The Town’s new Community Housing Fund Advisory Board is preparing for a referendum on a half-percent transfer tax to support housing programs here.
Liz Hanley, newly-appointed CHFAB chair, presented information to the Town Board on Tuesday about the committee’s goals for its inaugural year. A primary focus is to educate voters about the Peconic Bay Region Community Housing Fund Act.
This recently-enacted state law calls upon voters in the five East End towns to decide whether to approve a half-percent real estate transfer tax to fund Community Housing in their towns.
The question will be on the ballot in this fall’s general election, and the outcome in each town impacts just that town.
Shifting exemptions to offset transfer tax
If voters approve the initiative, the Town gains potential revenue for Community Housing, and individuals buying homes at $1 million or less save on transfer tax costs.
That’s because the Community Housing Fund transfer tax is in addition to the 2 percent homebuyers now pay to support the Community Preservation Fund. Our NYS Assemblyman Fred Thiele of Sag Harbor wrote both laws.
He incorporated new exemption levels for the Community Housing Fund, but only where voters approve the additional half-percent.
So here on Shelter Island, if voters reject the initiative, the Town loses potential revenue for Community Housing, and individuals buying homes at $1 million or less miss out on potential savings.
Community Housing Fund
Hanley, an accountant who also serves on the Community Housing Board, presented a slideshow with crucial points about the proposed transfer tax and its relation to the Town’s nascent housing fund.
[You can watch her presentation on the Town’s YouTube Channel, or look for it in the lineup on Channel 22.]
The Town Board is working toward establishing a Community Housing Fund. The board expects to hold a public hearing at its April 29th meeting. Once approved by a Town Board resolution, the fund becomes the repository for any monies reserved for Community Housing.
That includes the half-percent transfer tax (if voters give it the go-ahead).
Hanley said CHFAB would also be working with a consultant to create a Community Housing Plan, which the Town Board must adopt before spending the Community Housing Fund revenues, no matter the source.
“I think it’s actually a great check and balance,” Hanley said. “We can earmark, or set aside intentionally, money that we want to have for Community Housing. And then we also set it up so that any money expended has to be in service of the housing plan. It can’t be spent just willy-nilly.”
Town Attorney Stephen F. Kiely reiterated the point, saying the Town cannot “co-mingle” transfer tax proceeds with other Town revenues, but must retain them in a separate fund.
Funding the CHF
Once the Town Board establishes the Community Housing Fund (CHF), it may provide it with revenues from multiple sources, including (but not limited to):
- the half-percent transfer tax, if approved by voters
- bonds
- Town fund balances or surpluses
- proceeds from the sale or rental of Comunity Housing
- gifts
- state and federal grants
Among the many rules governing the CHF is that interest accrued by fund resources stays within the fund, Hanley said.
How exemptions work
“I’m a tax accountant, and I know when folks say ‘tax’ everyone loses their minds,” Hanley said. “So let’s look at what we’re actually talking about. How does it actually play out.”
It may seem counterintuitive to add a transfer tax when trying to make housing more accessible. But Thiele included a mechanism to shift exemptions where voters approve the new half-percent tax.
Under the current 2 percent transfer tax, the first $250,000 of a home’s value is exempt. If voters agree to another half-percent on Shelter Island, the first $400,000 of the home’s value would be exempt.
Hanley shared a chart to show transfer tax savings for buyers of homes costing less than $1 million.
| Sales Price | Current 2% transfer tax | Proposed 2.5% transfer tax |
| ($250K exemption) | ($400K exemption) | |
| $500K | $5K | $2.5K |
| $750K | $10K | $8.75K |
| $1 M | $15K | $15K |
| $2 M | $35K | $40K |
| $5 M | $95K | $125K |
| $10 M | $195K | $250K |
Based on 2020 home sales, Thiele’s office estimates that if voters approve the additional half percent, the total transfer tax would be lower for one-third of East End home purchases. And for another one-third, the transfer tax would rise by no more than $5,000, Hanley said.
“It is, obviously, an additional tax, but it’s not going to affect a lot of middle- and working-class folks,” she said. “I think it’s really important to keep in mind the actual math.”
She said CHFAB would dig deeper into the numbers. The Town plans to hire a consultant to assist in developing a formal needs assessment that would include figures specific to Shelter Island.
Community Housing Fund uses
The Town can use the CHF to:
- Assist first-time homebuyers who reside on Shelter Island or work for the Town
- Such assistance can’t exceed 50 percent of the home price
- If it is a loan, it must be repaid to the Town
- The loan amount will reduce the assessed value
- All repayment revenues go back into the fund
- Funding can be part of a public/private partnership
- Produce community housing for sale to eligible individuals
- Produce community housing in conjunction with a public/private partnership where the private partner agrees to NYS Affordable Housing guidelines and other state provisions
- Produce and maintain rental housing for eligible individuals either by the Town or in conjunction with a public/private partnership as above
- Convert existing structures for Community Housing for sale or rental to eligible individuals
- Provide housing counseling services
The Town can use CHF revenues for land acquisition, planning, engineering, construction costs, and other hard and soft costs directly related to the construction, rehabilitation, purchase, or rental of community housing.
Community Housing definitions
Early on in her presentation, Hanley sought to define Community Housing.
“When we talk about Community Housing, we actually have some caps set on that,” Hanley said.
For instance, if the Town creates housing to purchase, the price is capped and there are income limits on who is eligible to buy such homes.
As expected, some of the legal definitions are unwieldy.
For instance, Community Housing is “a primary residential property for an eligible individual that does not exceed 150 percent of the purchase price limits established by the State of New York Mortgage Agency’s (SONYMA) low-interest-rate program in non-target categories for Suffolk County in effect on the contract date for the sale of the property.”
Hanley put it plainly: If SONYMA’s limit is $719,950, our local purchase price cap is 150 percent, or $1,079,925.
Eligibility is also based on SONYMA limits. Right now, eligible individuals have a household income capped at $124,700 for 1- or 2-person households and $145,800 for 3+ person households, Hanley said.
‘Smart Growth’ principles
The Peconic Bay Region Community Housing Fund Act further specifies that towns should spend CHF monies on projects that — where practicable — adhere to certain “Smart Growth” principles.
As defined by the Environmental Protection Agency, Smart Growth “covers a range of development and conservation strategies that help protect our natural environment and make our communities more attractive, economically stronger, and socially diverse.”
Smart Growth, the EPA says, “makes efficient use of land, fully utilizes urban services and infrastructure, promotes a wide variety of transportation and housing options, permanently preserves critical natural resources, and protects architectural and environmental character through compatible, high quality, and environmentally-sensitive development. “
As East End towns develop their housing plans, they’re called upon to incorporate, where possible, these principles:
- Public Investment. Account for and minimize social, economic, and environmental costs of new development, including infrastructure costs such as transportation, water, schools, recreation, and loss of open space and agricultural land;
- Development. Encourage growth in areas where transportation, water, and sewage infrastructure are available or practical;
- Conservation. Protect, preserve, and enhance the Town’s resources, including agricultural land, forests, surface waters, groundwater, recreation, open space, scenic areas, and significant historical and archeological sites;
- Coordination. Promote coordination of state and local government decisions and cooperation among communities to work toward the most efficient, planned, and cost-effective delivery of government services by, among other means, facilitating cooperative agreements among adjacent communities and coordinating planning to ensure compatibility of one’s community development with the development of neighboring communities;
- Community design. Strengthen communities with development strategies that integrate all income and age groups and incorporate: mixed land uses, compact development, traditional neighborhood development, planned unit development, open space districts, downtown revitalization, brownfield redevelopment, enhanced beauty in public spaces, and diverse and community housing near places of employment, recreation, and commercial development;
- Transportation. Provide transportation choices, including increasing public transit and alternative modes of transportation, to reduce automobile dependency, traffic congestion, and automobile pollution;
- Consistency. Ensure predictability in building and land use codes; and
- Community Collaboration. Through a collaborative community-based effort, utilize smart growth plans that include long-term land use and permit predictability and coOrdination, efficient decision making, and planning implementation.
Other Community Housing Plan details
Under state law, a town’s Community Housing Plan will:
- Be updated every five years
- Be added to the Comprehensive Plan update
- Ensure perpetual affordability
- Provide housing opportunities in a fair manner so that no neighborhood has an undue concentration of Community Housing that would substantially alter the character of the community
Hanley said CHFAB is planning opportunities to gather public input.
“Please join us this summer as we draft our housing plan,” she said. “We want to hear from you.”
Kiely said the Town Board will review the plan and adopt it by resolution after a public hearing. The plan need not be in place prior to the public referendum on the transfer tax. However, funds cannot be expended until the plan is in place, he said.
If you’re interested in learning more about the CHFAB’s work or have input to share, contact Hanley at ehanley@shelterislandtown.gov.
