Albany – January 22, 2008 – Gov. Eliot Spitzer’s budget proposal sends mixed messages to thousands of New Yorkers who will be seeking to achieve the American Dream of homeownership in 2008 and beyond. While the governor has said he wants to increase homeownership in our state and keep New Yorkers from fleeing the Empire State for less expensive environs, we are concerned that the tax proposals released today will have the opposite effect.
As reported by MSNBC just a few weeks ago, New York State has the highest closing costs in the nation. These present an often insurmountable barrier to young families and individuals who want to own their own homes. In his 2008-09 budget proposal, Governor Spitzer calls for increases to these closing costs through higher transfer tax and mortgage recording taxes.
Under his plan, the real property transfer fee will rise from $75 to a price-based assessment that could reach $400 for residential properties. Given that statewide median sales in November was $215,000, most homeowners can expect to be paying more at the closing table under this proposal.
In an attempt to help local governments, Governor Spitzer’s budget would allow local governments the option of increasing the mortgage recording tax. Increasing the cost to purchase a home as a way to aid local government spending is a short-sighted approach to providing aid to municipalities. Giving localities the option of increasing the mortgage recording tax will do further damage to an already struggling housing market leading to loss in ancillary tax revenues.
The mortgage recording tax penalizes most those who can afford it the least. A working family that scrimps and saves to be able to put 10 percent down on their new home pays a heavier tax levy than the wealthy family that is able to put down 50 percent. This is a fundamentally inequitable tax. Only in New York would we tax someone for the privilege of taking on the debt of a mortgage.
Regressive taxes such as these will keep many of our families from buying the home of their dreams in New York State, and have them seeking more affordable options beyond our borders. Our current tax structure effectively puts the brakes on one of our state’s leading economic engines. Not only does our economy benefit from the sale of a home, but also the multiplier effect of a new homeowner in the community.
Today, we know many hardworking New Yorkers in professions such as teaching, law enforcement and other public service jobs cannot afford to live in the very communities they serve. And, many others cannot afford to own a home of their own because of unnecessary barriers raised by high closing costs and limited affordable housing programs.
We applaud the governor for his vision in the area of affordable housing. He has proposed a strong start to addressing this issue through his proposal to allocate $100 million for the development and rehabilitation of affordable, workforce housing initiatives across upstate New York. We also support his plan for an additional $300 million would be dedicated to downstate housing needs including supportive, affordable and workforce housing.
We applaud the governor for his leadership in exploring ways to reduce property taxes, which will ultimately help struggling New Yorkers remain in their own homes. It is our hope that the bipartisan Property Tax Commission will identify reforms that address the root causes of unsustainable property tax increases. Our ever-increasing property taxes create an additional barrier to those who wish to own a home, and make our state unattractive to businesses that would seek to relocate here. It is time to make the current tax relief system fairer for middle class taxpayers, and it is well past the time to create a fair and effective school tax cap.
New York’s REALTORS® urge the governor and Legislature to focus their attention on providing more incentives to homeownership, such as these proposals and the NYSAR supported First-Time Homebuyer bill, not on reinforcing the barriers to homeownership.
Editor’s Note: The New York State Association of REALTORS® is a not-for-profit trade organization representing more than 66,000 of New York state’s real estate professionals. The term REALTOR® is a registered trademark, which identifies real estate professionals who subscribe to a strict code of ethics as members of the National Association of REALTORS®. These REALTORS® are also members of the New York State Association of REALTORS® as well as their local board or association of REALTORS®.