Transfer tax would climb under City Council plan

Realty transfer taxes in Pittsburgh would climb to 4.5 percent next year, up half a percentage point, under a controversial agreement City Council struck Wednesday.

The extra revenue would enable an affordable housing trust fund, also known as the Housing Opportunity Fund, that council approved last December. Under a compromise supported by seven of nine council members, the transfer tax rate would remain at 4.5 percent through 2019, then jump to 5 percent in 2020.

Critics fear the increase will discourage homebuyers from settling in Pittsburgh. Even Councilwoman Theresa KailSmith, who backed the higher tax rate, said she was “hoping this is the right choice.”

But Councilman R. Daniel Lavelle said he doubts worstcase scenarios will materialize. He said aid should help invigorate neighborhoods “where the private market is not currently active.” The trust could support foreclosure prevention, down payment assistance, new housing and other assistance as the city tackles a shortage of affordable housing.

“Government will now be able to invest and rehab buildings [where] you will then see the private market come to play afterwards,” Mr. Lavelle said.

The taxes amount to a onetime charge based on a property’s sale price. It is paid at the time of purchase, often split between the buyer and seller. Revenue under the 4 percent rate is divided among the state (1 percent), city schools (1 percent) and city government (2 percent).

Under the council plan, the city would receive 2.5 percent in 2018 and 2019, then 3 percent starting in 2020. Combined with existing city funds, the approach should fulfill the $10 million annual funding goal for the housing trust, Councilman Corey O’Connor said. Council also agreed to allocate $2 million from the arrangement to improve early childhood education.

A final vote on the agreement is expected Tuesday. Mayor Bill Peduto has signaled he would support a transfer tax increase.

Still, council members Darlene Harris and Natalia Rudiak would not endorse the higher tax rate Wednesday.

“You don’t make housing more affordable by making it more expensive,” Ms. Rudiak said. She said the increase “directly takes out of the pocket of low- and moderate-income homebuyers. It makes it more

difficult for low and moderate [-income] people to buy homes” in Pittsburgh.

Realtors, too, have voiced concern. Closing costs on a $79,000 home in Observatory Hill already run about $12,000, “and you’re going to Haislip, president-elect at the Realtors Association Metropolitan Pittsburgh.

Transfer taxes at 4.5 percent would be the highest in the state and “an additional burden to prospective homebuyers,” said Mike Suley, a former association president. “It is almost double the tax in the suburbs.”

Mr. Lavelle noted pending legislation should lessen the burden for many of those potential buyers. A bill introduced by Councilman Dan Gilman would draw on the trust to help eligible firsttime homebuyers with closing costs. If they buy a house of an average price — around $135,000 last year in Pittsburgh — or less, the city would offer a grant worth 2.5 percent of the sale price.

Council could vote next week to finalize that legislation. The bill would direct the Urban Redevelopment Authority to craft the aid offering.