Complex and divisive real estate transaction fees have been floated as a way to fund affordable housing in Colorado.
When a simple yes or no question about them was recently posed at a Durango City Council candidate forum, however, the discussion that ensued showed it wasn’t necessarily easy to answer.
The candidates were asked: Are you in favor of implementing a property transaction fee? Who would pay the fee – buyer or seller – and what percentage would it be?
The Taxpayer’s Bill of Rights prohibits cities from imposing property transaction taxes, but fees could be allowed, city attorney Dirk Nelson said.
“The basic idea of a fee is it needs to be supported by some findings of what a service costs,” he said.
The city could probably use fees to fund affordable housing, he said.
However, those who oppose fees often argue that they are, in fact, taxes, said Rich Jones, director of policy and research from the Bell Policy Center.
“It’s not unusual to have that debate,” he said.
Candidates at the forum discussed fees or proposals that they were familiar with, including one that might work on the state level and one that does work within a development. But in follow-up discussions about such fees, it was clear that council candidates are leery of them in Durango.
Chris Bettin said the Colorado State Senate had considered a real estate transaction fee, but the proposal died in committee.
It would have increased the fee on documents filed with county clerks from $1 to $5. The additional $4 would have gone into a statewide attainable housing investment fund, according to a bill summary.
That type of fee would be exempt from TABOR restrictions, Jones said.
Bettin said he is not in favor of real estate transaction fees and taxes in Durango because they could keep some from buying homes.
“We are talking about affordable housing and then people talk about adding costs to housing,” he said. “That does not seem rational to me.”
A nominal state fee might have been a relatively painless way to raise a substantial amount of money that would have been shared with Durango, but small fees likely would not raise a meaningful amount of money on the local level, Bettin said.
While he does see transfer fees and taxes as a solution, he supports funding affordable housing in town.
“I am very interested in how we create diverse housing,” he said.
At the forum, Melissa Youssef noted that the Three Springs development has a real estate transaction fee.
A seller in Three Springs pays 0.25 percent on the home’s price into a fund for affordable and attainable housing. It is part of the development’s Master Association covenant requirements, said Tim Zink, real estate portfolio manager for the Growth Fund. The nonprofit Master Association governs both the residential and the commercial property at Three Springs, he said.
Some of the Three Springs fees were given to the Regional Housing Alliance, now known as the Homes Fund, to help residents buy homes, he said. But it is not restricted to that purpose.
Youssef clarified later in an interview that she is not in favor of any new fees at this time.
Instead, she would like to create a 10-year comprehensive plan of the city’s financial needs.
Dean Brookie said a fee to help pay for affordable housing would be worth investigating, but it could not be so onerous that it prices people out of the market rather than encouraging home ownership.
Candidates Tom Eskew and Dave McHenry both opposed a property transfer fee at the forum.