Fred Thiele, the State Assembly member from Sag Harbor, has released the latest revenue figures for the East End’s Community Preservation Fund and they are troubling.
For the first six months of 2019, the CPF took in $38.23 million, a 23.8 percent drop from last year’s first-half haul of $50.17 million. The CPF is funded by a real estate transfer tax of 2 percent on sales in the towns of Southampton, East Hampton, Riverhead, Shelter Island and Southold.The decline in CPF means less farmland protected, less open space preserved and fewer water-quality improvement projects undertaken. But the canary-in-a-coal-mine aspect of this also is troubling.
Reduced revenues means reduced home sales, and the CPF has now registered six straight months of declining revenue compared to 2018 totals. Thiele, who has spoken to real estate attorneys and brokers across the East End, said the consensus is that blame falls on the new $10,000 cap on the federal deduction for state and local income taxes (SALT) and a reduction in the mortgage interest deductible limit from $1 million to $750,000 went into effect in 2018.
“I don’t think there’s any question that changes in the federal tax code, SALT in particular, and also the cap on mortgage interest, but primarily SALT, I think that was the trigger that basically caused buyers to think twice about continuing to pay prices that were on the upswing,” Thiele told the Point.
Thiele said the downturn, which began toward the end of 2018, is unprecedented. “The rule of thumb was always if you had a good stock market, people took their bonuses and capital gains and put it into real estate,” he said. “It’s almost automatic, and this almost defies that trend which is basically decades old.”
Thiele said that June was a relative bright spot, with its $8.8 million in revenue closer to normal, and while he cautions against making too much of one figure, he does wonder whether sellers are recalibrating and “getting a little more realistic with their prices.”
“I’m not saying this is over,” Thiele said, “but there are some signs of life out there.”