State legislation authorizing the five East End Towns of East Hampton, Riverhead, Shelter Island, Southampton, and Southold to each establish a Town Community Housing Fund (A.2633/S.6492) has been signed into law by Governor Kathy Hochul. The bill was sponsored by Assemblyman Fred W. Thiele, Jr. and State Senator Anthony Palumbo. The authorization to create such a fund is a home rule decision by each Town Board, subject to a mandatory referendum.

Under the proposed legislation, the Community Housing Fund can be used (a) to provide financial assistance to first-time homebuyers not to exceed 50% of the purchase price, (b) for the production of community housing for sale, (c) for the production of community housing for rent, (d) for rehabilitation of existing buildings for community housing, (e) for housing counseling, and (f) for the acquisition of real property in existing housing units, to result in production of community housing for sale or rent. The legislation could also be utilized to enter into public/private partnerships to provide housing opportunities and employee housing for local businesses.

Towns would have to first adopt a Community Housing Plan and a local law establishing the fund. Finally, a mandatory referendum must be approved by the voters. 

Town Community Housing Funds would be financed by a ½% addition to the existing 2% real estate transfer tax that funds the Community Preservation Fund. In addition, the legislation would increase the exemption on the entire transfer tax for improved property to $400,000 in the Towns of East Hampton, Southampton, and Shelter Island. The exemption would increase to $200,000 in Southold and Riverhead. The exemption would only apply to transfers of $2 million or less. The new law, if implemented, will result in a tax cut for transfers under $1 million on the South Fork and on Shelter Island, and $400,000 or less on the North Fork and in Riverhead.

Finally, the purchase price limit for the exemption for first-time homebuyers in the towns of East Hampton, Southampton and Shelter Island would be increased from 120% to 150% of the purchase price limit as defined by the State of New York Mortgage Agency (SONYMA). These exemption increases will mitigate any adverse impact from the transfer tax on the provision of community housing. It is estimated that the new law, which will remain in effect until 2050, will generate more than $600 million for community housing.

Now that the Governor has signed the legislation, the focus shifts to each of the five East End towns for implementation. Each Town must adopt a Community Housing Plan so that the public will know how each Town would utilize the fund. The law provides for an advisory committee to assist in the preparation of the plan. Each Town would also be required to pass a local law creating the fund and imposing the ½% transfer tax with the higher exemptions. Finally, the creation of the fund and imposition of the tax would be subject to a mandatory referendum. It is anticipated such a referendum could be held on election day in November 2022.

The need for a dedicated affordable housing fund in the Peconic Bay Region has been well documented. In June 2019, the State Comptroller issued a report entitled “Housing Affordability in New York State” which concluded that “the challenge of affordability extends throughout New York State” and such costs are generally “higher in downstate regions”. According to the State Comptroller’s report, Suffolk County is the fourth most expensive county in the State with regard to rental housing and the second most expensive with regard to owner housing. For 31.8% of Suffolk renters and 17.5% of homeowners that burden is “severe”.

The issue of affordable housing is even worse for the Peconic Bay Region of Suffolk County. Housing prices are higher, and incomes are lower than in the rest of Suffolk. According to the U.S. Census, the median value of an owner-occupied home in Suffolk in 2019 was $397,400. However, in East Hampton the median value was $869,600 and in Southampton $671,600. At the same time the median household income in every town in the Peconic Bay Region ($73,161-$96,687) is below that of the rest of Suffolk ($101,031). The Peconic Bay Region is one of the most expensive housing markets in the state.

The ongoing affordable housing crisis on the East End has been exacerbated by COVID-19 and the sudden and drastic increase in second home purchases. This has driven up the cost of real estate on the East End and decreased housing supply.

Thiele stated, “The lack of affordable housing has reached crisis proportions. Local employers have difficulty hiring and retaining employees because of housing costs and availability. Local volunteer emergency services are experiencing difficulty in recruitment and retention. Long-time residents are forced to leave the area. This has all been made worse by the COVID-19 pandemic, which is driving up the second home real estate market on the East End. This legislation will provide Towns with a meaningful tool that can make a difference by providing new housing opportunities for its residents. This legislation can help make existing housing stock more affordable, as well as foster the construction of new housing inventory. Ultimately, it will be the voters who will get to decide. My sincere thanks to Governor Kathy Hochul for approving this legislation and giving East End residents the power of self-determination on the issue of affordable housing.”

Palumbo added, “Making all of Long Island, but especially the East End, a more affordable place to call home has been and will continue to be one of my top priorities as State Senator. The passage and enactment of this bi-partisan legislation is an important first step toward ensuring that everyone from first responders, to the local workforce and young families have an opportunity to achieve the American dream of homeownership here on the East End.”