Luxury homeowners in Los Angeles are racing against the clock. The city is a few days away from implementing the "mansion tax." The tax applies to sales of homes with values ranging from $5 million to $10 million and a rate of 4%. Additionally, a 5.5% tax will be levied on the sale of properties that cost above $10 million. The tax was approved by LA voters in November last year.
There is growing concern that the "mansion tax" will lead to a rise in luxury home prices, which could put off potential buyers. As a result, many luxury home sellers have been giving incentives to their prospective buyers to encourage them to make a purchase. Some of these incentives include luxury cars, such as a Bentley Bentayga EWB, McLaren GT, Aston Martin DBX 707, and Aston Martin Vantage. According to an article in the Los Angeles Times, one property listed for $16.5 million is offering buyers the option of choosing between several luxury vehicles as an added incentive. To qualify for this offer, the buyer has to pay the full price and close escrow before April 1.
Funds generated from the tax will be used to build affordable housing for the homeless, city officials said. While this may be a laudable goal, some critics are concerned that the measure could violate California's state constitution. In December, lawyers representing the Howard Jarvis Taxpayers Association and the Apartment Association of Greater Los Angeles filed a lawsuit to prevent the tax from being enforced. In 2016, the city raised $1.6 billion from a bond issue and planned to use the funds to build 12,000 units of affordable housing.
As a result, some prominent real estate agents, such as Josh Altman, are in a race to sell as many luxury homes as possible before the new tax goes into effect. Altman has reportedly promised a $1 million bonus to any agent who can get a buyer for a $28 million Bel Air mansion by April 1. Altman is one of LA's top real estate agents and has been featured on several real estate TV programs. Overall, it seems this new tax law will have a significant impact on the luxury real estate market in Los Angeles.