Affordable Housing Rears Its Ugly Head

I haven’t heard much about “affordable housing” in the transportation debate, but it’s been lurking there in the background. One of the mechanisms the state Senate proposes to employ to raise $1 billion a year for new transportation expenditures is a tax on real estate transactions. In an earlier post in this blog, I noted that it made absolutely no sense to tax real estate transactions in order to fund transportation projects — there was no rational nexus between those who paid the tax and those who benefited from the expenditure.

It’s nice to see that someone else fails to see the common sense in the proposal. Del. Rosalyn Dance, D-Petersburg, has spoken out against a version of the tax now being considered in the House of Delegates. In prepared remarks, she said on the House floor:

Affordable housing is essential for all Virginians. Affordability of housing diminishes each time another tax or fee is added to the homeowner’s bill. And, as all of you can attest, many of us are seeing our assessments going through the roof!

During this last election cycle, all the candidates for Governor recognized this when they proposed to protect homeowners from real estate tax bills — some of which have doubled for many Virginians in the past five years.

I hope many of you will agree with me that home equity is the single greatest source of retirement savings for most homeowners.

Real estate and grantor taxes leave Virginia’s seniors with less money in their retirement to pay for skyrocketing health care and other costs.

I hear people talking about how this tax is only a few hundred dollars — but to my constituents in Petersburg and to many of yours across the Commonwealth — a few hundred dollars is real money.

Virginia Commonwealth University Political Science Professor Robert D. Holsworth was right this last election cycle when he observed in the Washington Post that, “Virginia is on the verge of a property tax revolt in many localities…”

… Our friends in the Senate propose a plan which will require property owners to pay almost 50% more in real estate taxes in the year they sell their property.

Encouraging homeownership is really encouraging the American Dream, Mr. Speaker. This is the time when we are all going to make some difficult choices, but I encourage the conferees and the House to oppose any fee that will be a barrier to Virginians wishing to own their homes.


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8 responses to “Affordable Housing Rears Its Ugly Head”

  1. Ray Hyde Avatar
    Ray Hyde

    Strangely enough, I don’t have a problem with this. It is not a tax on the property but on real estate transactions. If we are going to tax labor on auto repairs, why not tax labor on real estate transactions, or indeed, services of all kinds?

    If we elect to tax only income and sales, we could eliminate the tax on property and seniors would be free to accumulate ALL the equity in their home until such time as they sell it. At that time time only the net profit after buying their (smaller) retirement home would be taxed. If they stay in their home they would not have to worry about soaring assessments.

    The mere fact that assessment or other rate caps have even been mentioned suggests that even lawmakers are smart enough to realize there is no connection between real estate taxes and ability to pay. And special reduced rates for seniors in some counties are another form of recognition.

    If we recognize this, it is only a step to realize that not only seniors are trapped in this disconnect, but everyone who is stable enough to have remained in one location for many years, but with relatively fixed income.

    Taxes on property itself are what affect housing affordability, not so much taxes on the transaction. Taxes on the property hurt year after year, and frequently at accelerating rates. Not only do they punish savings, industry and thrift, but stability as well.

    If there is no rational nexus between those who pay the tax and those who benefit from the expenditure, then why do we insist that new homes pay enormous proffers? Couldn’t you make the same argument? You see, there is an incidental side effect of taxing only income and sales: if you tax only income and sales, if you eliminate all the nickle and dime stuff, then we can stop arguing the idea that “Those that benefit should pay”.

    If we did that, we could eliminate a lot of arguing about who pays and put more focus on just what it is we are buying.

  2. Connecting land use to transportation? Why not?

    By the way, it would be nice if local cdc’s like ohhic.org could get more support to build quality affordable housing in partnership with the neighborhoods and clients.

  3. Anonymous Avatar
    Anonymous

    A developer who turns raw land into a hundred and fifty new $350,000 homes will pay substantial grantors tax as they sell. No nexus? Oh yeah there is.

  4. Ray Hyde Avatar
    Ray Hyde

    But Jim pointed out there is a problem here. Are we going to charge land users for transportation, or transportation users for land use, or both?

    Isn’t part of the problem we have with land use now, that residential areas only pay 80% of what they cost? If that’s the case, then why are we proposing only that new construction pay? Maybe new construction should pay, but everybody should be paying more, in which case the charges to new construction might not be so high. After all, this post is about affordable housing, no?

  5. Anonymous Avatar
    Anonymous

    Sure there’s a nexus between development and transportation, but the budget deal of 2004 increased the recordation tax and now the Senate wants to increase the grantors tax. Why not dedicate the last increase to transportation since there’s a surplus and give the Governor and the Senate the “dedicated stream of revenue” they crave?

  6. NOVA Scout Avatar
    NOVA Scout

    excellent comment and thread. I keep thinking that some brave souls in Richmond (oops – already I’m sounding a bit silly) will be willing to review the entire concept of ad valorem taxation, at least on big ticket items like homes. There may have been a time when such taxation had benign effects. But we are generally in an era where home values move so out of phase with personal income that inequities occur. The absolute burden is not often that oppressive – a few hundered dollars per year despite immense gains in assessed value. But the concept is flawed and truly fixed income homeowners (retirees, for expample) can get squeezed in homes they have owned for decades. Of course, the revenue most probably have to be made up in income taxes, a prospect that gives the vapors to our gallant band of legislators, and the mechanics of getting the revenue to local governments without it leaking out all over Richmond is a daunting challenge. But the time really has come to look seriously at this.

  7. NOVA Scout Avatar
    NOVA Scout

    Similar praise are due the adjacent (preceding) post and comments. This is Bacon’s Rebellion at its best.

  8. Anonymous Avatar
    Anonymous

    Sure, that’s pretty fair: squeeze them out on assessments and then charge them a tax for leaving.

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