First-time homebuyer tax break goes under NH House panel’s microscope
After Senate passage of bill, representatives voice skepticism
A tax break for first-time homebuyers easily passed the NH Senate and has won the full support of Gov. Chris Sununu, but if the questions raised at a Tuesday hearing are any indication, the bill might have a tougher time of it in the House of Representatives.
Senate Bill 301 would reduce for two years the rate of the real estate transfer tax from 75 cents to 50 cents per $100 in valuation on homes purchased for less than $300,000. It would be retroactive to Jan. 1 and sunset at the end of 2019.
“SB 301 would decrease the marginal costs to first-time homebuyers, increase homeownership, and help retain and attract New Hampshire’s future workforce,” wrote Sununu in a letter read by his policy director, D.J. Bettencourt, to introduce the bill at the House Ways and Means Committees
Committee members peppered him with questions.
What about “people with limited means?” and would “a general reduction with a certain threshold” be preferable? asked Rep. Bill Ohm, R-Nashua.
The Senate thought from a financial standpoint that a “more narrow tax break was the way to go,” replied Bettencourt, who was careful not to respond in the name of the governor.
And Rep. Norman Major, R-Plaistow, asked what the cost of the tax break would be.
The Senate felt the exposure was very limited, replied Bettencourt, but though the state Department of Revenue Administration couldn’t provide a revenue estimate.
Others raised questions on how to verify whether someone actually is a first-time homebuyer or if the break should be granted to a newly married couple when only one of them has never owned a home.
And Rep. Susan Almy, D-Lebanon, raised another question: “Why are we being contracted by construction companies and lobbyists saying this is not going to help?
It was Bob Quinn, the NH Association of Realtors’ policy director, who came to the bill’s defense, armed with statistics.
First-time homebuyers “are the lifeblood” of the housing industry, he said. Some 38 percent of all homebuyers are first-time buyers. The median price of the home they buy is $222,000. They usually can only scrape up a 5 percent down payment for the house, whereas a repeat buyer’s down payment is more like 15 percent.
“They’re more cash-strapped,” he said. “Would it be an incentive enough to attract a buyer? The answer is certainly yes. Closing costs are significant. Talk to any real estate agency, and they will tell you about a deal that fell apart over $500.”
He pointed to a federal tax break for first-time homeowners in the midst of the recession. Sales rose as high as 50 percent, but that break included those who had not bought a house in the preceding three years.
Quinn said he would not object to a broader cut in the transfer tax, which he said was one of the highest in the country, but any tax cut is more likely to affect those who don’t have a home, not those that do, he said.
Enforcing the tax won’t be so much of a problem, said Carollynn J. Ward, tax policy analyst for the NH Department of Revenue Administration. Like any other tax, homebuyers would self-report, but the DRA would randomly audit transactions in order to try to keep people honest.
But the DRA couldn’t estimate the cost a first-time homebuyer tax cut, because it has no idea how many transactions involve first-time buyers. She also said that a retroactive tax would be much harder to administer, but several committee members indicated that they would probably change the effective date.