Manny Trelles, CPA
Measure ULA (aka the “Homelessness and Housing Solutions Tax”) was recently approved by voters in the City of Los Angeles. The new transfer tax is set to start April 1st, 2023.
The transfer tax applies to all real property asset classes in the City of Los Angeles as follows:
- Residential Property (examples include single-family home, multi-family homes, and apartment buildings)
- Commercial Property (examples include office buildings, restaurants, or a warehouse)
- Vacant Land
Under the new tax, sales of residential and commercial real property valued at over $5 million but less than $10 million in the City of Los Angeles will be subject to an additional transfer tax at a rate of 4%. Sales of property over $10 million would instead be subject to an additional transfer tax at a rate of 5.5%.
This is in addition to the 0.56% existing transfer tax currently levied by the City of Los Angeles.
For example, if the sale price of a property is $8,000,000, the new 4% transfer tax will equal $320,000, if the sale of a property is $12,500,000, the 5.5% new transfer tax will equal $687,500.
The tax would be due regardless of whether it is being sold at a gain or loss. The thresholds under the measure will be adjusted each year for inflation. The measure is expected to generate between $600 million and $1.1 billion annually in order to fund affordable housing and tenant assistance programs.
It is important for buyers, sellers, and developers to understand the new transfer tax impact.
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