Pittsburgh City Council vote means deed transfer tax will likely increase in January

Pittsburgh City Council on Wednesday advanced legislation that would increase the city's realty transfer tax by 25 percent to help the city increase its stock of cut-rate housing options for families living at or near the poverty line.

The tax on property sales would increase in two phases by 0.5 percent. It would jump from 4 percent to 4.5 percent in January and to 5 percent in January 2020. It would remain at 4.5 percent in 2019.

The money would go into a trust fund that council established last year to build housing and rehabilitate older homes for those who qualify under low-income standards.

Realtors attending a council meeting opposed the increase, saying it would stymie real estate investment and push potential home buyers to suburbs where the tax rate is lower.

They said the increase would be tacked onto a buyer's closing costs and have a disproportionate impact on first-time home buyers and people in lower income brackets who are buying a home.

Councilwomen Darlene Harris of Spring Hill and Natalia Rudiak of Carrick agreed. They voted against the increase.

Rudiak said her office found that 74 percent of real estate transfers in 2016 were for $150,000 or less.

“What that means is low- and moderate-income people buy properties of $150,000 or less and they will bear the greatest burden of this tax,” Rudiak said. “I don't think we can solve the affordable housing crisis by making housing more expensive.”

Supporters noted soaring rental rates in neighborhoods such as East Liberty, where development is booming. They said pending council legislation that would provide subsidies to help lower-income property buyers pay closing costs would offset the tax increase.

“When folks talk about 10,000 vacant houses in the city of Pittsburgh, we don't have any money to fix them up,” said Mark Masterson, executive director of the Northside Community Development Fund. “When you see these vacant houses, that's the big reason.”

Council gave preliminary approval to a bill sponsored by Councilman Dan Gilman of Squirrel Hill that would authorize grants from the affordable housing trust fund equal to 2.5 percent of a sale price to first-time home buyers.

The grants would be available to people who buy owner-occupied homes at or below the average sale price of a house in Pittsburgh. Gilman said the grants would more than cover a 1 percent increase in the transfer tax.

“Any argument that it is more expensive to buy your first home in the city than the suburbs is moot,” he said.

Officials have estimated 17,000 city residents need housing at below competitive market rates.

The current 4 percent transfer tax is divided among the city, which receives 2 percent, Pittsburgh Public Schools and the state, which each receive 1 percent. It is a one-time payment typically split between the seller and buyer of a property at closing.

Council approved the increase by a 7-2 vote. A final vote is expected on Tuesday. Mayor Bill Peduto previously said he would support the tax increase.

Bob Bauder is a Tribune-Review staff writer. Reach him at 412-765-2312, bbauder@tribweb.com or on Twitter @bobbauder.