The City of Santa Monica wants to triple the transfer tax on homes sold for over $1 million dollars beginning January 1, 2015. The current transfer tax in the city is $3.00 per $1,000. On the sale of a million dollar property, the transfer tax is $3,000. The new proposal wants to raise it to $9.00 per $1,000 making it $9,000 on the same million dollar property.
The city states they need the extra funds to further enhance the quality of life in the community of Santa Monica and help redevelopment efforts. In 2012 all city redevelopment agencies in California were dissolved due to budget cuts. Currently, Santa Monica has a lower transfer tax compared to Los Angeles ($4.50 per $1,000), but the new proposal would double that of Los Angeles.
With property values increasing over 40% in the Santa Monica over the past three years, the city is already seeing increased revenues from the transfer tax. The average median home sale in Santa Monica is approaching $1.3M and the large majority of residences in Santa Monica will be impacted by this increase.
Further, how fair is this to the people who bought at the height of the 2005 market. The market has recovered above those numbers but this unexpectedly cuts into a seller’s bottom line and ability to purchase an up-leg property. Sellers in Southern California are expected to pay the transfer tax (though it is negotiable) and this would increase the total closing costs for Santa Monica residents about .7%. The county of Los Angeles also receives $1.10 per $1,00.00 as well. Assuming a 5% brokerage fee and the numerous fees that go with selling a home, Santa Monica residents are looking at 9% in sale expenses.
If you are going to increase the transfer tax, why not make it less daunting, maybe $5.50 per $1,000.00? This seems like a dramatic jump for a city that already levies increased taxes on the purchase of a car and charges a 9.5% sales tax compared to LA’s 9.0%. A good chance exists this measure will pass with a majority of renters in Santa Monica and the powerful group Santa Monican’s for Renters Rights pushing to get this passed. Feel free to read more about Measure H.