Workforce Housing Fund Would Tax Construction Of Large Homes

Even as workers choke highways driving east in the mornings to set up vacation homes for Memorial Day occupancy, a new tool has been pulled out to try to fix the nagging issue of a shortage of affordable housing on the East End.

A “workforce” housing fund would offer no-interest loans of up to $250,000 toward a home purchase, pay for the right to reserve existing housing for workers, and provide housing counseling to local residents, under legislation proposed recently by State Assemblyman Fred W. Thiele Jr.

The money would come from a surcharge on the construction of homes exceeding 3,000 square feet. A “workforce impact fee” of $10 per square foot would be charged for building permits, such that a 7,000-square-foot house would put $40,000 into the fund.

Just as they did with the Peconic Bay Community Preservation Fund, each of the five East End towns could decide by referendum if they wanted to opt in to the program.

“There’s really a demand for it,” Mr. Thiele said this week, adding that the time is right given the pressing need and a brighter economic climate. A press release announcing the proposed legislation cited the difficulty of finding employees, staffing volunteer emergency services, traffic congestion, and the flight of longtime residents as casualties of the housing crisis.

Across the East End towns, 40 percent of all housing units are seasonal, Mr. Thiele said in the release. According to U.S. Census data, Southampton Town had 40,772 housing units in 2013, with only 21,528 of them fully occupied, as opposed to being vacant or used recreationally, seasonally or occasionally. In East Hampton Town, there were 21,189 housing units, with more than half, 12,068, reported to be vacant or inhabited only partially.

The Workforce Opportunity Fund, as it is called, would work much like the CPF, said Mr. Thiele, who was instrumental in the creation of the latter program, which has raised more than $1 billion to protect open space and farmland. “We have the CPF for land—the other side of the equation is the people who live here.”

A major distinction is that the housing fund would work on a revolving basis, with borrowers paying a portion of the increased value if they sell their homes. For example, if the fund provided a $200,000 loan toward a $600,000 house, and the owners later sold the house for $900,000, one-third of the resale price, $300,000, would be returned to the fund for future housing.

Town residents earning up to 120 percent of median family income would be eligible for the loan program. In Southampton Town, median household income was $78,133, while the median home value was $589,400, according to 2013 census figures. In East Hampton Town, median home value was $826,800, while household income was $77,021.

The Long Island Builders Institute opposes the Workforce Opportunity Fund proposal.

“We are very supportive of the concept of having a workforce housing fund,” said Mitchell Pally, the institute’s CEO, on Friday. “We are not supportive of the way in which the revenues are being taxed on new home buyer.”

Mr. Pally said providing workforce housing would benefit all residents of a town, and therefore all of them should pay for it. “New home buyers should not be singled out,” he said.

The institute strongly supports a different bill, proposed early this year by Mr. Thiele and State Senator Kenneth P. LaValle, in which a Peconic Bay Region Community Housing Opportunity Fund would be created using other revenue sources—including general fund balances or surpluses, mortgage recording taxes, and the sale of development rights or affordable housing.

Mr. Pally said his organization also likes the fact that the bill would encourage the actual production of new homes. “Everybody has to live west of where they work,” he said. “The issue is not having enough inventory. … Local governments and the state must do a much better job of building workforce housing.”

Mr. Thiele had said that there was not much vacant land left on which to build affordable housing, which is why his recent bill also proposes using the fund to buy rights to existing housing stock.

The towns could pay for covenants, restrictions or easements that would limit some existing homes to use as affordable housing, much as they now purchase development rights to farmland using the CPF. The most likely candidates would be around “existing hamlet centers and areas like that,” Mr. Thiele said. “The housing stock that is sort of on the cusp, smaller homes in more affordable areas.”

Supervisor Larry Cantwell said the number of available vacant parcels in East Hampton Town is very limited, with perhaps 90 percent of 25,000 tax map parcels already either developed or preserved.

“I think it’s a question of both redevelopment and new development, where there are there are going to be opportunities in both areas,” he said. “And to begin to fill the need, we’re going to need to be proactive both in terms of new housing and existing housing.”

Given that land is so expensive, one solution is to use a housing fund to subsidize the purchase of land, whether it is to be used for a small apartment building or a single-family home.

Mr. Cantwell said he sees a broad range of needs, from seniors to the working poor to young professionals and working-class families who all need affordable places to live.

Funding is key, he said, and “the more tools we have, the better the chances that we can do something.”

That sentiment was echoed by Peter Elkowitz, president and CEO of the Long Island Housing Partnership, which serves all of Suffolk and Nassau counties. “Especially on the East End, where you have very high-cost housing and very limited funds to support this kind of homeownership, another source—another tool—that would help,” he said.

According to Mr. Elkowitz, it is not uncommon to impose a tax to support affordable housing programs as is done for clean water or other environmental needs. Mr. Thiele said programs like the one he proposed last month are already in place in California and Colorado.

The third prong of the three-pronged proposal is to provide housing counseling for local residents, one of a number of services offered by the Long Island Housing Partnership along with the development of affordable housing, education and technical assistance, and help with rehabilitating housing.

“That’s very key, because that not only helps the person get into the home without being taken advantage of … [it] helps people when they get into trouble” by offering guidance from someone they can trust, who is not a lender, Mr. Elkowitz said.

Mr. Thiele said he’d learned, in dealing with the Housing Partnership in the past, that residents need to know what they can afford to avoid the kind of faulty mortgages behind the recession in 2008.

In fact, he said, he’d done a lot of work on the workforce opportunity legislation around 2007, and “when the recession came, nobody wanted to talk about this program.”

But this year, he said, “the demand and the need for workforce housing is greater than ever. And the economic climate is right for its adoption, especially on Long Island.”

He said he’s talked with East End town officials for years about the proposal. And as for its chance of approval at the state level, Mr. Thiele said: “I’m optimistic.”