More specifically, Measure RE successfully raised assessments on high-value real estate sales but didn't significantly reduce transaction volume, as far as we can see. (Again, look at the orange line.)
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While Culver City's market has gone up and & down, the quarterly volume of property sales subject to Measure RE doesn't change much in comparison to property sales that aren't subject to Measure RE.
Culver City's transfer tax doesn't appear to be creating drag on the market. (Unlike ULA)
Why is Measure RE be working so much better than ULA?
Most importantly, RE is marginal. (Early hypothesis to be confirmed)
RE's higher tax rate starts above $1,499,999. So w/a $1.5mm sale, the higher rate only applies to $1.00 of that sale. The remaining $1,499,999 is taxed at the lower rate.
So even if the transfer tax rate increases with property price in Culver City, a higher sale price still always means more revenues to the seller under Measure RE.
(Side note: Measure ULA thresholds were raised slightly on June 30, 2024. The 4% rate now kicks in at $5,150,000 and the 5.5% rate starts at $10,300,000.)
Another difference: Measure RE imposes lower overall rates than ULA (1.5-4% versus 4-5.5%), but it applies to less expensive sales (starting at $1.5mm vs. $5mm).
This, combined with its marginal structure, seems to help RE preserve the incentive to sell much better than ULA does.
Comments
Culver City's transfer tax doesn't appear to be creating drag on the market. (Unlike ULA)
Most importantly, RE is marginal. (Early hypothesis to be confirmed)
RE's higher tax rate starts above $1,499,999. So w/a $1.5mm sale, the higher rate only applies to $1.00 of that sale. The remaining $1,499,999 is taxed at the lower rate.
Shockingly, this is not the case for Measure ULA.
A $4,999,999 sale in LA pays 0.45% or $22,500 in trasnfer tax.
A $5mm sale pays 0.45% + 4% = $222,500. That's 10X more(!) So a $5mm sale in LA is now worth ~$200K LESS than a $4.9mm one. That's just dumb.
This, combined with its marginal structure, seems to help RE preserve the incentive to sell much better than ULA does.