Guest Commentary: Proposed San Diego ‘mansion tax’ would unfairly affect La Jolla property owners
If the San Diego Housing Federation is able to place a progressive real estate transfer tax on the November 2024 ballot, La Jolla homeowners will be unfairly impacted.
The proposed tax would require property owners in San Diego to pay an additional 1.75 percent to 2.25 percent on all residential and commercial property sales above $2.5 million. A certain percentage of the funds generated from the tax would go to homelessness prevention assistance, eviction support programs and tenants’ rights education.
Roughly 90 percent of the available single-family detached homes on the market in La Jolla would meet the criteria for the proposed “mansion tax.” This potential tax imposition would weigh down property owners in La Jolla, leading to an imbalanced burden. While acknowledging the homeless and housing crisis in San Diego, it is important to recognize that excessively taxing specific groups of property owners or communities is not a viable solution.
San Diego homeless-service providers have already received $2.37 billion from local governments, and even with all that money, San Diego’s homelessness crisis is growing faster than it can be contained.
The monthly report from the Regional Task Force on Homelessness also reported for the first time the number of veterans who were housed
Levying additional taxes on property owners and throwing more money at the problem has proved not to work. The city of Los Angeles recently implemented a real estate transfer tax on luxury home sales to try to help the city tackle its homelessness crisis. Measure ULA, the “Homelessness and Housing Solutions Tax,” was approved by Los Angeles voters, and while this new tax is commonly referred to as the “mansion tax,” it applies to all real estate sales, not just residential properties. This also would be the case with San Diego’s transfer tax.
The Los Angeles tax became effective April 1 and increased the real property transfer tax on certain transactions by more than 1,000 percent. Moreover, Measure ULA was in addition to, not in lieu of, the existing base real property transfer tax, so property owners were hit twice as hard.
Before the implementation of Los Angeles’ “mansion tax,” home sellers were hustling to unload their homes quickly. Home prices were slashed and million-dollar transactions were hastened through escrow. A few sellers were even giving away cars and lavish incentives to entice potential buyers to close deals on their properties before the end of March. This flurry of activity was driven by the desire to evade Measure ULA before it went into effect.
It was projected the tax would generate about $56 million a month for the city of Los Angeles. However, in its inaugural month, it managed to generate only a modest $3.6 million because property owners simply pulled their homes off the market and the money that could have been generated through reassessment was not realized. Since March, sales of luxury homes in Los Angeles have almost stopped.
Homelessness involves addressing a variety of issues, including mental health, housing, employment, drug addiction and alcoholism. Changes in the law are needed to get people off the streets and into the help they need to function in society, not excessive tax increases on property owners.
While it might be tempting to believe that affluent property owners can effortlessly absorb an additional tax, it’s important to recognize that many of them may choose not to sell, as was evident in Los Angeles when the city implemented its “mansion tax.”
The unintended consequences of such a tax in trying to solve San Diego’s homelessness crisis greatly outweigh the benefits. The practice of raising property taxes on a small number of property owners is simply wrong.
Mark Powell is a licensed California real estate broker and a board member of the Greater San Diego Association of Realtors. He also served as president of the La Jolla Sunrise Rotary Club. ◆
Get the La Jolla Light weekly in your inbox
News, features and sports about La Jolla, every Thursday for free
You may occasionally receive promotional content from the La Jolla Light.