State lawmakers are considering two bills that would make Delaware’s realty transfer tax more compatible with efforts to develop affordable housing.
State code currently exempts property sales to affordable housing developers from the tax if the developer is restoring an existing home. State Sen. Russ Huxtable’s (D-Lewes) bill would do the same for sales to affordable housing developers for new construction — a far more common approach to affordable housing development in Kent and Sussex Counties. The bill would also exempt properties purchased with federal, state or local funding for affordable housing construction.
“If we are encouraging our local jurisdictions and county to invest in affordable housing, the state shouldn’t take a portion of that back as far as transfer taxes are concerned," he said.
Local governments receive nearly 40 percent of the realty transfer tax revenue from transactions within their boundaries, but state code currently limits how they use that funding; current legal uses include public safety and public works projects.
State Sen. Eric Buckson (R-Dover) has brought forward a bill would add affordable housing programs to that list. He argues a government like Sussex County's should be able to use it to launch new affordable housing projects or continue programs launched with temporary federal funding during the COVID pandemic.
“Creating enabling legislation that allows them to decide whether or not they want to continue with something they established," he said. "They — Sussex County — received ARPA funds and they decided on their own to create the housing initiatives.”
Last year, Sussex County allocated more than $6 million to affordable housing initiatives, including grants for a half-dozen nonprofit developers and a homeownership assistance program. The county collected roughly $32 million in realty transfer tax revenue in 2023, and it has consistently opted to spend no more than 60 percent of realty transfer tax revenues in a year, leaving it with sizeable reserves — especially after a surge in revenues in 2021 and 2022.
Of Delaware's three counties, Kent County collects the least revenue from realty transfer tax. Given its sizeable spending on public safety and parks, the county has little of that revenue in reserve, giving it fewer opportunities to spend future realty transfer tax dollars on affordable housing development.
Buckson’s bill missed its scheduled committee hearing Wednesday, but it will likely be heard next week. Huxtable’s bill cleared committee with bipartisan support.
