New Real Estate Fee Would Aid First-Time Homebuyers

State Assemblyman Fred W. Thiele Jr. has introduced legislation to help make housing more affordable for low and moderate-income residents of East Hampton, Southampton, Shelter Island, Riverhead, and Southold by establishing a fund to provide loans to first-time homebuyers.

Money for the fund would be generated by adding a half-percent surcharge to the region’s real estate transfer tax — the same levy that currently replenishes the community preservation fund. Houses valued at $1 million or less on the South Fork and Shelter Island would be exempt from the tax, and those valued at $750,000 or less would be exempt on the North Fork.

“After the recession, and with the housing market going up, the affordability gap has grown substantially over the last three or four years,” said Mr. Thiele this week. “This has been one of the biggest problems that’s defied a solution for many, many years.” 

Mr. Thiele’s bill lays out the range of negative consequences caused by the lack of affordable housing, from residents being forced to live in overcrowded conditions to the traffic congestion caused by the so-called “trade parade,” in which much of the area’s labor force commutes between East End worksites and their residences farther west, where housing is more affordable.

Mr. Thiele emphasized that his proposal is a study bill and has a long way to go before becoming serious legislation. And even if the bill is enacted, the East End town boards would still need to formally adopt the measure, which would then be subject to a mandatory voter referendum.

Still, a considerable amount of research has been done to substantiate the effort. For instance, Mr. Thiele estimates that the half-percent surcharge would generate about $15 million to $20 million a year, predominantly from house sales in Southampton and East Hampton. That money would then be used to provide loans for first-time homebuyers for up to 50 percent of the purchase price. 

Eligible applicants would have to be either a resident of or an employee in the towns. Income eligibility requirements would also be in place (the cap in the current version of the legislation is $132,960 for a one or two-person household and $155,120 for a household of three or more), as would a limit on the purchase price of a house. The loan would come due upon resale of the property, with the amount of the loan — plus a share of any financial gain from the resale — coming out of the proceeds and going back into the fund. 

“With the environmental constraints of the East End, we are not going to build our way out of this problem,” said Mr. Thiele, in a statement announcing the proposal. “Instead, we need to have a tool that brings the existing housing stock within the financial reach of middle class and working class East Enders.”

Mr. Thiele has a long history of crafting legislation designed to help middle-income homebuyers — including his 2006 “McMansion bill,” which proposed establishing a loan fund by charging a $10-per-square-foot fee on residential houses that exceeded 3,000 square feet — but to no avail. This time, he believes, the economic and political climates make getting something done far more feasible. “The landscape has changed, because of the federal tax act, which will make buying a first home even more difficult,” he said, referring to the bill signed by President Trump in December. “Plus, the tax act will help the wealthy and then put more pressure on the luxury market.”

The opposition to his previous attempts, said Mr. Thiele, mostly came from state lobbyists for the real estate and building industries, but that local builders and brokers recognized the benefits of making the East End affordable for all. “Everyone needs the volunteer fire department and the stores on main street and people who work in the hospital,” he said. “And I would argue that the thing that makes East Hampton and Southampton special isn’t just the historic places or the bays and beaches, it’s also the sense of community we have here.”

None of three East End real estate professionals contacted by The Star agreed to share their opinions on the proposed legislation, but Mitchell Pally, the chief executive officer of the Long Island Builders Institute, offered a mixed assessment. Solving the affordable-housing crisis, said Mr. Pally, can be done only by increasing the supply of homes, not just reducing their cost. “You have to solve both problems at the same time,” said Mr. Pally, who noted that the institute’s board had not yet taken an official position on Mr. Thiele’s bill. “We would hope that the funds could also be used to buy land to build housing units on.” 

Mr. Thiele said that over the next few months, he will be meeting with people from each of the towns, including builders and real estate professionals, looking to build “a coalition of support.” 

One element Mr. Thiele believes will help bond the coalition together: a universal dislike of traffic. “People being able to live and work in the same community will ease the traffic congestion,” Mr. Thiele said. “And no matter how big your house is, you still have to deal with traffic.”