When most people hear the words “mansion taxes,” they think of luxury homes and waterfront properties. But after looking at housing data, I found myself asking a different question. What can the data tell us about how the meaning of a million-dollar home has changed over the years? And the answer is more interesting than I expected.

Lesson 1: A Million-Dollar Home Has Become Much More Common

While there isn’t any official definition of a mansion, in real estate, a million-dollar home has traditionally been considered the entry point into the luxury market. In 2005, there were about 1.5 million owner-occupied homes in the United States valued at least $1 million. They represented only 2% of all owner-occupied homes. By 2024, that number had increased to about 6.9 million homes, accounting for 8%.

This definitely doesn’t mean our country is filled with luxury homes. In many parts of the country, especially coastal areas, it just reflects years of home price appreciation. Homes that once sold for a few hundred-thousand dollars now exceed the million-dollar mark. For example, in Hawaii about 40% of owner-occupied homes are worth at least $1 million. The share is almost that high in the District of Columbia (31.5%) and California (31.3%). In Washington state, it’s 17.4%, followed by Massachusetts (15.5%) and New York (13.6%). Now, compare that with most areas in the Midwest and South. In Mississippi, North Dakota, and West Virginia, only about 1% of owner-occupied homes are worth at least $1 million. States such as Iowa, Indiana, Kentucky, Louisiana, Nebraska, and Ohio are all below 2%.

The first lesson from the data is simple: The definition of a million-dollar home has changed over the years.

Infographic comparing $1 million-plus owner-occupied homes in 2005 and 2024. The number of homes valued at $1 million or more increased from 1.5 million to 6.9 million, a 368% increase. Over the same period, total homeowner households increased from 74.3 million to 86.7 million, a 17% increase. The share of all housing stock valued at $1 million or more grew from 2.0% in 2005 to 8.0% in 2024.

Lesson 2: Buyers Pay Attention to Thresholds

Looking at the transaction data, another very interesting finding emerges. Home sales drop significantly once prices move above $1 million. Specifically, since 2015, there have consistently been about 2.4 times more homes sold just below $1 million than just above it. In economics, this is called “bunching,” when transactions cluster around a particular price point.

Why does this happen? Firstly, it’s simply about how buyers think. Many buyers search for just below round numbers, so $999,999 is a common cutoff when purchasing a home. Another reason is that mortgage qualifications change as prices rise. And, in some markets, taxes also begin at that threshold, increasing the total cost of the purchase.

Whatever the reason, the data suggests that buyers don’t view $999,000 and $1,000,000 the same way. But even a very small difference can affect buyers’ decisions.

Bar chart showing the share of home sales by price range around the $1 million threshold. Home sales account for 0.31% of sales in the $975,000 to $1 million range but fall to 0.13% in the $1 million to $1.025 million range. The chart notes that the share of sales just above $1 million is 2.4 times lower than the share of sales just below $1 million, suggesting a significant drop in transactions once prices exceed the $1 million mark.

Lesson 3: Housing Markets Change Much Faster Than Policies

New York is an example of a market where policy hasn’t caught up. The state’s mansion tax threshold has remained at $1 million since 1989. Adjusting for inflation, that threshold would be about $2.7 million today.

In the meantime, home prices have changed substantially since 1989. As of 2024, nearly half of owner-occupied homes in Manhattan are now worth at least $1 million. In Brooklyn, more than one-third have reached that level. The threshold has stayed fixed. However, the market didn’t.

Infographic showing that New York's $1 million home value threshold has remained unchanged from 1989 to 2026. The graphic notes that a $1 million home in 1989 would be equivalent to a $2.7 million home today when adjusted for inflation. It highlights that the threshold was set more than 30 years ago while home values continued to rise. The share of homeowners living in $1 million-plus homes in 2024 is 48.2% in Kings County, 35.1% in Queens County, and 23.7% in Westchester County, compared with 5.2% national

Affordability isn’t the only issue. Transfer taxes can also influence whether homeowners decide to move. Many longtime homeowners don’t want to sell because they refinanced when mortgage rates were below 3%. Selling means giving up that low mortgage and taking on today’s higher borrowing costs. That’s the mortgage lock-in effect. Many of those same homeowners have also accumulated substantial housing wealth. Nationally, about 13.1 million homeowners have capital gains that exceed the current federal exclusion, creating another financial reason to stay put. Add a transfer tax on top of that, and you have what I think of as a triple lock-in effect: mortgage lock-in, capital gains lock-in, and transfer tax lock-in. Each of these increases the cost of moving. Together, they reduce homeowner mobility when mobility is at historic lows. Fewer moves mean fewer existing-homes come onto the market—fewer opportunities for the next generation of buyers.

Lesson 4: The Affordability Cliff – Small Costs Can Affect Affordability

One question that often comes up is who actually pays the transfer tax. Is it the buyer or the seller? In New York, it’s the buyer. In New Jersey, it’s the seller. From an economic perspective, however, the more important point is that the tax becomes part of the transaction. If buyers pay it directly, their upfront cost increases. Then, if sellers pay it, they usually factor that cost into their asking price. So, either way, the tax affects the affordability of a home transaction.

Take New York: The 1% tax on a $1 million home adds another $10,000 to the purchase. That increases the income required to qualify for the home, even by a couple of thousand dollars. However, this increase reduces the number of households statewide that can afford it by about 17,400.

Infographic showing the impact of a mansion tax on home affordability in New York State. Without a mansion tax, an estimated 908,950 households can afford a $1 million home. With a mansion tax, that number falls to 891,550 households, reducing affordability for 17,400 households. The graphic also shows that the income needed to qualify for a $1 million home increases from $242,740 without the tax to $245,140 with the tax.

Lesson 5: These Taxes Don’t Only Affect Housing

One of the biggest surprises in the data is that transfer taxes can also apply to commercial real estate. In Los Angeles, for example, Measure ULA applies to many office buildings and other commercial properties. More importantly, Measure ULA was introduced at a time when the office market was already experiencing record-high vacancies, negative absorption, and weaker investment activity. Many of the affected properties are exactly the types of buildings that could be renovated, repurposed, or converted into housing.

So, the data does suggest that timing matters, especially when additional transaction costs are introduced during a challenging market.

Infographic showing that office building sales of $6 million, $10 million, and $20 million can incur additional transfer taxes ranging from $240,000 to $1.1 million, affecting redevelopment and investment projects.

Not only timing but also data matters. The broader lesson from the data is that housing markets and tax policies don’t always move together. Understanding how the market changes helps us ask better questions—not only about taxes, but about affordability, mobility, redevelopment, and how housing policy keeps pace with a changing market.