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Builders Make Great Case For Transfer Tax

BubbleIt is generally accepted that the housing bubble precipitated the current recession. Easy access to money and low interest rates fueled housing inflation that made housing speculation profitable without growth in the underlying economy. In 2007 the Chief Executive of the National Association of Homebuilders acknowledged that overbuilding during the boom years was a factor in the housing meltdown.

That same year NC Realtors and Homebuilders fought tooth and nail at the Legislature to prevent counties from having a transfer tax option to pay for the infrastructure demanded by housing growth. Although unsuccessful at the Legislature in 2007 they have since spent millions to defeat transfer tax proposals at the polls in local referendums.

Proponents of the transfer tax argue that it relieves some of the burden of property tax by deferring it until a sale when cash flow is available, especially for existing homeowners on fixed incomes with over-inflated home values. Realtors and Homebuilders argued against it saying “Fight the Home Tax – It’s a Bad Idea”. Now faced with unsold inventories of speculatively built houses NC Homebuilders have turned to the Legislature for relief from “some of the burden of property tax by deferring it until a sale when cash flow is available.”

House Bill 852, “Defer Tax on Builders’ Inventory“, has sailed quietly through the House, 106 votes to 8, and through committees, and is calendered for a Senate vote Wednesday July 8th, with little opposition expected. In fiscal years 2010-11 and 2011-12 combined this bill is projected to have a negative effect on county and municipal revenues of $40-$45 million.

“A builder may defer the portion of tax imposed on real property that represents the increase in value of the property attributable solely to improvements resulting from the construction by the builder of a residence on the property.”

Homeowners will find no such relief and local governments will have to cut services or raise revenues to make up the $40-$45 million shortfall. Realtors and Homebuilders have argued that taxing the equity in homes is a bad idea but now they argue that “It’s a Good Idea” when it comes to builders who overbuilt in the boom years straining infrastructure and local revenue streams. The NC Homebuilders make a great case for the transfer tax.

One Comment


  1. gregflynn

    July 8, 2009 at 3:33 pm

    Senate just passed this 44-2 without debate. Now if they just gave counties transfer tax authority 44-2 without debate we might have something to work with.

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