Pittsburgh, Pennsylvania, a working class town, is generally known as an affordable city. Of course, many families struggle, but the National Low Income Housing Coalition ranks Pittsburgh among the cities with the highest availability of affordable housing units for rent. Nevertheless, the Pittsburgh City Council has recognized the need to stay ahead of the curve. Circumstances could change at any moment. The economy could change. Unemployment rates could reverse course again and the need for affordable housing units could again exceed availability. Therefore, the Pittsburgh City Council has been proactive in adopting affordable housing policy.
The City Council created an Affordable Housing Task Force in 2015. It has adopted inclusionary zoning policy and encourages use of low income housing tax credits. Most recently, at the end of 2016, the City Council approved an Affordable Housing Trust Fund. The ordinance commits funding of not less than $10 million annually. However, the ordinance does not create a revenue stream to fund the $10 million and the debate continues as to whether the trust fund will actually be funded.
The most obvious source of revenue for the trust fund is a transfer tax on deeds and mortgages. Florida, for example, assess documentary stamps on deeds at the rate of $.70 per $100 of consideration and $.35 per $100 of consideration on mortgages. Closer to Pittsburgh, Philadelphia charges a $10 recording fee on deeds and a $17 recording fee on mortgages that is allocated to the Philadelphia Housing Trust. However, there is strong opposition to any sort of additional transfer tax in Pittsburgh, particularly from local realtors. Transfers are already taxed at 4% in Pittsburgh, which is the highest in the Allegheny County. One-half of that amount is allocated to the city. Realtors fear that a higher tax will have a chilling effect on the real estate industry.
Living and practicing real estate in a state that taxes conveyances at a significantly higher rate, I have to chuckle at such an assertion. Buyers will continue to buy and sellers will continue to sell regardless of the transfer tax. The tax is just the cost of doing business, even in residential sales. Because these taxes are paid at closing and not after the fact, the responsible party doesn’t feel the pain of having to write a check at a later date.
The need for an Affordable Housing Trust Fund is too great to worry about the small price that buyers and/or Sellers of real estate might have to pay at their closings sometime in the future. With out this revenue, every day tax payers will be covering additional social service costs including temporary housing costs. In the short and long term, the an additional point or two on transfer taxes at closing is a good investment for everyone. Pittsburgh should act now and fund the Housing Trust immediately.