Why LA’s rich are ditching their mansions — and where they’re moving to


Angle down icon An icon in the shape of an angle pointing down. Los Angeles luxury homebuyers are eyeing other locations where their money can go further. Charles Harker Wealthy Californians are showing signs of frustration with the state’s affordability crisis.One-percenters are ditching their Los Angeles mansions for homes in cheaper areas.Many wealthy buyers have been driven out by the “mansion tax” in LA, among other tax-related issues.

Gus Lira, a managing partner at a private jet charter company, loved where he lived in Malibu. His condo overlooked the ocean right off the Pacific Coast Highway, near the Getty Villa.

But he knew he needed to get out of California.

“For me, really the main reason, and for many of the people that I know, is just taxes,” Lira told Business Insider, adding that many of his friends had also recently left the state. “It’s just crazy. California is making it very difficult for everybody.”

More ultrawealthy California residents are scouring the market for good deals, prioritizing tennis courts and guest houses over an exclusive ZIP code.

In particular, the luxury market in Los Angeles is stalling to a “chill” with high interest rates, the fallout of the Hollywood strikes, and the rising cost of insurance in the state slowing home sales. For some wealthy residents of LA, the final straw in their desire to leave was the “mansion tax,” which took effect in April 2023 and applies a 4% tax to sellers on homes above $5 million and a 5.5% tax on homes above $10 million.

When friends of Lira’s from Orange County who had recently bought a place in Las Vegas recommended he check out Nevada, he was skeptical of moving to the desert. But after visiting Summerlin, a Vegas community near Red Rock Canyon, he bought a place within days — a $1.9 million four-bedroom home with a pool.

Lira said a similar place in his neighborhood in Malibu, on the Pacific Palisades side, would probably go for $8 million.

He still has his Malibu home, and he said he planned to spend about five months of the year there.

“But I’m not a California resident anymore,” he said. “Couldn’t afford it anymore. You can’t get ahead when you get $100 and they take $60.”

Cami Lincowski, a Las Vegas real-estate agent who helped Lira find his home, said she’d seen an uptick in clients coming to Vegas from California “because they see how much bang for your buck goes here.”

LA topped Redfin’s list of US metropolitan areas that homeowners are looking to leave the most, based on its user data of home searches. The data suggested Golden State residents were most likely to dream of moving to Las Vegas and Seattle, and many did seemingly take the plunge as the state lost 350,000 residents between 2021 and 2023, according to the US Census.

Lower taxes and more space have also been luring Californians to Florida, Texas, and Tennessee, among others.

But the exodus isn’t just happening among those who struggle to make ends meet. The personal-finance site SmartAsset found that wealthier Americans making more than $200,000 a year were moving out of high-cost states such as New York and California.

Jennifer Janzen, a San Diego real-estate agent, said she’d recently had LA clients head south to trade up in style. One client traded her Hollywood Hills home for a five-bedroom, $7 million home in Rancho Santa Fe, a wealthy enclave about 30 minutes north of downtown San Diego, where homes sold last year for a median of $6 million, according to Redfin. The client’s house came with a guest house and was on a golf course. Janzen said the client wanted an “amenity-filled” lifestyle and a “peaceful” place for her parents to live.

Another client of Janzen’s was a young family who grew tired of the city life in LA. They settled on a $6.5 million, 10,000-square-foot spread in Rancho Santa Fe that came with its own tennis court and soccer field.

“People coming from LA want their resort at home, and towns like Rancho Santa Fe have these giant parcels of land,” Janzen, who’s with Sotheby’s, told BI.

Wealthy homeowners say the mansion tax has just piled on

Another factor has been the mansion tax, which the luxury-real-estate industry has sounded the alarm on since LA voters approved the measure in November 2022 with 57% in support.

Lira called the tax the “coup de grâce,” or final blow, for him and his high-earning friends to leave California.

The mansion tax has also probably contributed to the low inventory of luxury homes in LA, with potential sellers worried about how much they may have to pay in taxes. Between April 1, the day the tax was implemented, and June 1, only three homes above $5 million sold in LA, Vanity Fair reported. Nearly 130 homes in the same price range were sold in March alone, right before the tax went into effect, the report said.

Jade Mills, a real-estate agent in LA, told BI she had a client who was looking to sell their $20 million home but backed out from the process altogether when they realized they’d have to pay the 5% tax — for them that amounted to $1 million.

Some of the wealthiest Californians are deciding to keep their LA homes but rent them out as luxury pads rather than accept lackluster prices on a sluggish market.

Rob Desantis, a homeowner, listed his seven-bedroom, 12-bathroom Manhattan Beach home for $150,000 a month.

“This is a hedge,” Desantis, an investor, told Bloomberg, “I believe leasing it out will highlight the value of the property in a much better way.”

The stalemate has even reached reality television, as the LA agents of the popular Netflix series Selling Sunset opened their latest season complaining about the slowdown.

“This is going to be a nightmare for us,” the agent Mary Fitzgerald said on the show. “We’re just screwed.”



This article was originally published by a www.businessinsider.com . Read the Original article here. .