Monday, March 30, 2009

Housing Trust Fund for Texas--new hope!

The Texas Legislature will likely consider a positive and dramatic expansion of the state's Housing Trust Fund. Currently, Texas places a meagre $5.8 million annually into the fund. Now Senator Royce West and Representative Yvonne Davis have drafted bills that would establish a flat document recording fee of $10 on real estate transfer/sale documents. Such a fee would generate an estimated $30 million (conservative estimate) annually to the Housing Trust Fund.

The Housing Trust Fund makes funding available for the development of much needed affordable housing for low-income families in Texas. Those of us who work in the field of affordable housing recognize the pressing need for these funds and, even more, for the creation of a steady, sustainable stream of funding for this important purpose.

Unfortunately and, in my view, inexplicably, Texas realtors oppose even this small fee increase that would fund this important work. Housing Texas provided the following page of "myth and fact" about the pending legislation relative to this important issue.

Review what follows and then contact your state senator and representative to express your support for the legislation:


Myth: The Housing Trust Fund bills before the Texas Legislature (S.B. 950 and H.B. 3163)
will create a “real estate transfer tax” on home sales.
Fact: S.B. 950 and H.B. 3163 will establish a flat document recording fee of just $10 on the first page of real estate documents. THIS IS NOT A TAX.

Myth: The proposed document recording fee will add to the cost of housing, and keep low income families from affording homes.
Fact: A $10 fee is minor compared to thousands of dollars in existing fees on real estate
transactions. It should not be the determining factor in whether a family can afford a home.
When compared to the average realtors’ fees on a home sale, $10 is minuscule. (If it is enough to make our break a home sale for a family, they clearly are not financially prepared to purchase a home.) The average real estate agent commission on the sale of a $200,000 home is $10,000 (based on a 5% commission rate). In addition, “administrative” fees and another $3,975 in title and closing costs bring total fees on the transaction to over $14,000.23.

Myth: The Housing Trust Fund is bad for realtors’ business.
Fact: Not only is the Housing Trust Funds a major economic stimulant that spurs additional private investment, adds to the tax base and creates local jobs, but it is actually good for realtors’ business. If funded at $30 million per year, the Housing Trust Fund could provide home buyer assistance to 3,000 households who otherwise may not be in the market to buy a home. Assuming the homes are resold every even years, realtors could generate over $64 million in realtors’ commissions over the next 30 years. This figure is based on the statewide, average loan of $108,231 for homes purchased under the home buyer assistance program, not factoring in likely home appreciation.

With $30 million per year, the Trust Fund could provide owner occupied home repair to 1,000 households, elevating the value of these homes by an average of 250 percent. Assuming a modest initial home value of $60,000, values would be increased by $90,000, or a total increase of $90 million for all homes repaired with Housing Trust Fund dollars. In resale, this would represent $4.5 million in realtors’ commissions.

Myth: Realtors are always opposed to generating revenue for housing trust funds from the real estate industry.
Fact: Individual realtors have endorsed the Texas Housing Trust Fund Campaign and housing trust fund campaigns in other states.



Anonymous said...

I have another idea. Just add it to the phone bill. I don't have any idea what all those charges are on that bill every month!

(Seriously, this is a great idea. I don't know why anyone would oppose this. It is truly miniscule in the overall transaction).

c hand said...

Would you voluntarily donate $10 or $100 to the Texas Housing Trust Fund? Does the state's fund director spend your money better than you do?

Anonymous said...

Far from the misleading rhetoric of the Texas Realtor's group, what this really does is require those of us who CAN afford to buy a house (and are in fact buying one) to help out one tiny bit to get those who CAN"T afford a house into decent housing. Seems modest and reasonable.

dmowen said...

@ c hand Yes, I would voluntarily donate $10 to the Texas Housing Trust Fund. Because I love my fellow Texans and I want them to have a place to live. I'm a student making less than $30,000 a year, but I would give 10 bucks to just about any charity. I mean, it's only 10 bucks. And yes there are certainly organizations that can spend my money better than me to achieve a greater social return on investment than the marginal utility I would receive from, say, a takeout lunch or an extra drink at the bar.

I understand there is a difference between voluntary contributions and taxes/fees, but if you accept that taxes are necessary/beneficial to society as a whole and the real issue is the benefits they achieve relative to the burdens they impose on particular citizens, in this case the benefits seem like they would outweigh the relatively minor burden of another $10 on top of thousands in closing costs.

c hand said...

Does Gov. have a good track record in efficiently and economically providing housing? Why not give the $10 directly to a neighbor for housing.

Anonymous said...


Let's be real. You give $10 to your next door neighbor. Great, you've paid - what - 1-2% of their rent for 1 month. But if everyone who files a deed is assessed $10 extra, it becomes $30M. That's a lot of affordable housing that is still there 10 years from now. That's the power of collective action.

The gov't is certainly not fool proof when it comes to using our money. But, as we've discovered recently, neither is the market.

dmowen said...

I don't know about the government's overall track record, but the housing trust fund makes the money available for non-government entities to do the actual work of creating affordable housing. I wasn't very familiar with the program but I looked at their website and over half the money goes to something called the "Bootstrap Self-Help Housing Program" which supports people building their own homes with significant sweat equity. Another large chunk is dedicated to helping returning veterans afford housing.
Sounds pretty good to me. The reason I wouldn't give the $10 directly to the neighbor is the same reason why the $10 document fee is not a big deal: $10 by itself doesn't make much difference one way or another. It is only when these funds are combined into a pool that they can be efficiently used for a purpose like developing affordable housing.

Anonymous said...

There must be some "fuzzy math" going on here.
From 2000 to present, Texas averages about 250,000 home sales per year. At $20 per sale, that's $5 million, not $30 million.
How do you get to $30 million per year?

So, once passed at $10 a recording, look for this tax/fee to either be raised OR applied to all filings.
Seems like if the State is behind this, it should be funded just like all other programs as part of the General Account, not placed on a narrow segment of our economy. I read this week the TX House is considering a $5 million increase to this fund bringing it to $10.6 million annually.
Sorry, Larry, I'm not for it.

Anonymous said...

Quack, quack.

Larry James said...

Anon 7:22, no funny math at all.

The estimate in my post and in my recent Op-Ed piece in The Dallas Morning News came from the Texas Comptrollers office upon request from Senate staff.

The figure you reference includes only those homes sold from the MLS/realtor services side. The Texas A&M Real Estate Center estimates another 250,000 in new home sales for a total of 500,000 annually.

The $10 applies to all real estate transaction documents, so would be included in a line of equity, for instance, and other real estate transactions that do not involve a home sale. It also applies to commercial real estate transactions.

Hope this helps. Thanks for taking the time to post.

Anonymous said...

Thanks for your late post, Mr. James. I know you have a tough battle every day and you're seeking to do good things. My housing estimate was from the TAMU Real estate web site for TOTAL houses sold. I think 250,000 houses is the total residential transactions for a $5 million annual fund.
I think the $25 million burden will fall on commercial developers, apartment builders, businesses, etc. who are out there taking the risk of development.
I think it's misleading in this blog and in your op-Ed piece to pose this as only a $10 fee on a home sale, who could object to that? But your are only talking about 15% of the fund. I wish you would give your readers more of the story.

Say a developer wants to build apartments; think of all the documents, deeds, easements, etc. that have to be recorded. It seems unfair for this narrow segment of the tax role to bear this burden. Plus, I have my doubts about the clerks office keeping up with these amounts as collected.

Anonymous said...

So much for the $10 - and the truth. This is how a liberal "persuades."

Larry James said...
This comment has been removed by the author.
Larry James said...

Just for the record, the TAMU study does not record all of the homes sold annually, only those off the MLS listings. The data I report comes from industry leaders and a study commissioned by some of our representatives in Austin.

Scott Collier in Dallas said...
This comment has been removed by the author.