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Governor signs bill authorizing referendum for affordable housing tax in East End towns

New York Gov. Kathy Hochul has signed legislation that will allow East End towns to establish a new real estate sales tax for community housing funds.

The new law, which had been previously vetoed by former Gov. Andrew Cuomo, will authorize the five towns in the Peconic Bay region to hold referenda on adding 0.5% to the existing 2% Community Preservation Fund tax on real estate transactions in those towns. 

Each town would need to present a plan for the funds to their respective communities before holding a referendum.

“The issue of affordable workforce housing on the East End has been a critical issue for a long time and it has only gotten worse. I think because of the pandemic, the demand for people who wanted second homes on the East End really drove up costs and reduced inventory to the point that … affordable housing is a crisis here,” said Assemblyman Fred Thiele (I-Sag Harbor), who cosponsored the act with Sen. Anthony Palumbo (R-New Suffolk). “This legislation is a major tool I think the towns can use not just to build affordable housing for rental and for sale but also to make the existing housing stock more affordable.”

He noted that community housing funds could be used to provide financial assistance for first time home buyers or offer down payment assistance. 

The timeline for referendum remains up to individual towns. They may hold a special election or wait for the general election next November, Mr. Thiele said. “My recommendation would be to do it in a referendum next November,” he added, pointing out that special elections tend to see low voter turnout.

A press release from Mr. Thiele’s office noted that if the housing fund had been in place in 2020, it could have generated $30 million in the region for affordable housing.

More than 35 East End leaders and organizations signed a letter urging the governor to sign the bill in late September. The letter said the lack of affordable housing in the region “has reached crisis proportions,” citing staffing shortages at local businesses and volunteer emergency services. 

“Local families are leaving the area,” the letter said. “Traffic congestion on local roads has reached gridlock levels because of the need to import labor from areas to the west with lower housing costs [and] the lack of affordable housing often results in substandard and illegal housing conditions.”

The letter pointed to high property costs on the East End as a primary cause for the housing crisis, exacerbated by the flight of New York City residents to the region during the COVID-19 pandemic.

“The public is going to have their say. I think it’s a good benchmark to test public commitment to affordable housing,” Southold Supervisor Scott Russell told the Times Review.

Mr. Russell, who signed the letter to the governor, said in a previous interview that the fund could potentially be used to lower the cost of land acquisition for private developers or provide grants on a per-unit basis to offset construction costs, among other things.

If adopted in each town, the legislation would also increase the exemption on improved properties on the East End, effectively reducing the real estate transfer tax for nearly one-third of all transactions.

The exemption in towns on the North Fork would be increased from $150,000 to $200,000 and the exemption on Shelter Island and the South Fork would be increased from $250,000 to $400,000 — ultimately reducing the existing transfer tax on all transactions of $400,000 or less on the North Fork, and $1 million or less on Shelter Island and the South Fork. 

The letter to the governor noted that although the legislation could increase financial resources to address the affordable housing crisis, it does not expand town powers. 

“This legislation will allow each town, on its own, to tell everyone whether they care enough about the issues involved to actually tax themselves and newcomers into the area, and then use the funds for these legitimate purposes,” said a separate letter from the Long Island Builders Institute, also sent in late September. 

The Long Island Association sent a letter to the governor in support of the legislation as well.