Realty Transfer Tax Increase Proposed

Realty Transfer Tax Increase Proposed

Legislation to increase the City’s realty transfer tax from 2% to 3% is to be introduced into City Council today.  As part of the City’s affordable housing task force which released its recommendations last May, it listed among its suggestions for providing money for the fund a boost in the tax, though the ordinance as proposed does not specifically mention affordable housing or the task force (it mentions possible cuts or elimination of the Community Development Block Grant program and needed programs and activities).  An ordinance creating an affordable housing trust fund was enacted last year.

In Pennsylvania, a tax on realty transfers (see page 21) is levied by the state (1%), the municipality, and the school district.  By and large the latter two split a 1% rate 50/50.  Home rule municipalities can exceed the limit, and the Pittsburgh Public School District is governed by a separate statute and levies the tax at 1%.  Thus, the current realty transfer tax in the City of Pittsburgh is 4%.  It would rise to 5% if the proposed increase goes through.  A current listing of realty transfer tax rates in Allegheny County is here.

In the Pittsburgh City Code there are two separate sections detailing the City’s transfer tax (here and here); the proposed ordinance would raise the home rule portion of the tax to 2%.  The last increase came in 2004.

Interestingly the General Assembly passed legislation that was signed into law in 2015 that provided for a portion of its realty transfer tax to go toward the Housing Affordability and Rehabilitation Enhancement Fund (a fund established in 2010) if tax collections exceeded the estimated amount for FY 2014-15 (the distribution would be either a percentage of the difference, or $25 million, which ever was less).  In the current fiscal year for the state this transfer is estimated to total $12.7 million–that is roughly the amount 1 percentage point of the City’s 2% tax is expected to raise this year ($25.3 million).

The tax increase introduction comes one day after the release of the City’s audited 2016 financials which show a $37 million surplus ($6.2 million of this came from increased collection of the realty transfer tax) as measured by the net change in the fund balance for the general fund in 2016 (see page 7 of the CAFR).  What impact this will have on the debate over a tax increase will be interesting to see.