Housing
This section of the BDN aims to help readers understand Maine’s housing crisis, the volatile real estate market and the public policy behind them. Read more Housing coverage here.
In the four decades that Peter McPheeters has been a real estate agent in Maine, he’s never seen it so difficult for a young person to buy a house.
Maine households now need to make more than $100,000 annually to afford the median home here. First-time buyers can get help with loans and a down payment through a state program, but those loans aren’t seen as competitive as cash offers or conventional financing.
“It’s just not fair,” McPheeters, owner of the Biddeford Pool-based Oceanview Properties, said.
At the same time, there have been more sales of Maine homes valued at over $1 million in recent years than ever before. More than 1,100 properties sold for more than that sum last year, according to the Portland Press Herald.
To create a sustainable source of funding for affordable housing projects across the state, House Speaker Ryan Fecteau, D-Biddeford, is proposing a higher real estate transfer tax on these $1 million homes when they sell and to eliminate that tax for first-time buyers who use state loan programs. The state’s real estate trade association doesn’t like it.
“Taxation is not good for the housing market; it’s not good for affordable housing,” Jeff Harris, president of the Maine Association of Realtors, said.
The trade association circulated a memo to members at the end of March encouraging them to testify against the bill, saying that any transfer tax would negatively affect buyers and sellers at all income levels and inhibit the consolidation of generational wealth.
Not all realtors think it’s a bad idea. Tom Landry, a Portland-based broker with Benchmark Real Estate, said an increase in the transfer tax most likely would have no effect on the housing market and lauded directing money towards affordable housing projects. But he still opposes the bill because he thinks the threshold should be raised so it doesn’t tax older Mainers trying to pass on their generational homes, or young people investing in multi-family properties.
“Not everybody who buys a property at these levels, believe it or not, is truly wealthy,” Landry said.
McPheeters supports the bill, saying of the hundreds of million-dollar transactions he’s been involved with, only a couple of people have ever complained to him about the transfer tax. Those buyers were generally on the lower end of the spectrum who were only just able to make the purchase work, he said.
“People who are buying $2 million houses, generally speaking, they can afford it,” he said.
The revenue collected by the proposed tax, which would increase the rate from $2.20 to $5 per every $500 for real estate sales over $1 million, would be directed to fund state affordable housing programs that have struggled to find a sustainable funding source in today’s tight budget environment and have historically been funded by borrowing money.
“This week, the last dollars are being distributed for the rural affordable rental housing program and the affordable home ownership program,” Laura Mitchell, executive director of the Maine Affordable Housing Coalition, said. “Without a source of state support to get them over the finish line, [projects] simply won’t get built.”