The high cost of real estate in the District has been an impediment to many potential homebuyers, especially millennials. But now some D.C. Council members are hoping to make home ownership a little more affordable by reducing some taxes buyers pay when they record a property with the city.
Earlier this month, the council’s Finance and Revenue Committee discussed the possibility of lowering the transfer and recordation tax for home sales over $400,000. Supporters of the proposal say it could help spur some young renters into becoming buyers.
Currently, the transfer and recordation tax for a home priced above $400,000 is 1.45 percent — the highest in the metropolitan area. Homes that are listed at $399,999 or less are subject to a tax of 1.1 percent.
Council members Jack Evans (D-Ward 2) and David Grosso (I-At Large), who co-introduced the bill last year, said they were hopeful that the recordation tax could be brought down to 1.1 percent across the board. “The recordation tax for homes above $400,000 was raised during a financial crisis the city had, but I can’t remember why we haven’t lowered it since the crisis ended,” said Evans, who chairs the Finance and Revenue Committee. “It should have come down again.”
The median owner-occupied home price in 2013 for the District was $445,200, according to U.S. census data.
Transfer and recordation taxes are taxes imposed by a city or state to record the deed of sale or a mortgage on a home. Often the tax goes to the city or state treasury, which is why the tax was raised during a financial crisis.
According to the DC Association of Realtors (DCAR), the District has the second highest recordation tax in the country, surpassed only by Manhattan. Many real estate agents testifying in favor of the bill said it would help people afford now pricey areas in the city, such as U Street corridor in Ward 1.
“Creating these tax benefits for homebuyers in D.C. would have a profound effect on the real estate in Ward 1,” said Bonnie Roberts-Burke, an agent who lives and sells properties in the area. “The area is too expensive for people I like to call the ‘save the world people.’ The people who run nonprofits and are in the middle class.”
However, some members of the community have concerns. Council member Elissa Silverman (I-At Large) agreed with the intent of the bill, according to her opening statement, but stopped short of supporting it. She referenced a New York Times article that asserted that many people in that city purchased houses, not because of the tax incentive in place, but because they were going to anyway.
Similar questions were raised by Elizabeth Falcon, who testified on behalf of the Coalition for Nonprofit Housing and Economic Development (CNHED). She reiterated that the recordation tax was used to help the Housing Production Trust Fund (HPTF) create affordable housing throughout all eight wards in the city. However, Mayor Muriel Bowser (D) has promised $100 million to the fund in fiscal year 2016.
“We need to focus on the spectrum of housing in the city,” said Ed Krauze, chief executive of DCAR. “We have worked with HPTF to make sure lower-end housing is available, but it is time we get people who live in apartments in the city to move into homes in the city. This bill is the first step to make us competitive with our Maryland and Virginia neighbors.”
Only 42 to 44 percent of residents in D.C. are homeowners, said Krauze.
Evans and Grosso are finalizing the bill, and are working to finish it before the budget for fiscal 2016 is complete.