The rocky housing market and Montgomery County’s lack of affordable housing have County Council members reconsidering proposed legislation that would increase closing costs for homebuyers and sellers to help pay for infrastructure improvements.
Members of the County Council’s Management and Fiscal Policy Committee put off a decision Monday on a proposal to increase the recordation tax from $6.90 to $11.20 per $1,000 paid for property.
Real estate industry representatives told council members that increasing the tax could make it tougher for people to buy and sell homes in an already-tough housing market: Sales of single-family homes and condos in Montgomery County fell 20 percent in 2006, according to the Greater Capital Area Association of Realtors.
“Each time the taxes associated with home sales go up, it increases the closing costs,” GCAAR President Brenda Small said. “A lot of residents can’t afford homeownership, and [raising the recordation tax] goes contrary to what the state and county are saying about increasing affordability and increasing home ownership.”
The median priceof an existing home in the county was $510,000 in September, according to GCAAR. Under the tax increase, the homebuyer would pay a recordation tax of $5,152 instead of $3,174 (the first $50,000 is exempt from the tax).
The County Council introduced the bill to raise the recordation tax rate in May, at the recommendation of the county Planning Board.
Since then, the Planning Board has gained two new members, reconsidered the matter in September and reversed itself: The board now advises the council against raising the rate.
“We’re looking for new development to pay its share of increased infrastructure needs and our staff came up with a number of ways they thought this might occur,” Planning Board spokeswoman Valerie Berton said. “It was among a few measures, and when they looked at it again, they chose not to support it.”
County Executive Ike Leggett also has opposed the tax increase.
Council President Marilyn Praisner and Committee Chairwoman Duchy Trachtenberg said they are still considering the tax increase and will discuss it at the next committee meeting.
“Given what we know might happen around home sales, I think being cautious might be important,” Trachtenberg said. “… Some things going on in surrounding communities indicate the market might not remain stable. We don’t want to discourage home ownership.”
Council Member Roger Berliner proposed an approach to the tax rate in which homes selling for more than $600,000 would face a bigger increase in the recordation tax than less expensive houses.
“All of the lead thinkers are saying we need more revenue if we’re ever going to make a dent in the infrastructure needs in our community,” Berliner said. “But we don’t want to discourage folks from buying the moderately priced housing that is available.”
