Governor Signs Community Housing Act, Allowing Towns To Create Tax To Fund Affordable Housing

Governor Kathy Hochul on Friday, October 8, signed into law a bill allowing the five East End towns to establish community housing funds, using a new tax on real estate transfers to generate revenue earmarked for affordable housing.

The Peconic Bay Region Community Housing Act allows the towns to ask voters via referendum to approve a 0.5 percent tax on top of the 2 percent tax that is already collected by the Community Preservation Fund on most real estate transactions on the East End. Voters in each town approved the CPF in 1998.

“This is a sweet moment,” said Assemblyman Fred W. Thiele Jr., who first drafted similar legislation in 2003. “We’ve worked on this for a long time.”

In 2019, an earlier version of the Peconic Bay Region Community Housing Act made it to the desk of former Governor Andrew Cuomo, but he vetoed it.

Just last week, 35 East End leaders and organizations signed on to a letter urging Hochul to sign the bill ahead of a midnight deadline on Saturday, October 9, to help stave off an affordable housing crisis that has been made even worse by the COVID-19 pandemic.

“The framework is very broad in what the towns can do,” Thiele said of the new law.

He said, for example, that towns can provide financial assistance to first-time buyers, which he described as “an attractive option for most towns,” because it would help make existing housing stock more affordable.

Towns would also be allowed to fund new construction for sale and rental, create public-private housing partnerships, fund employee housing, renovate existing buildings, acquire affordable housing easements on existing stock, and just about anything else they can think of to make a dent in the housing crisis, Thiele said.

“The authorizing legislation is there,” he added. “Now the work shifts to the towns to come up with their plans and implement them.”

Thiele said one of the most common concerns his constituents bring to him is the lack of affordable housing.

As prices have continued to escalate, the lack of affordable housing has reached a crisis with organizations as large as school districts and as small as family businesses scrambling to find ways to house their employees.

“The Community Preservation Fund itself has been so successful in terms of preserving land, I hope that this fund is as successful in creating affordable housing opportunities,” Southampton Town Supervisor Jay Schneiderman said on Monday.

He estimated that the 0.5 percent tax will generate about $15 million annually for affordable housing in Southampton Town.

He noted that the town has already begun to put together a housing plan that outlines how the money will be spent. The towns are required to create such a plan before holding a referendum on the Community Housing Fund.

“It goes on the ballot next November, so if approved by voters, we’ll start seeing the money in 2023,” Schneiderman said.

He said the fund could do all sorts of things: “From helping to build apartments to helping create accessory apartments to down payment assistance to affordability easements. It could have a wide range of applications, even just simply bridging the affordability gap between local wages and what’s necessary to pay the mortgage. So if somebody can afford a $500,000 house and the only thing that’s out there is a $700,000 house, it’s possible that the town could purchase an affordability easement for the differential.”

If a house with an affordability easement is sold and ceases to be an affordable unit, the money would have to be paid back to the fund, he explained.

“I want to get the best bang for the buck, but it’s more complicated than that,” Schneiderman continued. “I always say, what are the right community solutions that maximize the funds toward creating affordable housing? Because, you know, it doesn’t make sense to buy a million-dollar house and then sell it for $300,000 to somebody. That just takes $700,000 out of the fund. So that might be the easiest solution, but that’s not the right solution.”

He identified the high cost of land as one of the biggest challenges to creating affordable housing. “The only way to make the numbers work is to allow greater density on a piece of property, and that’s where everybody comes out in opposition,” he said. “So having this money available has the potential to bring down those densities to make it more palatable to the surrounding community.”

He recalled how Speonk Commons started out as a plan for a 51-unit affordable housing complex, but it was decreased to 38 units after the town worked with the community. “We ended up with less units, but at least we got the community to embrace it and actually support it,” he said.

But lowering the density required an additional $1.5 million in funding from the state attorney general’s office to “make the numbers work,” he said. “Now we’ll have our own funds that could be used in situations like that.”

Other than multi-unit complexes, Schneiderman sees opportunities for accessory apartments in houses, garages and basements, spread out in all areas of town.

He said he is pleased with Hochul for signing the law. “It simply gives the voters the opportunity to decide whether to tax themselves,” he said.

Schneiderman predicted that getting voter approval for the Community Housing Fund would be more challenging than the referendum for the Community Preservation Fund was.

“But the public is well aware of the need to create housing opportunities for the workforce and the children who we’re educating in the area that all have to leave and can’t come back,” he added. “So I think there’ll be public sympathy.”

Curtis Highsmith, the executive director of the Southampton Housing Authority, said the additional funding mechanism is absolutely going to make a huge difference in being able to produce more affordable units, whether for sale or for rent. It will also allow the town to balance where affordable housing can exist, whether east or west of the Shinnecock Canal.

He said that housing officials on both the South Fork and North Fork appreciate Thiele’s leadership and persistence in making sure that the plan would get back on the governor’s desk.

East Hampton Town Supervisor Peter Van Scoyoc said on Wednesday, October 13, that he met with the governor back in August when she visited Southampton and he expressed to her how important this legislation is to East Hampton and the rest of the East End.

“Given the meteoric rise in property values and costs of living and the geographical commute from more affordable areas, we’re really struggling, across the board here,” he said.

The Community Housing Fund tax will be a “significant funding source for dealing with housing affordability,” according to Van Scoyoc.

Ahead of a referendum in 2022, the town will take some time to put together a plan for how the money is spent to address the housing affordability crisis, he said, and will advertise to help people understand how significant this will be for the ability of the town government, the hospital, schools and businesses to hire and retain staff to provide services.

“It’s become so expensive here that even doctors and other professionals are struggling,” Van Scoyoc said. “This isn’t just about the lowest rung of the economic ladder, helping people in that situation. It’s across the board. Any working person really would find it difficult to acquire housing here now.”

He said prices for housing are increasing dramatically while open land for any type of housing development is decreasing rapidly. “We have to take a different approach to try to figure this out, and having that additional revenue certainly would help,” he said.

One approach he highlighted is to subsidize the purchase of existing housing, which he said would keep neighborhoods intact while not increasing density.

On the likelihood that the referendum passes in East Hampton, Van Scoyoc was optimistic, though he said there is work to do to help everyone understand what’s at stake. “I really think our local public, for the most part, understands what a crisis this is and what the implications are,” he said.

Although the new law will create a new tax, Thiele pointed out that it also raises the exemption in the current CPF tax. The first $400,000 of the purchase price of a property on the South Fork is exempt from the transfer tax under the new law, up from $250,000.

“Any real estate transaction of $1 million or less will actually pay less now,” he said, “and anything above $1 million will pay a half-percent more.”

Michael Daly, the founder of affordable housing advocacy group East End YIMBY, said on Tuesday that the bill’s signing is a “hopeful step,” and if each of the voter referendums passes “it will certainly be an arrow in the quiver of needed solutions in the coming years.” But he added that immediate action is needed and called for exclusionary zoning codes to be rewritten to allow multi-family homes and apartments.