Newly proposed legislation would pave the way to allow East End towns to establish a fund that would assist first-time homebuyers with up to half of the purchase price.
State Assemblyman Fred W. Thiele Jr., who represents Shelter Island Town and the towns on the South Fork, has created a study bill that would authorize the Towns of Shelter Island, Southold, Riverhead, Southampton and East Hampton, to establish a Community Housing Revolving Loan Funds.
If passed in Albany, the towns would have the ability to establish such a fund, but it would not be mandatory, Mr. Thiele said in a press release.
A half-percent surcharge on the existing regional real estate transfer tax would finance the fund.
The fund could generate up to $20 million annually between all five East End Towns, Mr. Thiele said, projecting the annual revenue at $1.25 million in Southold Town, $600,000 in Riverhead, and $425,000 in Shelter Island. Southampton and East Hampton Towns would generate the most at $12 and $6 million, respectively.
The proposal would exempt real estate transactions of $1 million or less on Shelter Island and the South Fork from the tax. On the North Fork, sales of $750,000 or less would be exempt.
On Tuesday, State Assemblyman Anthony Palumbo, who represents the Towns of Southold and Riverhead, said he supports the concept.
“It’s an interesting idea and I think we need to do all we can to help first-time homebuyers on Long Island in general and particularly on the East End, because unfortunately we’re losing young minds at an alarming rate, sadly,” he said. “Of course there’s always a concern adding any sort of additional taxes, but it’s really to help first-time homebuyers get into the market.”
“The demand for luxury and seasonal housing has driven housing costs beyond the reach of most moderate income and working class local residents,” Mr. Thiele said. “We are losing the most precious resource that makes our communities special.”
Sen. Kenneth LaValle is co-sponsoring the bill in the State Senate.
To qualify, first-time homebuyers have to live or work in the town where they are purchasing a home. Income eligibility to qualify would be the same as existing state loan programs, which is currently $132,960 for a one or two-person household and $155,120 for a household of three or more. Under those state loan programs, a home buyer could qualify on a house with a price tag up to $878,565.
Loans would be repaid when the house is resold. Re-payment would be the original amount of the loan plus a proportional share of any gain from the sale. The example Mr. Thiele gave was if the fund financed 25 percent of the original purchase price, and the home was resold at $200,000 more than was originally paid, the homeowner would pay the Fund back the amount of the loan, plus $50,000.
Mr. Palumbo said the fund would share in the equity of the house. “For example, if you bought a home for $600,000 and you borrowed $100,000, they have one-sixth of the equity, so if you sold it five, 10 years later for $1 million they would still get their share, their one-sixth. The fund would be paid back.”
Repaid money would go back into the fund to help more first-time homebuyers. Also, towns could use up to five percent of the fund to provide counseling about buying a home to first-time homebuyers, Mr. Thiele said.
Just like with the establishment of the community preservation fund, town boards would have to adopt a local law and hold a mandatory public vote to establish the Community Housing Revolving Fund.
The study bill is still several steps away from legislative action. Mr. Thiele said he plans to meet with town officials and other stakeholders in the coming months to gain as much input as possible.