L.A. Brokers Call for Pause of ‘Mansion Tax’ Amid Wildfires To Aid Rebuilding

Los Angeles real estate agents are calling for the city to suspend its “mansion tax” amid the catastrophic wildfires, which have turned swaths of the city’s priciest real estate to ash.

A group of brokers has sent a letter to city and state officials with a number of requests to aid in rebuilding what was lost, including a suggestion to suspend the so-called “mansion tax” on the sale of damaged properties and raise the limit on insurance payouts to $6 million.

The letter, sent to officials on Tuesday, was written by brokers Jason Oppenheim of the Oppenheim Group and Ben Belack of the Agency on behalf of the brokerage community, and signed by close to 50 other high-profile real estate agents.

“In the spirit of rebuilding, we are calling for practical adjustments to laws, regulations and building codes for those most affected by this disaster,” they wrote, addressing California Gov. Gavin Newsom, Los Angeles Mayor Karen Bass and relevant regulatory agencies.

The first request addresses the lack of available insurance for homeowners in California, with many national insurers retreating from the state, largely due to the combination of elevated risk and regulatory limits on premium increases.

“Everyone’s underinsured,” Belack told Mansion Global. “People took what insurance they could get or afford. They didn’t realize or look that closely, and I think we’re going to see that they’re all underinsured.”

The state’s insurer of last resort, called the California Fair Plan, provides a backup plan for those who can’t find insurance elsewhere, but only insures homes up to $3 million, which doesn’t cover many of the pricier properties in affected areas like Malibu and Pacific Palisades, per the letter. The brokers requested that the state raise the Fair Plan’s minimum to $6 million, and also offer liability insurance. Additionally, the brokers are asking the state to do more in incentivizing insurers to return.

Second, the brokers requested that the city suspend the ULA transfer tax, better known as the mansion tax, for the sale and resale of destroyed properties for up to five years. The mansion tax, which took effect in April 2023, applies a higher transfer tax to both commercial and residential real estate trades above $5 million.

Funds raised from the mansion tax are utilized to address homelessness and fund affordable housing. It raised $375 million in the first year instead of an estimated $1.1 billion, 46% of which came from residential transactions, according to the city’s Office of Finance.

“Exempting developers from the transfer tax for five years will encourage them to purchase land from homeowners at reasonable prices and quickly rebuild these devastated communities,” the letter said.

Other suggestions include loosening regulations that could delay rebuilding, especially given that the permitting process in Los Angeles is notoriously difficult and lengthy.

Executive orders released by both Newsom and Bass have addressed some of these concerns. The governor’s executive order, issued Sunday, will suspend certain building and environmental codes, including the California Environmental Quality Act and the California Coastal Act, which directs how structures are built along the coast. Additionally, the governor’s order extended price gouging protections for building materials and services above Jan. 7 prices.

Bass’s executive order, issued Monday, also looked to streamline rebuilding, by exempting 100% affordable projects from discretionary zoning reviews, and calling all departments to expedite approvals for utilities, certificates of occupancy and other permitting requirements.

“Both Newsom and Bass have issued orders that go to the heart of some of our requests and do ameliorate some of the concerns that we are trying to address, but there is still much left on the table for them to do including several items in our letter,” Oppenheim said in an email.

That includes taxes and insurance, said Belack.

The governor’s and mayor’s offices have not yet responded to Belack and Oppenheim, and they did not immediately respond to Mansion Global’s requests for comment.