Southold moves toward aiding homebuyers with purchase cap just under $1M

Southold Town inched closer to offering first-time homebuyers help with their down payments Tuesday — a long-awaited step toward tackling the North Fork’s affordable housing crisis.

Town officials are proposing a $999,999 purchase-price cap for the program, which would provide eligible residents with down-payment assistance of up to 18% of a home’s price.

“That’s the cap, the houses will not be that expensive,” Supervisor Al Krupski said at Tuesday’s work session. “This cap is to bring it in line to reality.”

The board also discussed a limit on applicants’ liquid assets and a potential loan-forgiveness provision for qualifying volunteer first responders.

The assistance would come from Southold’s Community Housing Fund, financed by a half-percent tax on property purchases to support affordable housing rather than through annual property taxes.

Town officials said the $999,999 figure was chosen in part because it would keep the purchase cap below the state’s $1 million mansion-tax threshold.

“This is a genuine issue that needs to be addressed,” said Councilwoman Alexa Suess. “I think this number is more reasonable.”

The proposed ceiling follows months of revisions. An initial $750,000 cap would have covered just six Southold homes then listed for sale, The Suffolk Times previously reported. In July, officials replaced it with state-established limits, including $1.96 million for a single-family home — a figure town planners said eligible buyers were unlikely to afford.

The latest proposal falls above the North Fork’s $927,000 median single-family sale price in the second quarter, but below its $1.465 million average, according to Corcoran.

Community Housing Project Supervisor Andrea Sullivan said the proposed cap would better align purchase prices with the program’s income limits. Eligibility requirements are still being finalized.

“The maximum purchase price limits don’t really align with what the income limits also established by New York State law that those individuals could actually afford,” Ms. Sullivan said. 

For an $800,000 home, a qualifying buyer receiving the full 18% assistance would get a $144,000 loan from the town toward the down payment. The buyer would contribute $16,000, bringing the combined down payment to $160,000, or 20% of the purchase price. The buyer would still have to qualify for a mortgage covering the remaining $640,000.

Under the proposal, applicants would be limited to liquid assets worth no more than 25% of the home’s purchase price. Those assets could include cash, checking and savings accounts, certificates of deposit, money-market accounts and stocks. Officials said they are still working to determine whether certain retirement, education and health accounts would be included in the calculation.

Qualifying volunteer first responders could earn forgiveness of the town’s loan over 10 years of service. Existing active volunteers could also qualify, but service completed before closing would not count toward that requirement, Ms. Sullivan said.

Ms. Sullivan said the town could use Length of Service Award Program (LOSAP) records to verify a recipient’s service rather than requiring monthly monitoring. After 10 years, a participant seeking full forgiveness could provide documentation showing the service requirement had been met.

Town officials have discussed allocating roughly 22% of the fund toward the down-payment assistance program, though the board has not established a permanent funding hierarchy among the programs. Officials said allocations could be adjusted depending on demand and participation.

Officials did not announce an application opening date Tuesday.

“I’m very pleased to see Southold going in the direction that they are,” said New York State Senator Anthony Palumbo. “We’re way behind every other town, and when you think about even East Hampton, there isn’t a knockdown that’s under a million dollars in that entire town. They’re way ahead of us on affordable housing.”

In the meantime, the town is working with the Code Committee on housing code changes and will offer a public information meeting on Sept. 29 at 6 p.m. at Town Hall. Planning staff and the assistant town attorney are expected to explain the housing code changes and proposed programs. Residents will be able to ask questions and provide feedback while the proposals are still being developed.

“I’m very impressed with the work that everyone’s done there,” Mr. Krupski told The Suffolk Times. “They’ve done a tremendous amount of work to get it to this point and do all the code changes so that it’s consistent and meets our housing goal.”

Other issues discussed at Tuesday’s meeting include short-term rentals and a time clock for public comment at public hearings.

Southold Town officials are considering new limits on short-term rentals, but have not yet decided what percentage of homes would be permitted to operate as rentals. When decided, the town will set a public hearing for the issue.