State Assemblyman Fred W. Thiele Jr. has introduced legislation proposing a new tax on real estate transactions, modeled on the one used to raise revenues for the Community Preservation Fund, to fund a regional program to make houses more affordable for moderate-income, first-time homebuyers.
The bill, which Mr. Thiele introduced in the State Assembly but which has yet to see parallel legislation in the State Senate, would allow East End towns to create a new half-percent tax on the sale of homes selling for more than $1 million in Southampton, East Hampton and Shelter Island towns, and more than $750,000 in Riverhead and Southold towns.
Under the proposal for what Mr. Thiele has dubbed the Peconic Bay Region Community Housing Revolving Fund, the revenues raised from the tax would be used to subsidize the purchase price of homes for qualified buyers, in the form of loans that would have to be paid back only upon the future sale of the house.
The loans would be available only to those who already live or work in a given town—or according to other parameters set by each town—and would be limited to half the total purchase price. The subsidy amount would have to be repaid by the homeowners only when they were to sell the home—at a rate proportional to the appreciation of the home’s value during the time the borrower owned it.
“The example I use is that if a resident were to buy an $800,000 house, and got a $200,000 loan [from the fund], and, 10 years later, sold the house for $1 million, they would have to repay the fund $250,000,” Mr. Thiele explained. “You want the homeowner to be able to benefit, but you also want the continuous source of funding available. So the homeowner gets the bulk of the equity—but [the fund] would be made whole also.”
A half-percent real estate transfer tax could be expected to generate about $6 million per year in East Hampton Town and as much as $12 million per year in Southampton Town, Mr. Thiele estimated.
If the state approves the legislation, any of the five towns could opt in or out of the program. In each town that decides to adopt the new tax, voters would have to approve the measure at the polls—and it would not likely be on the ballot until the fall of 2019, at the earliest.
Mr. Thiele acknowledged this week that the bill likely is not in its final form, and that introducing it in the Assembly is intended to start serious discussions about the concept among local lawmakers, real estate and building interests, and affordable housing advocates.
“It sounds like it could work,” Southampton Town Supervisor Jay Schneiderman said on Monday. “It’s sort of a luxury tax that would go toward spurring affordability. It’s an interesting idea, I’ll say that.”
The island town of Nantucket, Massachusetts, has a law similar to what Mr. Thiele has proposed, tacking a “fee” onto all home sales over $2 million to fund the creation of affordable housing.
The fund would be targeted at helping first-time homebuyers, not funding public housing or multi-family projects, Mr. Thiele said.
He noted that recent changes to federal tax law, which eliminated deductions for state and local taxes, have put a new burden on those considering purchasing their first home.
“You can’t solve every problem with one program,” Mr. Thiele said. “If you’re buying your first home, those deductions can be the difference for some people being able to make that mortgage payment or not. So this is a good time to be trying to provide increased opportunity.”
East Hampton Town Supervisor Peter Van Scoyoc was somewhat skeptical of the approach on first hearing of it, saying that creating new “affordable” housing for workers who are not necessarily interested in buying, as opposed to lowering the cost to homebuyers, may be his town’s more urgent need. He also worried that subsidizing home buying would not help boost the supply of affordable houses as market prices continue to rise.
“You’re subsidizing to allow people a leg up to homeownership—but that’s where it ends,” he said. “It doesn’t stop the continual slide of properties out of reach. There’s homeownership, and there’s the ability for working people to live here. They may not be the same thing.”
The transfer tax is Mr. Thiele’s second attempt to find a way to tap the gargantuan amounts of money being spent each year on local real estate to help working-class residents find housing. He had previously discussed the possibility of generating revenue for affordable housing by creating a “McMansion tax,” in the form of additional local fees on the sale or construction of homes exceeding 3,000 square feet. But, he said this week, that proposal was staunchly opposed by construction industry representatives and was shelved. He said he hopes the new approach will find more support.
With the bill introduced, Mr. Thiele said the next step will be to take it to town lawmakers at next month’s meeting of the East End Supervisors and Mayors Association and to discuss with trade and real estate groups.
To see what’s new, click “Start the Tour” to take a tour.
We welcome your feedback. Please click the
“contact/advertise” link in the menu bar to email us.
One fine body…