Mansion Tax in for Fight

Fourteen years ago, Santa Fe voters rejected a tax on high-end homes that would have paid for affordable housing programs. As city councilors consider a similar idea for the November election in the face of new economic realities, the Santa Fe Association of Realtors plans to fight it again.

Donna Reynolds, government affairs director, acknowledged the association’s campaign to oppose a “transfer tax” that ultimately failed in a 2009 election and tells SFR the group has already decided not to support the new effort.

“[The Santa Fe Association of Realtors doesn’t] find it equitable, and it’s likely to have some interference with the market because you’ll have the purchaser really trying to avoid paying or mitigating to avoid paying that kind of tax,” Reynolds says. “We really think the city already has the funding to do what they want to do. There’s a lot of housing-related tax revenues that the city gets that actually funds them. "

Under the proposal making its way through the City Council process, municipal voters would decide whether to impose a 3% excise tax only on the portion of any home sale that exceeds $1 million dollars.

Backers say a funding source for affordable housing should be connected to one of the causes of the housing crisis: a robust mansion market.

Daniel Werwath, executive director of New Mexico Interfaith Housing and co-founder of the Santa Fe Housing Action Coalition, points to data that shows home sales over $1 million in Santa Fe County have doubled since 2019, with more than 400 being bought last year. For him, that’s just one of many reasons the tax seems like a good idea.

“We have this huge outside pressure that’s bringing a lot of outside capital into our community that pulls housing prices away from local workers,” Werwath says. “I think the reason this makes sense is it’s trying to tie a solution to one of the main drivers of the problem, which is people with outsized financial wealth really pushing the housing market farther and farther away from working people.”

District 4 Councilor Jamie Cassutt and District 1 Councilor Renee Villarreal are co-sponsors of the bill, which argues that rising home and rental prices are negatively impacting Santa Feans.

“This is not necessarily a fresh proposal...but given how things have changed, given what the housing market looks like and how the pandemic impacted it, given the incredible inequity in housing accessibility in our community, we do think that this is the time to move this forward and see if the voters are ready for something like this,” Cassutt says.

Werwath says there are clear differences between now and the 2009 election when 54% of voters rejected a tax that had a lower threshold ($750,000) and a lower tax rate (1%). Today, he says, the city continues to experience “unprecedented amounts of displacement” that are “akin to natural disasters.”

“I think there’s a big sentiment three years into our third housing crisis in 15 years that people want to see action around this,” he says. “The trust fund was a new thing in 2009 and sort of untested, and now we have almost a 10-year track record of really sound fiscal management impact, really innovative programs and affordable housing projects coming out of the trust fund that help make the case of why this investment makes sense.”

The city’s Fiscal Impact Report for the bill proposing the election question does not provide an estimated revenue from the tax. Cassutt projects the tax would generate about $4.5 million per year, based on data about 1,552 million-dollar home sales in Santa Fe between 2018 and 2022. Werwath described this revenue estimate as “conservative.”

Currently, the governing body allocates around $3 million annually to the Affordable Housing Trust Fund from the general fund, but according to Cassutt, a dedicated stream of revenue such as the one being proposed is “more protective” for the fund.

If the city established a dedicated source of funding, she says nonprofit organizations working in housing could undertake multi-year planning, apply for tax credits and ultimately get more units on the ground.

Cassutt points to the gulf between second-home buyers and the working class struggling to find affordable homes.

“It’s pushing out families, it’s preventing grown adults such as myself who grew up here from coming back home,” she says, “and that is changing the character of our community.”

Public comment on the bill at City Council begins at 5 pm July 12, with several committee hearings planned before a potential final vote Aug. 9. The last day for the city to submit ballot language for the Nov. 7 election is Aug. 29, according to County Clerk Katharine E. Clark.