
That is why they want to get rid of the electoral college, which gives the sparsely populated rural areas a chance to have a say in our politics.
Actually reminds me of Ancient Rome, where the city rabble dominated political decisions.
Anyway, fine analysis of the stupid LA tax, which is having exactly the predicted and expected effects, congratulations Daniel !!!!!
anytime there are new taxes, it’s a new money laundering scheme for those in power to give to those who keep them in power and promise them riches and protection – of course promises from the devil is the seduction of fools = California, like New York is shot to hell until those citizens of those states say enough is enough, I’m fed up and start to vote and openly threaten those elected –
By threaten means by not voting for them next election – not with physical harm which will get you locked up and on a terror watch list –
anytime there are new taxes, it’s a new money laundering scheme for those in power to give to those who keep them in power and promise them riches and protection – of course promises from the devil is the seduction of fools = California, like New York is shot to hell until those citizens of those states say enough is enough, I’m fed up and start to vote and openly threaten those elected that we are not voting for you again!
We don’t need any stupid taxes on everything from Big Macs to Handgun Ammo we need to replace all Tax & Spend Liberal Demo-Rats with Common Sense Conservatives
Lefties always statically score their tax proposals. For example, they believe that if 100 $5 million houses were taxed at 5% the state would raise $25,000,000
However, dynamic scoring is called for. The tax will likely have negative consequences on sales. 100 $5 million houses taxed at 5% would raise far less than $25,000,000, as California discovered.
Dem voters are so clueless about simple economics the pols can get away with their duplicity.
Just like all the other laws that were supposed to hit millionaires and provide money for the middle class and poor, this is an absolute bust. Legalized cannabis, emptying out jails, bonds for affordable housing–all gone.
Jason Oppenheim of Netflix’s Selling Sunset really timed it great to double his office space on Sunset for his 80 mostly unprofitable agents. Maybe he will get it on the backside. That didn’t come out right, did it ?
President Reagan described Democrat economics as: “If it moves, tax it!, if it keeps moving, regulate it. If it stops moving, subsidize it. “