Opinion: San Diego Must Not Adopt LA's Disastrous Real Estate … – Times of San Diego
Times of San Diego
Local News and Opinion for San Diego
Los Angeles’ new real estate “transfer tax” has proven to be crippling for the Los Angeles housing market and it’s urgent that the policy isn’t put on the ballot for San Diego in 2024 or beyond.
The tax, known as Measure ULA, was passed in 2022 and went into effect April 1. The measure places a tax of 4% on transfers of property valued between $5 million and $10 million and a 5.5% tax on property valued above $10 million.
In Los Angeles, the logistical implementation of this so-called “mansion tax” has proved disastrous. As the start date loomed, the housing market moved at an exceptional speed, as sellers tried to dispose of their property as quickly as possible by offering bonuses and drastically discounted prices.
After April 1, luxury property sales dropped to basically zero. The slowdown has destroyed any previous estimates of tax revenue LA expected from the ULA, leaving the city with a multi-million-dollar budget gap.
It’s also important to note that the tax not only applies to single family homeowners, but also commercial properties. These properties are often owned by small-time, mom-and-pop owners, and the additional tax could dissuade individuals from entering the market.
Along with these issues, the constitutionality of such a tax has been pushed into legal question. The Howard Jarvis Taxpayers Association and Apartment Association of Los Angeles each filed lawsuits arguing that the measure violates state and local tax law by specifically being designated for a special purpose.
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While the outcome is held up in a legal hellscape, the City Administrative Officer warned LA not to spend the marginal revenue that the failed tax has generated until the legal issues are sorted out. While proponents of ULA had argued that the revenue could be spent on new housing, if the court strikes down the measure, the city will actually owe the sellers their money back.
In short, this could potentially mean that Los Angeles crippled its housing market post April 1 for no reason.
Los Angeles’ abject failure should be a stark example for proponents of a San Diego version of the measure. Oftentimes, proponents of these measures assume that the additional tax will only impact the ultra-wealthy, but this assumption here is incorrect.
It is almost guaranteed that the sale price of property to trigger the additional tax would be lower than Los Angeles, most likely starting at $1.5 million. In a city where the average property price is close to 75% of that, many buyers and sellers will be disproportionally burdened by this ineffective way to raise money for the city.
In San Diego, that’s the average home in communities such as Clairemont, Paradise Hills, and Mission Valley, along with many others. Yes, this impacts you!
Similar to many other new ordinances, the unintended consequences are widespread and severe and do reach much, much more further than intended. The haste for the appearance of meaningful policy tends to leave out a careful thought process considering all outcomes.
As the failure of ULA has proven, implementing this sort of tax will only hurt the economy by both crippling the market and potentially forcing refunds. This is a failure San Diego can’t afford to take on with its already deficient housing supply and ever-increasing homeless rate.
We already have proof that a tax such as this doesn’t work. It’s up to San Diego residents to stop this. Not only should you act and vote “no,” but spread the word and inform your neighbors, colleagues and family. Your livelihood just might depend on it.
Carla Farley is a two-term past president of the Greater San Diego Association of Realtor®. She is also a broker/owner of the Corban Realty Group with over 30 years of experience in business.
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