The CEO of the Delaware Association of Realtors says the state’s real estate transfer tax is stifling affordable housing in the state.
That was the message from Wesley Stefanick when he made a presentation to a state taskforce looking at the possibility of creating a statewide agency to manage housing. He noted that the transfer tax is a major expense for people buying and selling homes, and one that can’t be folded into a buyer’s mortgage.
The transfer tax, which includes a state and local portion, ranges from 3.5% to 4%. Often, that fee is split between buyer and seller, but in the case of new construction, the buyer often has to cover the entire amount.
Stefanick acknowledged that the transfer tax is a big source of revenue for the state.
“That's nearly a quarter of a billion dollars a year flowing into the state budget generated directly by the transactions our members handle,” he said.
But, that revenue is keeping people from buying homes, he contends.
“It's the highest state-level transfer tax in the country, collected at closing on top of the down payment,” Stefanick said.
Also contributing to the problem, he says, is a staggering gap between the net worth of people who own homes versus those who rent.
“According to the Federal Reserve's 2022 Survey of Consumer Finances, the median homeowner's net worth is roughly $396,000 compared to just $10,400 for renters,” he said. He attributed that gap, at least in part, to financial literacy and noted that the Delaware Association of Realtors is building out a financial literacy website.
Republican State Senator Eric Buckson agreed that the transfer tax is high, but warned that lowering it would create some difficult choices for lawmakers.
“In order to do that, you're going to have to look at some serious decisions about what are we not going to spend, fund, or expand, or where are we going to get the dollars from,” Buckson said. “It's not that simple to just say, claw it back to 3%, but if somebody sends a bill my way that has that, I'm all in.”
While the task force is hearing about many aspects of the state’s housing challenges, its primary mission is to evaluate whether Delaware needs an overarching agency to coordinate the state’s housing efforts. On that front, Stefanick says the Delaware State Housing Authority seems to be the best option.
“DSHA has decades of institutional knowledge, established federal funding relationships, and existing statewide programs,” he said.
But, he warned, creating a statewide agency, or giving DSHA an expanded portfolio, shouldn’t take power out of the hands of legislators.
“Whatever structure does emerge, we do have one overriding concern. The General Assembly should not surrender its own authority by delegating rulemaking power that affects property owners to an executive agency,” Stefanick said. “Decisions that touch the property rights of Delawareans should remain with the people's elected representatives who directly answer to voters.”The Housing Department was originally expected to release a report in April, but extended its deadline to October 1.
