Popular Housing Tax Faces Legal Challenge

A lawsuit moves ahead after overwhelming support of high-end home sale tax

Santa Fe voters from every district in the city showed strong support in the Nov. 7 election for a high-end excise tax to support affordable housing projects but a lawsuit that seeks to stop it still remains ahead.

A buyer of a home over $1 million will pay the new 3% excise tax only on the portion of the sale that exceeds the threshold. For example, the buyer of a home priced at $1.2 million would owe $6,000. The revenue generated will support the city’s Affordable Housing Trust Fund.

The Santa Fe Association of Realtors, along with two individuals who say their properties are worth more than $1 million, Kurt Hill and Richard Newton, filed a lawsuit Oct. 12 in the First Judicial District Court against the City of Santa Fe that argues city officials lack the authority to impose the “mansion tax” under state law.

City Attorney Erin McSherry denied the claim in an Oct. 6 memo in which she evaluated the measure.

McSherry tells SFR in an interview Thursday she has no concerns regarding the measure’s legality and the city will be filing a motion to dismiss the case due to a lack of “strong arguments” from realtors, as well as overwhelming public support for the measure—73% of approximately 20,809 voters.

“The main thing here is that home-rule cities are supposed to have the authority to govern themselves, and laws are supposed to be able to be applied liberally to allow for that self governance,” McSherry says. “So everything in the state constitution and in state statutes should be considered through that lens of governance by the city. So that’s the starting point, but then we do go through each of the arguments that are being made by the plaintiffs.”

Precinct voting data from the New Mexico Secretary of State’s Office shows all four of Santa Fe’s City Council districts responded positively to the measure.

Charles Koenig, a retired 20-year resident of Santa Fe, said he owns a house in District 2 worth over $1 million. Still, he came to St. John’s United Methodist Church on Election Day and cast his ballot in favor of the tax because it aligns with his “progressive values.”

“We have an affordable housing crisis in this city, and I think [District 1 Councilor Renee Villarreal and District 4 Councilor Jamie Cassutt] who sponsored this piece of legislation were courageous and brilliant,” Koenig told SFR.

District 4, the central district that includes the Bellamah neighborhood and Midtown Campus, led the pack in favorability. Over 75% of 4,168 voters supported the tax.

District 1, which covers the city’s north side and downtown, plus a sliver of the west side, and District 2, the city’s east side district, also heavily backed the measure. In District 1, approximately 73% of 7,367 participants responded yes, while District 2 showed the third-most support with 72% endorsement from a total of 6,803 voters.

The city’s Southside territory, District 3, was least favorable to the tax: a 71% yes response among 2,356 voters.

Villarreal tells SFR she was “overjoyed” about the passage of the tax, adding it’s “a great way” to end her term. She didn’t seek re-election and the candidate whom she endorsed, Alma Castro, won the seat.

“It was a community-powered effort, and it was clear by the numbers that all Santa Feans from all parts of the city felt like this was long overdue,” Villarreal says. “Councilors are conduits to community voice and action. And this is one example where we saw many grassroots organizations like Chainbreaker Collective, Somos Un Pueblo Unido, Inter-Faith Housing Development Corp, even the Santa Fe County Democratic Party, Earth Care, Homewise and all those folks were really part of the outreach and door-knocking and making calls and talking to family and friends about the importance of it, so I feel like I’m part of an important policy piece.”

The tax is set to go into effect six months from the day election results are certified, McSherry says. The state Canvassing Board plans to meet for that process on Nov. 28, which would put the effective date as May 28, 2024.

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