There is some support for a real estate transfer tax in Oregon. Washington County already has one. I’ve done some initial research and if asked to vote on it today, would vote against. The basic theory is that when a seller sells their home, the sale would be taxed an the seller would put less money in their pocket. Money collected would go towards helping low income individuals become homeowners. I think, and have not confirmed, that Washington County’s tax simply goes into the general fund.
Portland Development Corporations lists the pros of what they term a Real Estate Transfer Fee (RETF). “Fee” is the kinder, gentler way of saying “tax.” They list no cons.
Pros of a RETF:
* Ongoing, permanent source of funding for affordable housing
* Funding flexible; could be used for services, operations and capital construction
* Nationally RETFs have raised the largest sum of ongoing revenue for housing trust funds
* RETFs raise the greatest revenue when real estate markets are hot, which is exactly when funds for affordable housing are most needed
I can think of a few cons, just sitting here with my first morning cup of coffee:
1) Eventually, everyone pays. When a landlord’s cost of doing business goes up, rents soon follow. The tax could keep someone that was just about to jump from renting to owning back into the rental market. Investors look at the short term and usually do not hold a property long enough to spread the cost over the longterm.
2) Sellers will raise their asking price to protect the net sales price. All buyers, including those who would be eligible for funds created from the program will pay more for the real estate they are trying to purchase. Buyers and sellers will fight to the bitter end over $100 on a $300,000 transaction. The tax will not go unnoticed.
3) It is not a secure source of income. Home sales have been strong and it is easy to be blinded by it. When market conditions change, fewer homes will sell and the revenue will drop. From what I can tell, the whole program rests squarely on a strong real estate market. Our market may slow but I don’t see prices dropping to a point that there is a drastic change in affordability. Revenue will drop to the program but the “problem” will not have gotten any smaller.
4) Government seems very adept at taking money generated for one idea and spending it somewhere else. If the market slows, what will support the programs created by the tax? If the program falls apart, are we just going to be paying into the general fund?
Just my two cents at the bottom of my first cup of morning cofee. There might, only might, be a place for some sort of tax regarding the housing market but I don’t see it as it is presented now. Maybe a different exepmtion for primariy residences? Overall, I am going to lean to the no new tax side when given the option.
Jack Bog’s Blog had a thread on this last year. It remains true that some clients are scared off by the higher tax rate of Multnomah County.