Note: The following commentary first appeared as a guest column in the Bend Bulletin.
Housing affordability for working families is near the
top of 2023 agendas for Bend and other Oregon cities that have experienced
rapidly appreciated home prices.
How to address the challenge, wherein a free market sets prices, will require
cooperation by government, nonprofit and private sectors – all of which will
benefit from strategies to improve livability of a community.
In Oregon, one of the most effective and least burdensome methods that could help fund affordable housing is—for now-- not possible. It’s called an
excise tax in some states, a transfer tax in others. Significantly,
the tax can draw revenue indexed to inflated housing prices that have created
the affordability problem, in turn serving to mitigate it.
In Oregon a state law specifically prohibits a tax on the sale of real property
unless it was enacted prior to March 31, 1997. Only Washington County, with a
tax of 0.10% of closing prices, was grandfathered under that legislation.
Oregon is one of 14 states that don’t tax the sale of real estate, according to
the recent data from the Lincoln Intitute. https://tinyurl.com/2omsj9j9
Even though state law already prohibited a transfer tax, Measure 79 passed by
voters in 2012 by an approximately 59 to 41 percent vote embedded the
prohibition in the state constitution.
According to campaign reports, by December of 2011, a year before the vote,
substantial funding to support the measure had come from from the
National Association of Realtors, which reportedly gave $735,000 and the Oregon
Association of Realtors, $332,140.
At a recent Bend Neighborhood Leadership Alliance meeting,
board members heard Bend housing director Lynne McConnell note two of the major
challenges for creating more affordable housing in the city – money and
available land.
A board member raised the question of why a transfer tax, or another measure
could not be implemented to create funds for affordable housing.
To that issue, at the meeting assistant city attorney Ian Leitheiser explained
state law and the constitutional barrier to a transfer tax.
In Leitheiser’s words, there is, “…a large well-equipped industry or two with powerful
lobbyists in the state that will squawk pretty loudly when people start talking
about transferring their bread and butter of selling real property.”
Given that the rolling median price of a Bend single family home sold in 2022
was $723,500 it’s unlikely that a transfer tax rate similar to Washington
County’s 0.10%, or $723.50 in this case, would significantly impede real estate
sales.
The tax could be paid by either buyer or seller, or shared between them. Sales
subject to the tax could also be tiered to reduce impact in lower price ranges.
The MLS of Central Oregon database shows 2022 sales in Bend of single family
homes on less than an acre $1,908,095,782. A modest transfer tax of 0.10% would
have yielded $1,908,096. The sales do not include single family homes on more
than an acre, townhomes and condos or undeveloped lots.
A local option tax for cities and counties would allow them to target
strategies for their specific needs. Provisions could require that the tax
sunset or have to be reauthorized after a defined period. Proceeds not deployed
could be returned to a housing trust fund and redistributed to qualified
projects, maybe to reduce infrastructure costs for new construction.
Funds might also be used with other sources to provide transitional shelter
opportunities for homeless populations.
A ballot initiative to repeal the Measure 79 constitutional roadblock to a transfer
tax would be a step in the right direction, while concurrently repealing the
related 1990s legislation. Perhaps the industry groups that backed the transfer
tax ban could come together to support its demise.
The financial impact on home buyers and sellers, and real estate and building
industries, would be minimal. The benefits for more affordable housing could be
substantial.
-by Lee Hicks
