Realtors Oppose Plan to Raise Tax on Transfers

Legal counsel: “the main issue for the Realtors’ association is the irony of making everybody’s housing less affordable to fund affordable housing”
RISMEDIA, Jan. 18 (KRT) A plan to raise money to build affordable housing in Rhode Island by raising the tax people pay on property sales is sparking protest from local real estate agents.

The Rhode Island Five Year Strategic Housing Plan: 2006-2010, approved by the state Housing Resources Commission on Friday, seeks to create 5,000 units of affordable housing during the next five years.

The plan now goes before the state Planning Council for approval.

Among the proposals in the plan is to create a permanent financing source for affordable housing, in part by tapping into the state’s so-called real-estate transfer tax.

The tax, paid by sellers, is currently $4 per $1,000 of the sale price, said Rhode Island Association of Realtors’ legal counsel Monica Staaf. It was last raised in summer 2002, when it was $2.80 per $1,000.

At the current rate, a $300,000 sale would generate a transfer tax of $1,200.

There is no dollar amount for the tax increase in the plan, said Staaf. But any increase, she said, would send the wrong message.

“The main issue for the Realtors’ association is the irony of making everybody’s housing less affordable to fund affordable housing,” said Staaf. “It just doesn’t make any sense.”

Among those who would be hurt by raising the transfer tax, said Staaf, are people who live in housing that “those of us in the private network” think of as affordable: condos and multifamily houses.

“The state has a very narrow definition of what affordable housing is,” she said. “The message that you’re sending is: if you don’t live in subsidized housing, we don’t care (what) your housing costs.”

If Rhode Island is committed to financing construction of more affordable housing, said Staaf, the state should take the money from its general fund or float bonds.

In addition to raising the transfer tax, the plan calls for a $75-million bond issue for housing, removal of regulatory barriers that hamper development of affordable housing and assisting towns in implementing the housing plan, said Ari Matusiak, acting director of HousingWorks Rhode Island, a coalition of nonprofits, business groups and philanthropic organizations.

HousingWorks, which is a member of the state Housing Commission, voted in favor of the five-year plan.

“Rhode Island has one of the lowest per-capita expenditures on affordable housing in the country,” said Matusiak. “This is a structural investment in the economic future of our state.”

The particular issue of the transfer tax “is not our fixation,” said Matusiak. “Our fixation is the larger point.”

And part of the larger point, he said, is to create a “permanent funding stream” for affordable housing.

The Realtors association’s Staaf said that, aside from raising the transfer tax, “there actually are a number of positive recommendations in the housing plan.”

Among those Staaf pointed to were the elimination of barriers to building affordable housing, such as large-lot zoning and restrictions on multifamily housing.