By Eric Engelbert

Jim Carrey recently made headlines by significantly reducing the price of his Los Angeles home. Originally listed at $28.9 million in February 2023, the property has now seen its price cut multiple times, currently listed at $21.9 million. This sharp decline is attributed to the newly implemented "mansion tax" in Los Angeles, officially known as Measure ULA.

Understanding Measure ULA

Measure ULA, which took effect on April 1, 2023, introduces a transfer tax on the sale of high-value properties in Los Angeles. Specifically, the tax imposes a 4% levy on properties sold for more than $5 million and a 5.5% levy on those sold for over $10 million. The revenue generated from this tax is earmarked for addressing homelessness and providing public housing in the city. The measure was passed in November 2022, with 57% voter approval, thanks to the efforts of housing advocates and labor unions.

The Market Response

The introduction of Measure ULA has led to a noticeable uptick in the number of luxury homes hitting the market. Celebrities and affluent homeowners, including Jim Carrey, Britney Spears, Kylie Jenner, and Mark Wahlberg, have all listed their properties, aiming to avoid the financial impact of the new tax. For instance, Spears listed her Calabasas home for $12 million just six months after purchasing it, while Jenner put her Beverly Hills property on the market for over $33 million.

Real estate agents have reported a "frenzy" of activity as sellers rushed to close deals before the tax took effect. This rush has created opportunities for buyers looking to acquire high-value properties at reduced prices. As a result, several high-profile sales have been completed at lower-than-expected prices, offering a unique snapshot of the current luxury market dynamics in Los Angeles.

The Political Paradox

An interesting dynamic has emerged as many of the wealthy individuals affected by Measure ULA are known for their support of progressive policies, including higher taxes. However, the financial implications of the mansion tax have led some to actively seek ways to mitigate its impact, highlighting a paradox between their political stances and personal financial actions.

Impact on Orange County Luxury Market

The mansion tax in Los Angeles has also had ripple effects on nearby Orange County. With the new tax in place, some Los Angeles residents are reconsidering their zip code and looking towards Orange County as a more attractive option. This shift could boost demand in Orange County's luxury real estate market, which has already seen an influx of buyers during the pandemic. Our data has highlighted more buyers considering Orange County for luxury home purchases.

In Orange County, there are currently 359 luxury homes priced over $5,000,000 that are listed for sale, compared to Los Angeles' larger luxury market with 966 homes listed for sale over $5,000,000. The shift in buyer interest could potentially balance out some of the market fluctuations caused by Measure ULA in Los Angeles.

The introduction of Measure ULA has significantly impacted the luxury real estate market in Los Angeles. As high-profile properties see price reductions and increased sales activity, the market is adjusting to the new tax landscape. For potential buyers, this period offers unique opportunities to acquire luxury homes at more competitive prices. However, the situation also underscores the complex relationship between political beliefs and personal financial decisions among the city’s affluent residents.