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Baltimore City Council committee approves fix for housing tax credit that lapsed

Baltimore City Council committee approves fix for housing tax credit that lapsed
A Baltimore City Council committee approved legislation to restore a tax credit that reduces the cost of buying a newly built house after the credit lapsed this summer. (Darryl Brooks / TNS)

A Baltimore City Council committee voted Thursday to advance legislation that would create a workaround after a property tax credit for newly constructed homes lapsed this summer.

The council relied on authority from the state General Assembly to offer the tax break, but it expired June 30 at the end of the last fiscal year.

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The bill now moving through the council creates a similar credit using authority contained in a different state law.

Like the old one, the new credit would cut in half the property taxes on a newly built home that is occupied by the owner for the first year. The discount diminishes 10 percentage points each year, phasing out in the sixth year.

Democratic Councilman Eric Costello is the lead sponsor of the legislation, which he said would help attract people to the city. Thirteen of the council’s 15 members are co-sponsors.

“We’ve come up with a creative way to keep the credit going," Costello said Monday at a working lunch for council members.

The former credit cost the city about $2 million each year in tax revenue, and its benefits were clustered in a few neighborhoods, according to city budget analysts. Since it was put in place in 1996, it has been applied to about 5,000 homes.

City Budget Director Bob Cenname said in a written submission to the council that his office wouldn’t oppose the workaround legislation. But he noted the credit appeared to benefit well-off purchasers at the expense of poorer homebuyers who are less likely to move into newly constructed houses.

“Moreover, data may suggest that this subsidy distorts the housing market toward new construction of owner-occupied dwellings, away from rehabilitation of currently occupied dwellings,” Cenname wrote.

It’s not clear why the General Assembly failed to act to renew the tax credit legislation. But Democratic State Sen. Bill Ferguson of Baltimore has said he was only told about the issue on the final day of the legislature’s annual session in April.

Costello said it appeared the credit was allowed to lapse “by mistake.”

Costello said the new law would be retroactive, so people who struggled to get applications for the old credit approved because of a ransomware attack that struck city computer systems in May would be eligible to receive the benefit.

The replacement credit would be authorized under a provision rewarding the construction of so-called high-performance buildings that meet environmental standards. Costello said in an interview that he’s confident virtually any newly constructed home would fit that definition.

“That’s really based on the quality of the city’s building code,” he said.

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