Judging from the absence of opposition, a major new affordable housing initiative should go into effect at the beginning of next year. A referendum on ballots in the election that concludes on Nov. 8 will ask voters to authorize a new half-percent real estate sales tax to be used to bolster the housing stock in the respective East End towns. While many aspects of its implementation remain to be resolved under real-world conditions, the money from the tax will incrementally ease the crisis-level lack of houses and apartments for the region’s work force.
Prospects for the proposition vary by town. In East Hampton and Southampton and probably Southold, it is expected to pass. In Riverhead, where there are still modestly priced rentals and properties to be found, approval is not assured. And on Shelter Island, a well-funded pushback effort from a handful of residents makes the housing fund there a coin toss.
The half-percent tax will apply to real estate sales above $400,000. First-time homebuyers will be exempt. On sales above $2 million, the tax will be applied to the entire purchase price. The buyer in a hypothetical $1 million deal would pay an extra $3,000, for example, one half of 1 percent of the $600,000 remaining above the $400,000 floor. This would be on top of the 2-percent community preservation fund transfer tax, closing costs, and other fees. For a $4 million house buyer, the tax would add $40,000. An estimated $17 million would have been collected in East Hampton Town in 2021, had the housing tax been in effect, officials here said. Once in hand, the money could be used in a fairly broad variety of ways.
The new community housing fund would pay for town-led and public-private undertakings, including buying land and existing buildings. Money could be used for renovations and conversions. For would-be buyers, down payment assistance might be available. For existing property owners, there could be loans to help pay to construct apartments or freestanding price-capped rental units. Business owners might also be able to turn to the fund directly for loans to create housing for employees. Money could also pay for financial counseling on the many complex housing questions facing residents and builders.
The plan is not without its concerns. Like the community preservation fund, spending authority would belong to the town boards, which could create an unwelcome opportunity to repay favors and steer projects to friends. Under the proposal, each town would have to set up an advisory committee to make recommendations. As also with the preservation fund, the public would have opportunities to be heard before town board members voted. But these are an inadequate safeguard, and a less overtly political process would provide greater confidence. Housing expenditures could require planning board approval, for example; community preservation fund negotiations are overly secretive, sometimes raising questions about their wisdom or whether the towns were getting a good deal or being fleeced.
Potential pitfalls aside, it makes sense for the towns to begin collecting the housing tax as soon as possible. Keeping a sharp eye on the spending side as the procedural bugs are worked out will be essential. Nonetheless, there are more reasons for voters to approve the proposal than not.