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Delaware Senate Democrats

Senate passes legislation to encourage more investment in affordable housing

May 18, 2023

DOVER – As a record number of Delawareans experience homelessness, the Delaware Senate on Thursday passed legislation to encourage more public and private investment in the construction of new affordable housing units throughout the First State.

Senate Substitute 1 for Senate Bill 87 would fully exempt affordable housing projects funded by nonprofits and government entities from the state’s portion of the realty transfer tax.

According to the latest data available from the National Low Income Housing Coalition, Delaware is currently facing a shortage of more than 20,000 affordable rental homes available to extremely low-income renters.

By effectively lowering the cost for both buyers and sellers, SS 1 for SB 87 will help to spur growth among the housing stock most within reach for low- and medium-income families.

“Towns and counties have a lot of leverage when it comes to determining what types of housing get built in their jurisdictions,” said Sen. Russell Huxtable, prime sponsor of SS 1 for SB 87 and a member of the Senate Housing & Land Use Committee.

“The bill we passed today will encourage our local jurisdictions to participate in the growth of affordable housing more robustly, while streamlining existing transfer tax exemptions for first-time homebuyers,” said Huxtable, D-Lewes. “While we still have a lot of work left to do around affordable housing, I want to thank my Senate colleagues for taking this important step to make sure our tax code aligns with our values and the needs of our residents.”

Delaware’s realty transfer tax is a one-time fee imposed when a property is sold from one party to another. The state currently charges 2.5 percent of the sale cost, while Delaware’s local governments collect 1.5 percent. Typically, the total cost of the combined 4 percent tax is split between buyer and seller.

Under current state law, a residential property rehabilitated by Habitat for Humanity, a church or other nonprofits is exempted from the state’s portion of the realty transfer tax.

SS 1 for SB 87 would expand that exemption to also include newly constructed affordable housing sold by nonprofits, as well as affordable housing built with federal, state, county or municipal funding, such as the $30 million in American Rescue Plan funding recently made available by the Delaware State Housing Authority.

First-time homebuyers are also currently exempted from paying the realty transfer tax on the first $400,000 of their home’s value if they occupy the home within 90 days of purchase.

SS 1 for SB 87 would amend that exemption to include first-time home buyers who occupy a residence within 90 days of obtaining a certificate of occupancy, a change that would allow people who buy property with plans to build a home more time to qualify for the exemption.

“The shortage of affordable housing has had a serious impact on residents’ ability to not only afford to purchase a house, but just to be able to put a roof over their heads. We as a state need to look for creative ways to increase our housing stock and get more Delawareans into homes,” said Rep. Paul Baumbach, SS 1 for SB 87’s lead House sponsor. “Exempting these homes from the realty transfer tax will help bring the cost down and make the dream of home ownership a reality for more residents.”

SS 1 for SB 87 now heads to the House for consideration.