The Baltimore City Council voted unanimously Monday to hike taxes on real estate transactions to fund a $20 million Affordable Housing Trust Fund, earning cheers from advocates but concern from the city’s budget chief.
Council members backed a deal struck by Mayor Catherine E. Pugh and housing advocates to levy two excise taxes on certain transactions and other allocations to fund the trust to create, rehabilitate and preserve more than 4,100 affordable housing units in the next decade.
Activists, who cheered the council’s vote at City Hall, say the fund will help low-income residents who can’t find decent homes or apartments.
“This is really exciting,” said Odette Ramos, director of the Community Development Network of Maryland, who pushed for the fund’s creation. “The people this will serve, these are families who are really, really struggling.”
Baltimore activists say they were surprised to learn of exemptions to a bill meant to raise money for affordable housing. But they say they are heartened to see a city analysis that the exemptions will cost the fund no more than $1.15 million. The City Council will consider the bill Monday.
The city’s finance department raised concerns about the volatile nature of transfer tax revenues and the city’s already high tax burden. Baltimore charges twice as much in property taxes as surrounding jurisdictions.
“The burden placed on residents and businesses in the city is significant in comparison to both other local jurisdictions and major cities nationwide,” Robert Cenname, the city’s budget director, wrote in testimony submitted on the legislation. “Any additional tax increase has the potential to reduce investment in Baltimore, which in turn could erode general fund revenues.”
The bill was the subject of consternation among activists in the days leading up to the council vote over exemptions and a sunset clause.
The exemptions would deprive the fund of about $1.15 million, according to city estimates. They included one for residential properties valued at over $1 million, for up to two years, and another that would exempt construction loans for projects that are currently in the pipeline and have a building permit by the effective date of the new taxes, which is Jan. 1.
Josh Greenfeld, vice president of government affairs for the Maryland Building Industry Association, has said the group sought the exemption that would grandfather in development projects that already had received building permits. Greenfeld said it’s important to protect developers who have projects in the pipeline and have secured financing on the basis of the current tax rate. Adding a new excise tax on top of that increases costs and jeopardizes that financing, he said.
Matt Hill, a lawyer with the Public Justice Center, said that even with the exemptions, the bill is a positive development for Baltimore’s poorest residents.
“This is still huge. This is $20 million a year to invest in Baltimore neighborhoods,” Hill said. “Baltimore needs investment. We need to invest in our neighborhoods and our communities in a way that doesn’t displace residents. One cornerstone is to make sure we have permanently affordable housing.”
The council amended the bill on the floor Monday to strike the sunset clause, which would have allowed the tax increases to expire after seven years.
Voters approved a ballot measure in 2016 to create an affordable housing trust. When funding failed to materialize, activists launched a petition drive to get another measure onto the ballot in November of this year to require the city to devote a nickel of every $100 in assessed city property value to the trust. With voters generally approving such ballot questions, city officials negotiated an alternate funding stream in exchange for the activists’ dropping their referendum effort.
In August, the city announced the new excise taxes: an extra 0.6 percent tax on the transfer of real estate valued at more than $1 million, and an extra 0.15 percent tax on recordation fees for transactions of more than $1 million. The city estimated those taxes would generate about $13 million a year for the trust, and Pugh committed to providing additional funds to bring the total to $20 million by fiscal 2023.
“It’s going to really help us,” said Council President Bernard C. “Jack” Young. “It would add to the affordable housing we’re already doing. With all the building going on in the city, so many people won’t be able to live in the city of Baltimore because the rents will be so high. It’s needed.”
Young encouraged the advocates to stop pressuring Baltimore and begin pressuring neighboring jurisdictions.
“I’d like to see the advocates come to Baltimore County and Anne Arundel County, where there’s no affordable housing,” Young said. “Everyone comes to us — this should be a regional thing. There should be affordable housing all over the state.”