Santa Monica Real Estate Measure GS Mansion Tax

What is Measure GS, Santa Monica Real Estate Transfer Tax?

Measure GS, the "Funding for Homelessness Prevention, Affordable Housing, and Schools" initiative, is a 5.6% transfer tax on property sales over $8 million in Santa Monica. Approved in 2022, it aims to fund homelessness prevention, affordable housing, and local schools.

Santa Monica transfer Tax calculator, Santa Monica Measure GS-Mansion Tax, Santa Monica City transfer fee explained.

How much is the los angeles county transferr tax fee when selling your properties in Los Angeles county? 

• County Documentary Transfer Tax: Calculated at $0.55 per $500 transfer value. This is a standard rate applied to all property transfers in the county.

How much is the Santa Monica city transfer fee when selling your real estate properties in Santa Monica? 

• City of Santa Monica’s Transfer Tax:

• First Tier Tax Rate-0.3%: $3.00 per $1,000 of the property value for sales and transfers under $5 million.

• Second Tier Tax Rate-0.6%: $6.00 per $1,000 of the property value for sales and transfers between $5 million and $7,999,999.99.

• Third Tier Tax Rate (Measure GS)-5.6%: $56.00 per $1,000 of the property value for sales and transfers of properties valued at $8 million or more, effective from March 1, 2023, following the approval of Measure GS by Santa Monica voters in November 2022.

Key Points About Measure GS, Also known as Santa Monica Mansion Tax:

• Who Pays the Tax on Measure GS when selling their real estate Property?

• The Measure GS tax applies only to sellers of properties valued at over $8 million. This tax is not an increase in general property taxes but rather a specific % tax rate of 5.6% on the portion of the property’s sale price that exceeds $8 million.

• What types of properties does Measure GS apply to?
  It applies to both residential and commercial property transfers in Santa Monica.

• Does Measure GS include land transfers?
  Yes, it covers all real property transfers, including land, valued at $8 million or more.

• Which transactions are affected by Measure GS?
  Measure GS affects any real estate transfers—residential, commercial, or land—within Santa Monica any real estate properties $8 million or above.

• How has Measure GS impacted real estate sales in Santa Monica?

  Since Measure GS took effect on March 1, 2023, there has been a significant decrease in high-value property sales in Santa Monica:

  Residential Sales in Santa Monica After the Measure GS: From March 2022 to March 2023, there were 32 residential sales of over $8 million. After Measure GS’s implementation, this dropped to 15 sales from March 2023 to March 2024—a 53% reduction.

  Commercial and Multi-unit Sales in Santa Monica after Measure GS: Commercial sales dropped from 18 to 5—a 72% reduction in the same period.

  Are there any exemptions for Measure GS?

• Measure GS exempts specific affordable housing projects from the transfer tax, including transactions involving non-profit corporations and community land trusts, which are not subject to the third-tier tax.

  How has the high-end real estate market been performing in Santa Monica recently?

  Santa Monica City’s higher transfer tax rate for properties valued at $8 million or more may discourage sizeable real estate transactions. This has negatively impacted the real estate market and related businesses in Santa Monica, and a lawsuit has been filed challenging the measure's legality

• The impact of this tax increase has had significant unintended consequences. It has led to a 60% drop in business opportunities for those working in the real estate sector at this price level. This includes a wide range of professionals—contractors, electricians, plumbers, roofers, painters, realtors, loan officers, escrow officers, title representatives, appraisers, designers, stagers, and photographers. These are everyday working-class individuals who live, work, and pay taxes in Santa Monica, and they have all been affected by this decline.

• Voters have the power to end Measure GS at any general election.

Effects on Development: Developers have become hesitant to build high-end or multi-unit properties in Santa Monica, citing lower profit margins due to transfer tax.

1. For Single-Family Homeowners:
   As a Santa Monica homeowner, how will the city's tax policies impact the equity I've built in my property, despite my investments in maintaining and beautifying it?

2. For Multi-Unit Property Owners:
   With the city’s tax policies and requirements like soft-story compliance and rental restrictions, upkeep, and maintenance, how can Santa Monica apartment building owners balance these investments' costs with the burden of nearly half a million dollars in taxes?

   For homeowners and multi-family/commercial property owners in Santa Monica, selling before your property's value crosses $8 million can be advantageous. At $7,999,999, the tax is about $48,000 (0.6%). At $8 million, the tax jumps to $448,000 (5.6%), a difference of $400,000. If your equity is near $8 million, selling sooner can save you a substantial tax burden.

Santa Monica Measure GS proposal initiative: Proposal to Exclude Multifamily Sales

Former Santa Monica Mayor Pam O’Connor has proposed an initiative to exempt multi-family dwellings from the city’s transfer tax, aiming to get it on the fall ballot. Critics of this proposal present several concerns:

1. Loss of Funding: Opponents argue that this exemption would reduce the money available for the original goals of Measure GS, which include homelessness prevention, affordable housing, and support for public schools.

2. Ignoring Voters' Decision: Some believe that the proposed exemption undermines the decision made by voters who approved Measure GS back in 2022.

3. Benefiting Developers: Critics worry that the change could mainly benefit wealthy developers, potentially diverting resources away from social programs that help the community.

4. Premature Change: Many feel that it’s too soon to make changes to Measure GS, as the full impact of the measure has not yet been fully understood or evaluated.

5. Impact on Affordable Housing: Some, including Sue Himmelrich, former mayor of Santa Monica, who initially supported Measure GS, believe that this change could harm funding for affordable housing, making it harder for the city to address its housing needs.

Supporters of the proposed initiative to exempt multi-family dwellings from Santa Monica's transfer tax (Measure GS) present several key arguments to defend their position:

1. Encouraging Housing Development: Proponents believe that exempting multi-family dwellings from the transfer tax could incentivize more development, especially for much-needed multi-family housing. This could be a crucial step toward addressing housing shortages in Santa Monica, where the demand for housing has often outpaced supply.

2. Improving Financial Viability for Developers: By removing this tax burden, supporters argue that development projects, particularly those involving multi-family units, would become more financially viable. This could attract more developers to undertake new projects, potentially leading to an increase in the overall housing supply in the area.

3. Meeting State Housing Mandates: The exemption is also seen as a way to help Santa Monica achieve state-mandated housing production goals. California has set specific targets for cities to produce more housing, and reducing financial barriers like transfer taxes could support Santa Monica's efforts to comply with these requirements.

4. Stimulating Economic Activity: Supporters also highlight the potential economic benefits of the exemption. By encouraging new development, the initiative could boost activity in construction and related industries, creating jobs and fostering economic growth in the community.

Will the Ballot Initiative to Exempt Multi-Family Housing from the Transfer Tax Succeed?

The outcome of this legal challenge will determine if the measure makes it onto the ballot. So far, it has not.

Bottom Line

If you own property in Santa Monica—be it land, a commercial building, a multi-unit apartment complex, or a luxury home with stunning views—it’s important to understand the implications of the transfer tax when selling. Measure GS in Santa Monica has introduced a significant city transfer tax that can be a substantial financial consideration for properties with high equity gains. Specifically, if your equity gain falls between $7 million and $8 million, selling now could help you avoid paying close to half a million dollars in transfer fees.

Whether you’re considering selling a luxury home, multifamily building, or commercial property, understanding how these tax measures apply to your sale is critical for maximizing your returns.

This is where our expertise comes in. With in-depth knowledge of Santa Monica’s real estate market and a track record of helping sellers achieve the best outcomes, we’re equipped to guide you through every step. From providing accurate property appraisals to offering insights into the market impact of Measure GS or any other new measures, we’re here to ensure a seamless transaction.

Have questions about how Measure GS might affect your sale, or wondering what your property could be worth in today’s market? Let’s connect. Contact us today for a tailored analysis and a strategy to help you sell at the best price, minimizing tax impact and maximizing your investment. Don’t let uncertainty hold you back—reach out now and take the next step toward a successful sale in Santa Monica.