If you're looking to pass a new ordinance and/or create a new tax, it's important to have the right name. Take, for example, Los Angeles' new "mansion tax." The majority of people do not have a so-called "mansion." And so signaling to people that you're going to tax this thing and then redistribute the funds to help others with better housing is, not surprisingly, attractive to many. Here's how the new tax works:
Known as Measure ULA — for “United to House LA” — the ordinance marketed as a “mansion tax” will impose a 4% tax on property sales above $5 million, rising to 5.5% on sales above $10 million. So a $5-million sale would include a $200,000 tax, and a $10-million sale would include a $550,000 tax, which is typically paid by the seller.
Of course, if you're a rich person with a mansion, your first thought is going to be, "how do I avoid having to pay this?"
If you're looking to pass a new ordinance and/or create a new tax, it's important to have the right name. Take, for example, Los Angeles' new "mansion tax." The majority of people do not have a so-called "mansion." And so signaling to people that you're going to tax this thing and then redistribute the funds to help others with better housing is, not surprisingly, attractive to many. Here's how the new tax works:
Known as Measure ULA — for “United to House LA” — the ordinance marketed as a “mansion tax” will impose a 4% tax on property sales above $5 million, rising to 5.5% on sales above $10 million. So a $5-million sale would include a $200,000 tax, and a $10-million sale would include a $550,000 tax, which is typically paid by the seller.
Of course, if you're a rich person with a mansion, your first thought is going to be, "how do I avoid having to pay this?"
Here
are two unproven and possibly illegal options that I am not condoning in any way:
For example, if a homeowner is selling a mansion for $15 million, they’d be slapped with a $825,000 tax bill. But if they split up the property into three parts owned by three different entities and sold all three pieces for $4.999 million each, they would hypothetically elude the tax since it only kicks in at $5 million.
Another strategy might be to hatch deals off the books to keep a sale under $5 million. For example, if a seller wanted $7 million for their house, they could reach a deal with a buyer to sell it for $4.999 million, thus avoiding the tax, but then sell the furniture in the home for $2 million.
I don't have a mansion, so I'm fortunate enough not to have to worry about such things. But I do think about the impact on things like new rental supply. My understanding of the ordinance is that if you're a developer of rental housing, and you buy a lot for $4.99 million, build a mid-market apartment, and then turn around and sell it to a pension fund for $10.01 million, you would be subject to this new tax.
are two unproven and possibly illegal options that I am not condoning in any way:
For example, if a homeowner is selling a mansion for $15 million, they’d be slapped with a $825,000 tax bill. But if they split up the property into three parts owned by three different entities and sold all three pieces for $4.999 million each, they would hypothetically elude the tax since it only kicks in at $5 million.
Another strategy might be to hatch deals off the books to keep a sale under $5 million. For example, if a seller wanted $7 million for their house, they could reach a deal with a buyer to sell it for $4.999 million, thus avoiding the tax, but then sell the furniture in the home for $2 million.
I don't have a mansion, so I'm fortunate enough not to have to worry about such things. But I do think about the impact on things like new rental supply. My understanding of the ordinance is that if you're a developer of rental housing, and you buy a lot for $4.99 million, build a mid-market apartment, and then turn around and sell it to a pension fund for $10.01 million, you would be subject to this new tax.
This morning I was reading about Aman's new condo and hotel project in New York, which is planned for the 100-year-old Crown Building at 730 Fifth Avenue. It will have 83 hotel rooms and just 22 homes, and be the first urban condominium for the resort company.
Owned by OKO Group, the hospitality company is mostly known for their "sleek, minimalist hotels in secluded, far-flung destinations," according to the WSJ. Rooms go for upwards of USD 2,500 per night and they, supposedly, have a rabid customer base known as "Amanjunkies."
What's interesting about this project is that (among other things) it's a bet the Aman brand will translate to an urban context and drive above-market pricing. And it will do it at a time when the ultra high-net-worth segment of the market in NYC has been cooling because of a new "mansion tax" and probably other factors.
The five-storey penthouse, which will be built into the building's "crown," is asking USD 180 million. If/when it sells, it will break the record for the most expensive home ever sold in the city on a square foot basis at $14,358 psf.
If you subscribe to the WSJ, you can read the full story here. I find it valuable to see how projects position themselves.
This morning I was reading about Aman's new condo and hotel project in New York, which is planned for the 100-year-old Crown Building at 730 Fifth Avenue. It will have 83 hotel rooms and just 22 homes, and be the first urban condominium for the resort company.
Owned by OKO Group, the hospitality company is mostly known for their "sleek, minimalist hotels in secluded, far-flung destinations," according to the WSJ. Rooms go for upwards of USD 2,500 per night and they, supposedly, have a rabid customer base known as "Amanjunkies."
What's interesting about this project is that (among other things) it's a bet the Aman brand will translate to an urban context and drive above-market pricing. And it will do it at a time when the ultra high-net-worth segment of the market in NYC has been cooling because of a new "mansion tax" and probably other factors.
The five-storey penthouse, which will be built into the building's "crown," is asking USD 180 million. If/when it sells, it will break the record for the most expensive home ever sold in the city on a square foot basis at $14,358 psf.
If you subscribe to the WSJ, you can read the full story here. I find it valuable to see how projects position themselves.
