Only 17 properties in Southold Town would currently qualify for an exemption to the 2-percent land transfer tax that funds the Community Preservation Fund, according to an analysis done for the town by assistant town attorney Damon Hagan. The exemption was passed in 2014 for first-time homebuyers to help low and moderate-income residents purchase their first home.
The Town Board is considering raising the income eligibility requirements so that people with higher incomes qualify for the exemption.
“We’ve had folks say the price of housing has gone up so much that they can’t take advantage of the CPF exemption,” said Denis Noncarrow, the town’s government liaison officer, at the Town Board’s work session Wednesday morning.
For first-time homebuyers to currently qualify for the exemption in Southold Town, the price of the home must be under 60 percent of the purchase price limits established by the State Mortgage Agency Low Interest Rate Mortgage Program, better known as SONYMA.
That would amount to a $353,868 price limit, according to Mr. Hagan, who said the maximum annual income under the program is capped at $127,400 for a two-income household.
“When we go through MLS listings, you’ll see that the available real estate in the area is fairly limited at the current purchase price cap that we have in Southold,” Mr. Hagan said.
The 60-percent cap is making it difficult for the first-time homebuyer to find a property that’s going to work for them and be eligible for the first-time homebuyer exemption under the CPF tax, he said.
“Only 17 houses in the whole town meet that criteria,” he said.
By comparison, if the maximum home price standard were raised to 80 percent, the purchase price limit would be $471,824, for which there are 45 eligible properties, according to Mr. Hagan.
At 100 percent, the SONYMA limit would be $589,780 and 81 properties would be eligible, and at 120 percent, which is what Southampton Town uses, the SONYMA limit would be $707,736 and there would be 123 eligible properties, according to Mr. Hagan.
The exemption in Southold is only available to town residents and the home must be the buyer’s primary residence, Mr. Noncarrow said.
Southold approved the first-time buyer exemption in 2014. Southampton, East Hampton and Shelter Island towns did so in 2008. Riverhead has passed an exemption.
“The issue is more basic for me,” Supervisor Scott Russell said. “You’re going to tell the public that you’re going to exempt someone from the CPF on a home that’s about almost $600,000? $471,000 is a little bit more affordable.”
Board members informally agreed to hold a public hearing on moving the purchase price limit to 80 percent.
“So we go to 80 percent and see how that goes,” Councilwoman Jill Doherty said. “It would open up a little more but it wouldn’t be devastating.”
The procedure for increasing that limit is merely to amend the local law, Mr. Hagan said. A public hearing also will be needed.
“It will be interesting to see what people say,” Councilman Bill Ruland said.
Under the current exemption, the town loses about $50,000 per year, Mr. Hagan said. He did not have estimates for how much would be lost if the purchase price limit was raised to 80 percent.
Photo caption: A Southold home listed for $389,000 that would not currently qualify for an exemption to the CPF tax if purchased by a first-time homebuyer. (Credit: MLSLI)