Brian O'Neill: Somebody’s going to pay for affordable housing
September 25, 2016 12:00 AM
Associated Press file photo
By Brian O'Neill / Pittsburgh Post-Gazette
City Council is considering a plan to make housing more affordable by making it more expensive to buy a house.
You don’t have to be a real estate agent to think that odd, but one slipped a flyer through my mail slot decrying this proposed increase in the realty transfer tax from 4 to 5 percent.
That would raise $9 million a year, proponents say, to create an affordable housing trust fund. They want it because the city is short about 17,000 homes affordable enough for the working poor, those who earn too much to qualify for subsidy but too little to buy a home. There are more than 700 similar funds across the country.
“I think the conversation became a lot more real when people started getting pushed out of East Liberty,” Mark Masterson, executive director of the Northside Community Development Fund and a member of the Affordable Housing Task Force, said.
No Realtors were on that task force. Charlene Haislip, president-elect of the Realtors Association of Metropolitan Pittsburgh, said her group agrees something needs to be done to keep housing affordable — but this isn’t the way.
This proposal would slap an extra $1,000 on every $100,000 sale, an expense split between the buyer and the seller.
Now $500 or even a few thousand dollars won’t necessarily make or break a sale. Haggling makes prices swing far more than that all the time. But big swings are mostly at the higher end. Many a first-time home buyer has trouble just coming up with a down payment and closing costs.
Mr. Masterson said this tax won’t be nearly the hurdle that the real estate agent’s 7 percent commission is. On the median price of a home in Pittsburgh — $114,600, according to Zillow — the buyer’s share of this proposed fee increase would be $573. Roll that into a 30-year mortgage at 4 percent and the cost per month is $2.74, he figures.
“Nobody’s not doing a deal in Pittsburgh because of a 1 percent realty transfer tax,” Mr. Masterson said.
Ms. Haislip said first-time home buyers aren’t necessarily allowed to roll those costs into the mortgage, particularly if they can only afford a small down payment.
“It’s more money you’re going to have to bring to the table,” she said. Those added costs might persuade more people to look just over the line in the suburbs, she said.
City Councilman Dan Lavelle of the Hill District, who co-chaired the housing task force with Planning Director Ray Gastil, understands the concern about higher closing costs, but this fund can help there. If a person qualifies for assistance in buying a home — and individuals making up to $39,900 and four-person families making up to $56,950 currently would — they might qualify for a grant to help with closing costs.
The fund’s other missions include preventing foreclosures, rental assistance, helping senior citizens stay in their homes by fixing the roof or furnace, and producing more affordable housing. It would make grants to developers to the cover the gap between the cost of construction and what they need to make back if they rent to the working poor.
Half the money in the fund would be targeted toward assistance for those earning up to 30 percent of the median income — $14,950 for individuals and $24,300 for four-person families — and another quarter of the money would go to those at the 50 percent level: $24,950 and $35,600 in the same two cases. The final quarter would assist homebuyers who can make up to 80 percent of the median.
“It’s necessary now,” Mr. Lavelle said. “In parts of the city people, are being pushed out because of the rising costs. We have to ensure that our housing stock matches the income levels. This has to be a city for all.”
Zillow says the city’s median valuation has gone up nearly 12 percent in just the past year.
The task force turned to the realty tax after rejecting other ideas, such as half-mill increase in property taxes. But one of the most intriguing — and least believable — aspects of this proposal is that the tax might drop back down someday.
Mr. Lavelle said he’d be open to including in the legislation, in a vote expected to happen before the end of the year, a kind of sunset clause. As tax increment financing deals for past developments expire, those additional taxes could go to this housing fund rather than the general fund. Likewise, a portion of the payments in lieu of taxes that the city has been trying to wrest from the hospitals and universities could be directed there.
That legislative language would need to be explicit. Nobody believes taxes ever go away. We know money has to come from somewhere, and nobody wants to be Mr. or Ms. Somewhere.
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