When we learned about The ULA Tax in Los Angeles we were compelled to play out the potential impact this could have in Orange County. As real estate professionals with over 30 years of experience, we’ve been fortunate to work with clients all over Orange County, but not many people know that Penny actually got her start in real estate right in the heart of Los Angeles!
Whether you’re up to date on all the details or not, LA’s ULA Tax is coming and the Orange County marketplace can be subject to a shakeup. So here’s our take on the potential implications.
What exactly is The ULA Tax?
On April 1st, 2023, a new tax on real estate transactions will go into effect in certain areas of Los Angeles County. Known formally as The ULA Tax or “unincorporated areas tax”, Los Angeles voters approved a tax on the sale of mansions and other multimillion-dollar real estate transactions. The goal as pitched to voters is simple, to raise money for affordable housing.
This will apply to real estate properties that are sold for $5 million or more in the unincorporated areas of the county. This means homes sold for more than $5 million will be subject to a 4% tax. Homes sold over $10 million will be subject to a 5.5% tax. This will apply to all sales from residential to commercial.
What is the goal of The ULA Tax?
This measure is expected to generate around $100 million in revenue each year. Its use will be to fund affordable housing and other services in these areas.
We know affordable housing has been a hot topic, and the ULA tax is just one of several measures that are being implemented to address the housing crisis in Los Angeles County.
Why is that?
Truthfully because many areas of the county are experiencing skyrocketing home prices and a shortage of affordable housing options, particularly in the unincorporated areas.
As real estate agents, we understand the need to grapple with Los Angeles’s long standing issues surrounding affordability and homelessness.
Given the recent reports of how sellers are scrambling and trying to get creative with selling before this April 1st deadline, we feel compelled to share the potential ripple effects LA’s ULA tax will have on our Orange County marketplace.
Why you should care about The ULA Tax here in the Orange County marketplace?
While we know the ULA tax is only applicable to properties in unincorporated areas of Los Angeles County, it’s our take that this could potentially have some indirect effects on the broader Southern California real estate market.
Buyers and sellers may now look to properties in neighboring areas, including Orange County, and the pricing and value of properties in the affected areas may be impacted.
It’s our belief that we could see an upswing in purchases here in OC as a result of this tax. With current issues surrounding inventory and what appears to be an insatiable appetite for Orange County real estate, we suspect both buyers and sellers, especially those in the luxury market, will turn toward Orange County now for their homes and investment properties.
What should I do next if I live In Orange County?
Whatever your opinions are on whether this will have the desired outcome voters in LA hoped for or not, we advise you to stay tuned and stay focused. We are predicting that ripple effect for both buyers and sellers.
It may be a while before this shakes out here in Orange County, but we do feel it will be here before we know it.
So whether you’re a buyer or seller give us a call now if you have questions about how this could affect your individual case. We’re ready to help.
Lastly, as we are headed right into the Spring market, take a look at our handy guide for getting ready to sell in what is traditionally the most active season of the year. See you this Spring!