The short answer is no, Prop 40 is not going to crash LA home prices. The measure applies to roughly 200 people, and it doesn't tax real estate at all. If it touches the housing market, it touches the very top of the very top, not the homes most of my clients are buying and selling on the Westside. What stands out to me more is what I'm not hearing. When Measure ULA was coming, everybody was talking about it. With Prop 40, I haven't had a single client bring it up. Since the vote is November 3, it's worth knowing what the measure actually does.
What is Prop 40?
Prop 40 is a statewide ballot measure that would impose a one-time 5% tax on the net worth of California residents worth $1 billion or more. Residency is locked in as of January 1, 2026, and net worth is measured on December 31, 2026 (Hoover Proposition Lab). The tax would be due in 2027, according to the state's nonpartisan Legislative Analyst's Office, and it could be paid in 5 annual installments (NBC Los Angeles). The measure is backed by the SEIU-United Healthcare Workers West union, and most of the money would go to health care programs.
Does Prop 40 tax real estate?
No. Directly held real estate is excluded from the net worth calculation, which avoids a conflict with Prop 13. The official voter guide says real estate, pensions and retirement accounts generally would be excluded from the tax (California Secretary of State).
That matters because a lot of the coverage implies billionaires will have to sell homes to pay the bill. The homes themselves aren't part of the 5%. Any effect on prices would have to come indirectly, from people choosing to leave the state or from general nervousness at the high end.
Who would actually pay it?
The tax applies to an estimated 200 billionaires in California. That is a very small group. It's also not certain the tax ever takes effect. Two competing measures on the same ballot, Props 41 and 42, are designed to cancel it. If either one gets more votes than Prop 40, the billionaire tax does not take effect (CalMatters). A September PPIC poll found 52% of likely voters supporting Prop 40, 51% supporting Prop 41 and 54% supporting Prop 42 (EdSource).
Why the headlines say it will hurt prices
The argument goes like this: billionaires leave California, they sell their estates, and the luxury market softens. Some brokers have said the threat of Prop 40 is already freezing high-end deals and making wealthy clients wonder whether a millionaire tax comes next (Fox Business).
The picture on the ground is more mixed. A Century City wealth attorney told the Los Angeles Business Journal that the dozen or so billionaires she advises have all decided to stay and pay, and the same report noted that Peter Thiel spent $130 million on a Bel Air home in July even after moving out of the state (LA Business Journal). A handful of very public moves make for good headlines, but they don't make a market.
Prop 40 vs. Measure ULA: why this one feels different
I worked through Measure ULA, and the difference in how people are reacting is the clearest sign of how much Prop 40 matters to the average Westside owner. ULA added a transfer tax of 4% on sales between $5 million and $10 million in the City of Los Angeles, and 5.5% on sales of $10 million and above (Orange County Business Journal). It hit the transaction itself, so every seller and buyer at that level had to factor it in. Everybody was talking about ULA. People felt it was going to pass, so it was only a matter of time, and the market reacted. In April 2023, the first month after ULA took effect, only 2 homes above $5 million sold in the City of LA.
Prop 40 is the opposite. It doesn't add a cost to buying or selling a home, it's aimed at a few hundred people, and nobody in my listings or showings is bringing it up.
What it means if you own on the Westside
For most homeowners in the Westside, Prop 40 doesn't change the math on buying or selling. Your buyer is not a billionaire, your home isn't being taxed, and the vote doesn't change what comparable homes on your street are selling for. If you own at the very top of the market, in Bel Air, Beverly Hills or Malibu, it's worth watching the November 3 result and how Props 41 and 42 play out. Even there, the homes themselves are excluded, so any effect would come from buyer sentiment rather than the tax.
Let’s Connect!
If you have questions about what this or any other ballot measure means for your home, reach out and I'm happy to walk you through it. Call or text 310-853-2643 or email info@paulsalazargroup.com.
FAQ
Will Prop 40 lower home prices in Los Angeles? There's no direct mechanism for it to. Prop 40 excludes directly held real estate from the tax, so it doesn't add a cost to owning, buying or selling a home (California Secretary of State). Any effect would be indirect and limited to the very top of the market.
Does the billionaire tax apply to my house? No. Real estate, pensions and retirement accounts generally are excluded, and the tax only applies to residents worth $1 billion or more (LAO).
When do Californians vote on Prop 40? Prop 40 is on the November 3, 2026 statewide ballot. If it passes and takes effect, the tax would be due in 2027 (LAO).
What are Props 41 and 42? They are competing measures written to block the billionaire tax. If either gets more votes than Prop 40, the billionaire tax does not take effect (CalMatters).
How is Prop 40 different from Measure ULA? Measure ULA is a City of Los Angeles transfer tax charged on the sale itself, at 4% for sales between $5 million and $10 million and 5.5% above $10 million (Orange County Business Journal). Prop 40 is a one-time tax on a billionaire's net worth and does not apply to the home sale.
