The real estate marketplace at Zillow.com reports that the median home price in Baltimore is a shade more than $123,000. Baltimore home values have increased by almost 5% in 2017 and will likely continue to increase in 2018. Baltimore rents are increasing at a similar rate.
Perhaps as an expression of their concern over the effects of these price increases on first-time home buyers and the City’s lower-income residents, the Baltimore City Council recently proposed to increase taxes on property transfers within the City limits, and to use the extra revenues generated by those increases to fund its affordable housing program.
The Baltimore tax attorneys at Rosenberg Martin Greenberg are following this proposal as it goes up for debate in early 2018.
How the Proposed Property Tax Transfer Increase Will Work
Home buyers in Baltimore currently pay a recording fee of $5.00 on every $500 of the price of a house that is purchased within the Baltimore City limits. The City Council’s proposal, if enacted, would raise this recording fee to $6.00. At the current $5.00 level, a home buyer that is purchasing a $100,000 house pays a recording fee of $1,000. With the proposed increase, that buyer would pay $1,200, and the extra $200 would be deposited into the City’s Affordable Housing Trust Fund.
Likewise, a buyer currently pays a transfer tax of 1.5% on the purchase price of the home. The City Council’s proposal would increase this to 1.75%. The transfer tax on that $100,000 home would therefore increase from $1,500 to $1,750, and the extra $250 would also be deposited in the Trust Fund. The City anticipates that it would collect an aggregate of $10 million for the Trust Fund every year if these increases are adopted.
Baltimore’s Prior Efforts to Provide Affordable Housing
Like many urban centers, Baltimore has struggled to provide solutions to market forces that drive up house purchase and rental prices within its City limits. Baltimore had previously enacted regulations that require developers to make at least 20 per cent of their new housing construction more affordable for lower-income families. Those regulations, however, required the City to compensate developers for that housing, but the City did not raise an adequate amount of funding for that compensation. As a result, Baltimore granted waivers to many developers, and fewer than 40 lower-income housing units have been built in the City since the regulations were enacted.
The new recording fee and transfer tax proposal seeks to add new revenues that the Affordable Housing Trust Fund will issue as loans or grants for the construction of affordable housing. Most or all of that housing will be reserved for the large number of City residents who currently pay more than one third, and in many cases more than half of their total income for rent.
Baltimore Joins the Many Other Cities Looking for Affordable Housing Answers
The City Council’s proposal joins a growing chorus of affordable housing solutions that are being tried in cities across the country. Cities expect to see the demand for affordable housing grow by more than 4.5 million units within the next 15 years. Denver, which is in the midst of a severe housing crisis, has imposed a new property tax increase and hopes to use that increase to raise more than $150 million for affordable housing in the next ten years. Cleveland and Minneapolis have supported mixed-use real estate developments with low-income units. Philadelphia is partnering with developers to renovate older distressed housing complexes.
Baltimore is not limiting its efforts to recording fee and transfer tax increases. The City is also considering whether to extend the type of tax increment financing (“TIF”) that revitalized the City’s waterfront into community housing development. The TIF proposal would dedicate a portion of the property taxes raised from new developments to pay for the financing for those developments.
Contact the Baltimore Tax Lawyers at Rosenberg Martin Greenberg Today
Rosenberg Martin Greenberg’s tax lawyers advise their clients on all aspects of tax law that might affect their personal or corporate financial positions, including income and capital gains tax matters, estate tax issues, and property transfer tax costs and fees. Our attorneys stay abreast of all national, state, and local tax laws and regulations that might affect our client’s financial position. Please contact us for answers to your tax questions or for more information on any tax law developments that might cross your desk.
Additional “Baltimore Property Tax Increase” Resources:
- Zillow.com, Baltimore Home Prices & Values. https://www.zillow.com/baltimore-md/home-values/
- Curbed.com, Solving Affordable Housing: Creative Solutions Around the U.S. https://www.curbed.com/2017/7/25/16020648/affordable-housing-apartment-urban-development