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Jun 24, 2019 3:37 PMPublication: The Southampton Press

Real Estate Transfer Tax Bill To Support Affordable Housing Passes State Legislature

Speonk Commons is one of Southampton Town's latest affordable housing projects. The recently passed Community Housing Fund bill could boost the production of similar projects within the town. DANA SHAW
Jun 25, 2019 3:03 PM

A bill meant to provide financial assistance to first-time homebuyers and affordable housing projects on the East End was approved by both legislative chambers in Albany last week and is now headed to Governor Andrew M. Cuomo for a final decision.

If it gets his signature, the Community Housing Fund bill, sponsored by Assemblyman Fred W. Thiele Jr. and Senator Kenneth P. LaValle, would authorize the towns of East Hampton, Southampton, Riverhead, Southold and Shelter Island to add a 0.5 percent tax on real estate transactions and use the revenue to subsidize affordable housing projects and to help with purchases for first-time homebuyers.

The tax would work in the same way as does the existing 2 percent real estate transfer tax that collects revenue for the Community Preservation Fund, or CPF, which the five East End towns have had in place since 1999. It is a one-time tax paid at closing when purchasing improved or vacant property, and its revenues are used primarily for preserving open space and farmland, and, more recently, for water quality projects.

The new proposal is intended to address the shortage of affordable housing opportunities on the East End that has made it difficult for employees and longtime residents to live in the area and employers to find workers.

“The legislature hereby finds that critical to the future of the Peconic Bay region is the need for an adequate supply of housing opportunities for all segments of the Peconic Bay community,” the bill reads.

First-time homebuyers who either live or work in the town could get financial assistance in the form of loans or grants to make existing homes more affordable. Any loan would have to be repaid by the borrower only after a property is resold later.

“The hardest part is basically just, as a first-time homebuyer, being able to enter the market. Being able to get that down payment,” Mr. Thiele said, explaining that towns could offer the loans up front so that homebuyers could use them toward a down payment.

The legislation gives the towns freedom to design their Community Housing Fund program in a way that addresses their unique housing needs. Each town’s appointed advisory board would assist its town board in determining what segments of the housing market should have priority for funding, as well as how the funds should be provided.

“They’ll be able to adapt to changing conditions, and if they find a better way to do these loans, they’ll have the flexibility to be able to do it,” Mr. Thiele said, adding that increased flexibility was one of the major changes from the original bill.

If the tax gets approved by the respective town boards, local voters will then need to approve it via referendum for it to become law.

Tom Ruhle, East Hampton Town’s director of housing, said that this program is “desperately needed” in his town. Not only would it generate affordable housing opportunities in the area, but the funds could compete against the impact of the CPF, which has taken land away from potential development for preservation purposes, he explained.

“We need ownership of property, we need middle-income rentals, we need low-income rentals—we need pretty much almost everything you could possibly think of,” Mr. Ruhle said.

East Hampton Town set up a Community Housing Opportunity Fund a few years ago in anticipation of a bill like this passing, Mr. Ruhle said, but it is not a renewable funding source, as the transfer tax would be.

“I think it could save the community, at least in terms of having a year-round population that can do all the things that a year-round population does, like volunteer for fire departments and work in stores and keep stores open year-round,” he said. “I think that’s push-back against what’s becoming the hyper-, hyper-seasonality of the area.”

The Town of Southampton is also interested in implementing this program to help mitigate the town’s great need for affordable housing. Diana Weir, the town’s director of housing and community development, said that her department was working with Mr. Thiele while he was drafting the bill to ensure that it could address Southampton’s needs.

“We think it’s needed,” Ms. Weir said of the program. “We do have an affordable housing crisis.”

She said she has about 1,000 people on her list waiting for affordable housing and the Southampton Housing Authority has others on its list as well. When applications were made available last week for the new Speonk Commons affordable housing apartment complex, she said her office was bombarded with people asking to be added to the list.

“You just have to get on the highway on any morning and you’ll know that people are coming from up west to work here because they can’t live here. That’s your best indicator right there,” Ms. Weir said.

The town would use the fund for all types of affordable housing aid including down payment assistance, affordable housing construction and employer-assisted housing.

As part of the legislation, the regional real estate transfer tax would be amended to allow homes sold for under $2 million to be eligible for greater exemptions.

Homebuyers in the towns of East Hampton, Southampton and Shelter Island would not be taxed on the first $400,000 of the value of a home, an increase from the current $250,000 exemption for the CPF. In the towns of Southold and Riverhead, the first $280,000 of the value of a home would not be taxed, an increase from the current $150,000 exemption.

The tax exemption increase would reduce closing costs for home purchases under $1 million on the South Fork and under $800,000 on the North Fork, affecting about 60 percent of the region’s real estate transfers, Mr. Thiele said.

Increasing the exemption would have only a minor impact on the revenue stream for the CPF, according to Mr. Thiele, who said that only a few million dollars would be lost annually—a slight reduction, given that the fund raised $100 million just last year. The CPF collects 90 percent of its funds from real estate transactions over $2 million, which is outside of the exemption eligibility, he noted.

“Every year, I pledge to work to make Long Island more affordable,” Mr. LaValle said in a prepared statement. “After establishment, the Community Housing Funds will go a long way in creating a more affordable future and better quality of life for local residents.”

The bill will be delivered to Mr. Cuomo between now and the end of the year, the deadline for him to either sign or veto bills that passed the legislature this year. Mr. Thiele said he is optimistic it will be signed, because Mr. Cuomo has long supported the CPF and prioritized promoting affordable housing throughout the state in his executive budget.

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All these taxpayer funded subsidies will accomplish is to drive up the purchase price of the lower end of the east end housing market and encourage the construction of the types of apartment complexes that drive down the value and quality of life of the surrounding communities.

Only permitting accessory apartments on a wide scale, and increasing density will resolve the problems caused by a shortage of housing.
By MoronEliminator (215), Montauk on Jun 25, 19 9:48 AM
Explain how increasing supply with no change in demand will "drive up the purchase price of the lower end of the east end housing market."

While you're at it. explain how building decent new complexes will "drive down the value and quality of life of the surrounding communities."

Explain how your plan of increasing density will do neither.
By VOS (1230), WHB on Jun 25, 19 5:35 PM
I'm not here to compensate for your lack of analytical ability, or your unwillingness to do basic homework.

When a tax is uniformly applied to goods where demand exceeds supply, what do you think happens to the average selling price?

A) The home sellers eat a reduction in the sales price to compensate for the additional tax added to the transaction so the selling price stays the same as if there had been no tax.

or

B) The average selling price rises to accommodate ...more
By ChrisDiPetta (37), on Jun 26, 19 10:56 AM
Affordable Housing Complexes are not Low Income Housing Projects. In order to rent an Affordable apartment, you must earn at least 80% of the median income. These are not "poverty stricken families" these are the working class people who serve your food and unclog your toilet. They are the recently retired and newly graduated. They are not the enemy.

That said, ENOUGH with all the new taxes already, you're bleeding us dry!!
By skipolsen (5), Calveron on Jun 27, 19 1:20 PM
These pages frequently rage about the ill-effects of inflated real estate valuation in our community...punitive property tax inflation, retail vacancies/greedy landlords etc etc. Much of which has been driven by government manipulation...interest rate suppression inflating asset values. So, along comes Fred Thiele & Co and the next governmental “fix” of a problem through governmental manipulation of real estate values, this time inflating the lower end of valuations, but of course it ...more
By CPalmer (111), Southampton on Jun 25, 19 11:24 AM
1 member liked this comment
NYS with 100% Democratic controlled State government just keeps giving, oh, mean taking!
By HamptonDad (236), Hampton Bays on Jun 25, 19 12:12 PM
2 members liked this comment
Fred Thiele will give it away to illegals "aka" non income tax payers who are the takers. He is a socialist as is most NYS government leaders.
By Hamptonsway (102), Southampton on Jun 25, 19 8:46 PM
What ever happened to paying your own way and not relying on the government for a freaking handout?!
By bigfresh (4593), north sea on Jun 25, 19 12:34 PM
1 member liked this comment
Rural version of gentrification.
By Mr. Z (11674), North Sea on Jun 30, 19 9:33 AM
Would have been better to find a way to include a carve-out in the current 2% CPF fund, which already has 100's of millions of dollars flowing through it (they were able to do it with water quality). Why the extra 0.5%? Dumb, dumb, and in the end will hurt property values as well. For a house over $1 million, that's now a 3.5% overage on purchase price (1%, NY Mansion tax on houses over $1 million, 2% for CPF, and now an additional 0.5% on the housing tax).
By Rickenbacker (257), Southampton on Jun 25, 19 2:12 PM
My heart breaks for the folks with million-dollar houses.
By Fore1gnBornHBgrown (8048), HAMPTON BAYS on Jun 25, 19 2:24 PM
I’m sure it doesn't, nor should it. But, in my experience, pretty much every time the government has messed with markets to benefit a certain group, it ultimately hurts that group. That’s what your heart should break for IMO
By CPalmer (111), Southampton on Jun 25, 19 3:05 PM
My heart should break based on your experience?
By Fore1gnBornHBgrown (8048), HAMPTON BAYS on Jun 25, 19 3:11 PM
Dump Fred Thiele

way too many hand outs...
By Local247 (36), Southampton on Jun 25, 19 3:07 PM
Another tax that will never go away. Just like the re-direction of the CPF. So much for letting the market dictate. Anything to get more money. Too many pet projects that become law and stay around forever.
By The Real World (368), southampton on Jun 25, 19 4:06 PM
1 member liked this comment
Wealth distribution continues in NY State
By even flow (990), East Hampton on Jun 25, 19 5:32 PM
If you've read Thomas Piketty, you'd know the "redistribution" in the last forty years has gone in one direction. It has gone "up", not "down".

The "wealthy" are FAR more advantaged when it comes to co-opting government to entrench their social position and fortune. Oligarchy and plutocracy are not fanciful, nor fantasy. They are quite extant in the modern United States. We have lost dynamism in our economy, and if you need some small shred of proof just digest that in 1982 4.4% of the ...more
By Mr. Z (11674), North Sea on Jun 30, 19 9:53 AM
Every time I manage to straighten up a little bit our useless politicians bend me back over.
By bird (824), Sag Harbor on Jun 25, 19 8:51 PM
No one helped me buy a house. I worked my @$$ off two jobs and saved and saved. The American dream is not guaranteed.Go to work. If your job doesn't pay enough, find another one. House cleaners make $25 cash/hour. A good side hustle. Another tax is going to slow down the main economic engine of the east end and that is selling real estate. Everyone out here works for real estate. Landscapers Carpenters, Restaraunts etc. We are all in with both feet. Plenty of affordable houses in Flanders, Hampton ...more
By North Sea Citizen (564), North Sea on Jun 27, 19 6:27 AM
2 members liked this comment
Another moronic excuse to raise taxes. We moved to Southampton 5 years ago and with the transfer tax as it was, we barely scraped through. Even the slightest increase would have kept us out. This is a bad law and an unfair tax.
By jediscuba (71), Suthampton on Jun 27, 19 11:29 AM
2 members liked this comment
Perhaps your focus on the "unfair" should focus more on the rent seekers who manipulate government for their own ends. Ergo, your focus on government instead of those who mold it to suit their own fortune is where you should turn your pitchfork.
By Mr. Z (11674), North Sea on Jun 30, 19 10:30 AM
Keep taxing the h*** out of everyone
By chief1 (2788), southampton on Jun 28, 19 10:12 PM
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