North Cincy News

As local governments grapple with fiscal challenges, increasing the real estate transfer tax has emerged as a potential solution. However, a white paper highlights significant drawbacks associated with this approach, affecting homeowners, REALTORS, and the broader economy.

A real estate transfer tax is levied by local or state governments on property ownership transfers. It is calculated as a percentage of the sale price and paid at closing by either the buyer or seller. The tax varies in structure and amount but generally adds substantial costs to real estate transactions.

The white paper argues that transfer taxes are regressive, disproportionately burdening lower-income households. According to data from the National Association of REALTORS (NAR), "households earning $10,000-$19,999 may face transfer tax burdens equivalent to 13% of their annual income," whereas "households earning $80,000 or more typically pay only 3%."

Additionally, increased transfer taxes raise closing costs and reduce housing affordability. For example, "a 2% increase in the transfer tax on a $346,885 starter home could reduce a family’s purchasing power from $393,333 to $330,400."

Transfer tax revenues are also unreliable due to market volatility. Historical data from San Francisco shows fluctuations ranging from "$50 million to over $400 million depending on market activity." This unpredictability can lead to budget shortfalls during economic downturns.

High transfer taxes can deter investment and economic growth. Evidence from Los Angeles indicates an "86% drop in property sales over $5 million within months" of implementing a high transfer tax. Such trends could affect Hamilton County if similar measures are adopted.

Moreover, increased transfer taxes can lead to reduced property values as buyers factor in additional costs. This decrease weakens the local tax base supporting government services.

Hamilton County has already seen a decline in home sales compared to surrounding counties like Clermont, Butler, and Warren due to higher taxes and limited development opportunities.

If considered necessary, any increase in transfer taxes should fund programs that stimulate economic growth and attract businesses. Examples include infrastructure improvements and affordable housing initiatives.

The REALTOR Alliance of Greater Cincinnati advises against relying heavily on real estate-related taxes for funding non-real estate programs. Instead, they advocate for stable revenue solutions that do not unduly burden homeowners and REALTORS.

"The REALTOR Alliance of Greater Cincinnati encourages policymakers to carefully consider the broader economic impacts of transfer tax increases."

For further details or involvement in advocacy efforts:

REALTOR Alliance of Greater Cincinnati