Governor Vetoes Thiele’s Affordable Housing Fund Legislation

New York State Assemblyman Fred W. Thiele Jr.

Governor Andrew Cuomo on Friday vetoed a bill that would have allowed public referendums in the five East End towns on a new real estate transfer tax to fund affordable housing initiatives.

The state bill, sponsored by Assemblyman Fred W. Thiele Jr., was modeled after the real estate transfer tax used to raise revenues for the Community Preservation Fund.
The vetoed legislation would have permitted the five East End towns — Southampton, East Hampton, Shelter Island, Riverhead and Southold — to create a new 0.5-percent tax on the sale of homes.

Mr. Thiele said the legislation was one of about 50 bills that the governor vetoed Friday, about 10 of which were tax authorizations for local governments. The governor was sending a message that he wasn’t going to authorize any new taxes at the local level, Mr. Thiele said.

But, he added, his legislation would actually cut taxes for more than half of all real estate closings on the East End.

“It appeared to be that we got lumped together with a bunch of different local tax bills,” Mr. Thiele said on Saturday.

His bill would not be a matter of the state or a local government imposing a tax, because the residents would vote by referendum to tax themselves, and for a specific purpose, the assemblyman said.

“We’ll reintroduce the bill next year,” he pledged. “We’ll try to sit down with the governor’s chief counsel in the next session and explain all the details of this bill.”

Dubbed the Peconic Bay Region Community Housing Revolving Fund, the program could be used in a variety of ways by individual towns to make it more affordable for moderate-income residents to stay on the East End.

While the legislation creating the program would have added the half-percent tax for affordable programming, it also would have reduced some of the existing real estate transfer taxes used for land preservation, resulting in a lower net tax for those purchasing a home for less than $1 million in Southampton, East Hampton and Shelter Island, and for less than $850,000 in Riverhead and Southold.

Under the current CPF law, which imposes a 2 percent transfer tax, $250,000 of the purchase price of all home purchases in Southampton, East Hampton and Shelter Island is exempt from the tax, and the first $150,000 is exempt in Riverhead and Southold.
The vetoed legislation would have increased the exempt amount to $400,000 for houses of less than $2 million on the South Fork and Shelter Island, and from $150,000 to $280,000 in Riverhead and Southold.

The law would have eliminated any exemptions from the sale of homes over $2 million, as well as imposing the additional half-percent tax to assist affordable housing efforts.

“I think the part that was misunderstood about this legislation was that it sounds like a tax increase, but it doesn’t actually bring in much additional money because of the larger exemptions at the bottom end — it would just allow some of it to be put toward creating affordable housing,” Southampton Town Supervisor Jay Schneiderman said of the bill, which the Southampton Town Board had endorsed. “So it would have made creating affordable housing more affordable, and made purchasing a middle-income home more affordable as well. But that’s hard to explain.”

The exemptions put in place when the Community Preservation Fund was created via public referendum in 1998 were the median home prices at the time, Mr. Thiele noted. The changes to the exemptions under the new legislation puts the burden on the luxury market, which is what is making housing unaffordable for local residents, he said.

The legislation had been passed, overwhelmingly, in both the Assembly and the State Senate earlier this year. Had the governor not vetoed it, the bill would have created a referendum on next year’s Election Day ballots allowing residents of each town to approve or reject it.

Most town leaders had said they expected that the bill would receive the same resounding support the CPF has attracted in three separate referendums to approve and extend its real estate sales taxes.

“People are watching their children be priced out of our community and realize we need to do something to stop it,” said Curtis Highsmith, executive director of the Southampton Town Housing Authority. “I would hope this is not a firm ‘no.’ Let’s come back to the table and find a way to get a better resolution. We need every additional mechanism we can get.”

Town leaders had already been working on crafting program management plans using the new revenue that would have had to be presented to voters before the fall referendum. Among those strategies were low-interest “gap” loans to help provide middle-income prospective home buyers with down payments, low-interest home loans that would have to be paid back only when the house is sold again, and subsidies for helping cover the costs of creating accessory apartments in existing homes.

“It would certainly have been a valuable tool for the town without directly burdening taxpayers,” East Hampton Town Supervisor Peter Van Scoyoc said. “Hopefully, this will come back.”

In just the last year, East Hampton Town has earmarked $4.3 million for the purchase of land to be used for future affordable housing projects and has a 12-unit development opening for occupancy next month, and another 37-unit development under construction.

Mr. Van Scoyoc noted that the success of the CPF program has been a double-edged sword for local communities, because as it has preserved land — keeping burdens on local infrastructure in check and preserving the quality of life in the area — it also has made the area more desirable at the same time it has made additional development more difficult. Both have driven up the costs of housing, he said.

The changes to the CPF exemptions by the housing legislation would have had minimal effect on that program’s revenues for land preservation and water quality improvement projects, Mr. Thiele said, because the vast majority of that revenue is coming from homes sold for more than $2 million. In 2019, with the fund expected to bring in about $75 million across the five towns, the new legislation would have reduced the revenue only by a couple of million dollars, he said.

The legislation passed in the Assembly with a 122-24 vote and in the Senate with a vote of 44-18. Mr Thiele said that, though it passed both houses with more than two-thirds of the vote, it is very unlikely that an attempt to override the veto would be successful.

“Veto overrides are very, very, very rare in the State Legislature,” he said. “I can’t remember the last time it happened, and certainly in regard to a local bill.” A better approach than a veto override is to work through the issues that the governor has with a bill, he said.

The CPF actually was vetoed by Governor George Pataki the first time it passed in the legislature, Mr. Thiele pointed out.

The new legislation would have generated about $20 million annually for a breadth of affordable housing initiatives across the East End and would help local families, young people and seniors stay in the community, the assemblyman said.

“Study after study, it’s been demonstrated that the housing costs on Long Island are too high,” Mr. Thiele said. “We’re losing people because they can’t afford to stay here.”