Lower Baltimore’s cost of living to make housing more affordable

Remember in 2011 when then-Mayor Stephanie Rawlings-Blake wanted to bring 10,000 new families to the city? It was a big and bold idea. People called her a visionary.

She faltered, dramatically, on how to do it. In just one year between 2015 and 2016, her last year in office, the city lost 6,700 people, bringing its population to a 100-year low. But at least she acknowledged one of the biggest problems plaguing the city for decades.

City Councilman Bill Henry, on the other hand, is busy rearranging deck chairs on the Titanic as the city takes on water. His proposed legislation to raise real estate transfer and recording fees to build, ironically, more affordable housing, is a case in point.

“Baltimore City is a difficult place to live right now for a lot of people. They just don’t have the money and the resources to pay all of their bills,” Mr. Henry said. “Society has a responsibility to address that.”

Yes, but not in the way he proposes, which will make housing more expensive for everyone except for the lucky few who win the affordable housing lottery with the $10 million he hopes to generate from the change in law each year.

First, Baltimore City already has a property tax problem that makes living in the city out of reach for thousands. With a rate about twice as high as the state’s other counties, it continues to drive people and business to surrounding counties. It also attracts nonprofits — who don’t pay property taxes — further shifting the burden to the remaining property owners. And last but not least, it helps rich developers get richer — again, at the expense of current property owners, because they demand and receive tax breaks in return for agreeing to build.

Second, the taxes that Mr. Henry proposes to raise are already exorbitant both relative to many surrounding counties and in general. For example, to purchase a $250,000 house in Baltimore City requires $5,000 in transfer taxes (1.5 percent to the city plus 0.5 percent of the purchase price to the state.) Transfer taxes on that same price house in Anne Arundel, Howard or Harford County (1 percent to county plus 0.5 percent to state) would set you back $3,750 at closing. In Florida, a state that many Marylanders are flocking to, the transfer taxes (0.70 per $100 of property) would be $1,750 throughout the state, except Miami-Dade County, where they are — get this — lower. If Mr. Henry’s legislation passes, taxes on that house in Baltimore City will rise to $5,625.

And we haven’t even added on recordation fees, which are twice as high as Baltimore County, and higher than all surrounding counties. If Mr. Henry gets his way, those fees (currently $5 per $500 worth of property) on that same $250,000 house would go up from $2,500 to $3,000, for a grand total of $8,625 added to the purchase price, not accounting for other fees and taxes. Does that sound affordable?

Third, Baltimore is becoming more and more unaffordable because fewer and fewer people have jobs. To put things in perspective, during Freddie Gray’s lifetime, the city has lost more than 95,000 jobs, according to statistics from the Federal Reserve Bank of St. Louis. For housing to be affordable, more people need to be able to make a living!

If Mr. Henry and other elected officials want to make an enormous impact in Baltimore, they must focus on policy changes that will make the city more affordable for the greatest number of people. As Byron Schlomach, director of Oklahoma’s 1889 Institute, wrote in a September paper, (The Importance of the Cost of Living and Policies to Address It) “Cost of living is clearly impacted by state policies like stricter zoning, higher minimum wages, occupational licensing, and other labor and business regulations, with highly regulated states seeing higher costs of living.” He added, “The consequence is that highly regulated states also greatly disadvantage those with low and modestly middle-class incomes. This likely helps to explain migration patterns that have long favored southern, low-cost states.”

Maryland and Baltimore City in particular are both highly regulated places with significant outmigration both internally to lower-taxed and regulated counties within the state and externally to places like Florida, Virginia and other points south with more job opportunities and where their dollar stretches farther.

Here’s hoping Mr. Henry expands opportunity and lowering the cost of living by loosening regulation and lowering taxes that have been driving people out of Baltimore for decades. Why should city residents settle for redistributing a shrinking pie when he could expand it for everyone?

Christopher B. Summers(csummers@mdpolicy.org) is president and chief executive officer of the Maryland Public Policy Institute.

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