New York State Assemblyman Fred Thiele has introduced new legislation in the State Assembly that would authorize the Towns of East Hampton, Southampton, Riverhead, Shelter Island, and Southold to establish Community Housing Revolving Loan Funds to provide loans for first -time homebuyers up to 50 percent of the purchase price.
The Fund would be financed by a ½ percent surcharge on the existing regional real estate transfer tax.
On the South Fork and Shelter Island, sales of $1 million or less would be exempt from the tax. On the North Fork, sales of $750,000 or less would be exempt.
Under the state legislation, the establishment of such a fund would require the adoption of a local law by the town boards, subject to mandatory referenda, as was the case with the Peconic Bay Regional Community Preservation Fund real estate transfer tax, which Mr. Thiele authored.
The text of the legislation, A.9541, is online here.
“The demand for luxury and seasonal housing has driven housing costs beyond the reach of most moderate income and working class local residents,” says Mr. Thiele. “We are losing the most precious resource that makes our communities special. Many residents, including young families who are educated in our local schools, are leaving the area for places with more affordable housing costs. The adverse impact on our communities is severe. Local employers are having difficulty hiring and retaining employees. Local volunteer emergency services agencies are experiencing difficulty in recruitment and retention of volunteers. Schools are experiencing declining enrollments. Traffic congestion is intensified by the importation of labor from areas with lower housing costs.”
Mr. Thiele’s office estimates the Fund could generate up to $20 million annually.
Under the proposed bill, to be eligible for a loan, an applicant would have to be a resident of the town or employed in the town where they are seeking to buy a home.
Income eligibility for a loan would be the same as existing state loan programs (currently $132,960 for a 1 or 2 person household and $155,120 for a household of 3 or more). There would also be a limitation on purchase price of the home at 150 percent of the purchase price limits under existing state loan programs (currently $878,565 for a one family home).
Re-payment of the loan would be due upon the re-sale of the home. The amount of the re-payment would be the original amount of the loan plus a proportional share of any gain from the re-sale (for example, if the Fund financed 25 percent of the original purchase price, and the home was re-sold at a gain of $200,000, the homeowner would re-pay the Fund the amount of the loan plus $50,000). Repayments would be returned to the Fund to assist other first-time homebuyers.
The towns could also use money from the fund to provide housing counseling to first-time homebuyers.
Mr. Thiele added that the affordability gap on the East End will worsen in the coming years.
“In 2017, the median price of a home in the Hamptons increased by 7.6 percent to $995,000,” he said. “Changes in federal tax law have capped the federal tax deduction at $10,000 for state and local taxes. It also sets a $750,000 cap on mortgage debt eligible for interest deductions. While other tax benefits for the wealthy should not inhibit the demand for luxury and seasonal homes, the loss of these deductions will make it harder for first-time homebuyers to enter the market. Also, the popularity of home-sharing services, such as Airbnb, is also depleting the inventory of homes available for both renters and first-time homebuyers. Many factors are at work to reduce affordability. With the environmental constraints of the East End, we are not going to build our way out of this problem. Instead, we need to have a tool that brings the existing housing stock within the financial reach of middle class and working class East Enders. We cannot survive as balanced communities without a range of housing opportunities that includes the middle class.”
Mr. Thiele emphasized that the new bill is a study bill at this point.
“It is my intent to meet with the towns and all stakeholders in the coming weeks and months to gain as much public input as possible. I will incorporate that input into final legislation before any action is taken in Albany.”