Gov. Kathy Hochul has signed into law a bill that will allow a new real estate sales tax to fund affordable housing programs in the five East End towns.
The Peconic Bay region community housing act, co-sponsored by Assemb. Fred Thiele Jr. (I-Sag Harbor) and state Sen. Anthony Palumbo (R-New Suffolk), would levy an additional half-percent real estate transfer tax.
Voters in the five East End towns — East Hampton, Shelter Island, Southampton, Southold and Riverhead — will still have to approve ballot measures to enact the tax for their towns.
Variations of the bill have been floated since 2003, but the initiative did not gain momentum until Democrats took over the Senate in 2019, Thiele said. A similar bill passed both houses in 2019 but was vetoed by former Gov. Andrew M. Cuomo, who cited its impact on taxes. Hochul signed the bill into law on Friday.
"We had made a lot of progress in the last couple of years," Thiele said. "And this year all the stars lined up, so we're pretty excited."
A representative from Hochul’s office could not immediately be reached for comment.
The legislation mirrors and would supplement the existing Community Preservation Fund, a 2% tax on real estate transfers used for preservation and water quality initiatives. It also increases exemptions of the tax for those buying at the lower end of the market, resulting in a net tax decrease for some.
The new law requires each town to complete a community housing plan, essentially outlining what kind of programs the money would fund. Thiele said town officials have expressed interest in plans to provide down payment assistance to first-time homebuyers, but it also could fund new affordable housing developments and other programs.
"They have very broad authority," Thiele said. "The goal isn’t just to build new housing, but to make existing housing more affordable."
Affordable housing has long been an issue on East End, where many residents find it difficult to afford homes. The law notes that 40% of the East End housing inventory is seasonal rentals and officials say the pandemic-driven real estate boom has worsened the housing problem.
If the new tax had been enacted in 2020 it could have generated $30 million for housing, with the majority of new revenue coming from home sales of $2 million or more, Thiele said.
The proposed state legislation also would increase exemptions and reduce the tax for all transfers under $1 million on the South Fork and Shelter Island, and for those under $400,000 on the North Fork, Thiele said.
Thiele noted the bill has broad local backing as evidenced by a letter recently sent to the governor in support of the bill signed by more than 30 elected officials and community and advocacy groups.
"The lack of sufficient affordable housing options is a significant issue in our region and has negatively impacted the ability of businesses on the East End to attract and retain workers," Long Island Association president Matthew Cohen said in a separate letter to Hochul. "This legislation could result in more housing options for residents, help businesses with their hiring challenges and could also alleviate the issue of illegal housing."