Can Thiele’s proposal provide first-time homebuyers leg-up?
Alana Schwab and her boyfriend Nathaniel Golz want to make a home together on the North Fork, where Mr. Golz was born and raised.
They’re both in their early thirties and employed full-time — she’s an office manager for a financial investment firm in Riverhead and he works for a construction company. They were pre-approved for an FHA mortgage on a home costing up to $425,000.
A year into their home search, however, they’re still living with his mother in Southold. Inventory within their budget is low and goes quickly. “Our price point definitely limits us to what we can try to buy,” Ms. Schwab said.
It’s a story all too familiar to young people on the Twin Forks, where property values have soared to levels that box many out of the market. Coupled with the area’s high rents, it’s not hard to understand why many struggle to come up with a downpayment on a place of their own.
Assemblyman Fred Thiele Jr., who represents Shelter Island and the South Fork towns, is working on a proposal that he hopes will help young people stay on the East End.
His newly proposed legislation would allow the five towns on eastern Long Island to establish a fund that would assist first-time homebuyers with up to half of the purchase price.
If passed in Albany, the legislation would permit the towns of Shelter Island, Southold, Riverhead, Southampton and East Hampton to establish a Community Housing Revolving Loan Fund. It would not be mandatory, but rather up to the individual towns to implement.
A half-percent surcharge on the existing regional Community Preservation Fund real estate transfer tax would finance loans made by the new fund.
Mr. Thiele said he knows how hard it is for young buyers to come up with enough money for a downpayment to qualify for a conventional mortgage.
Under his proposal, first-time buyers would have to live or work in the town where they are purchasing a home. Income eligibility to qualify would be the same as for existing state loan programs, which is currently a minimum of $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. Repayment would include the original amount of the loan plus a proportional share of any gain from the sale. Mr. Thiele gave the following example: If the fund financed 25 percent of the home’s purchase price, and the home were then resold for $200,000 more than was originally paid, the homeowner would pay back the amount of the original loan plus $50,000.
Asked to comment last week, 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 in a press release last week. “We are losing the most precious resource that makes our communities special.”
Jennifer Benton of Century 21 Albertson Realty in Greenport said this fund would be of great assistance to some of the prospective buyers she sees, who are forced to look further west because they can’t afford the North Fork.
“First-time homebuyers are having difficulty not just with the downpayment, but finding affordable housing to boot,” she said.
She finds that first-time buyers are generally looking in the $350,000 to $500,000 range. Most homes on the North Fork list for between $699,000 and $799,000, she said.
“Unfortunately, the majority of the housing out here on the North Fork — if they do manage to find something under $500,000 — needs a minimum of $100,000 or more to make the home habitable,” Ms. Benton said.
“Getting the housing is the first obstacle,” she said. “It’s not just the downpayment and competing with cash. Then you have to look at the affordability of maintaining the property, which includes paying the real estate taxes.”
Jamesport, Flanders, Riverhead and Baiting Hollow offer some better deals, she said.
“I do not envy any young person trying to find housing out here,” Ms. Benton said.
In her housing search so far, Ms. Schwab said one of the biggest problems she’s faced is cash buyers who are scooping up properties for second homes. “We just looked at a house that came on the market the night before,” she said, adding they got an appointment to see it the very next afternoon. “By that time, the owners already accepted a cash offer.”
Ms. Benton, who is not Ms. Schwab’s realtor, said cash buyers are no longer uncommon on the North Fork, even among those looking for primary residences. “It used to be that someone would come in with cash and it was an anomaly,” she said.
“Obviously, cash is king. It makes the transaction easier, faster, quicker to close, which usually makes the homeowner happy,” she said.
While Ms. Schwab and Ms. Benton like idea of the fund, both wondered how it would help in a highly competitive market.
“We don’t have a chance against a cash buyer,” Ms. Schwab said.
“This isn’t going to solve all the problems,” Mr. Thiele said by phone from Albany Tuesday. “But it would certainly create more access to the marketplace for a greater number of working- and middle-class families than there is now.”
“This is a great start,” said Diana Weir, director of housing and community development for the Town of Southampton. She served as executive vice president of the Long Island Partnership, which develops affordable housing and counsels first-time home buyers. “It’s a great opportunity to be able to build a program that will help more people on the East End.”
State Sen. Kenneth LaValle is co-sponsoring the bill in the Legislature.
Just as with the establishment of the Community Preservation Fund, individual Town Boards would have to adopt local laws and hold mandatory public votes to establish a Community Housing Revolving Fund.
Southold Town Supervisor Scott Russell said he is intrigued, but is concerned about another tax. “The nice thing about it is that it puts a focus on existing housing stock without the need to build new,” he said.
The fund could generate up to $20 million annually if all five East End towns chose to participate, Mr. Thiele has said, projecting 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.
Mr. Thiele said he understands that the North and South forks have distinct real estate markets. “One of my concerns for the North Fork — same as with the CPF, because it is a different market — [is] can you generate the level of funding that might be needed on the North Fork.” On Shelter Island and the South Fork, according to his proposal, real estate sales of $1 million or less would be exempt from the additional tax. On the North Fork, transactions of $750,000 or less would be exempt.
Mr. Thiele also wonders if the exemption levels might be too high and should be reduced for the North Fork.
While there has not been much regional collaboration among towns with CPF money, he believes this type of fund might encourage towns to pool their additional resources. There are also ancillary benefits to this fund, he said, such as access to employees and reduced traffic congestion.
“If you’re in the business community in East Hampton, do you care whether [your employee] finds a house in Southampton or the North Fork?” he asked.
The proposal is still several steps away from legislative action, a process for which Mr. Thiele says he has a two-year strategy.
He plans to meet with town officials, affordable housing experts and other stakeholders in the coming year to fine tune it and make it a better bill, while also generating support for the concept.
With Kelly Zegers and Tim Gannon
