Tax deferral can make homeownership more affordable.

There is a quick and easy way to make buying a home more affordable, encourage builders to construct more affordable housing, and even produce more revenue for state and local coffers. All of this can be accomplished by allowing the payment of certain taxes affecting the sale and purchase of a new home to be deferred until the home is resold or refinanced.

This "tax deferral program" would reduce the price of a home by 7% in New York City and 5% elsewhere (the approximate value of the deferred taxes) for all first-time homebuyers. The homebuyer would repay the deferred taxes when the benefited home is resold or refinanced.

With one stroke, the "sticker shock" of buying a home can be decreased substantially. The tax deferral program will result in lower down payments and will allow families with lower household incomes to qualify to buy homes. It will make homeownership an option for many people who are presently left out. According to the National Association of Homebuilders, every $1,000 increase in the price of a home prices leaves 40,000 borderline homebuyers out of the market nationwide. This translates into about 3,000 households in New York State.

This legislation would spur both the construction and sale of homes in the New York area. In many instances, these homes would not have been built. As a result, the state and local taxing authorities, will collect revenues which would not otherwise have been generated. To make the repayments under the tax deferral program both recession and inflation proof, it would be based on 5% or 7% of: a) the actual resale price, b) the original selling price, or c) the appraised value upon refinancing -- whichever is greater.

There is no magic to the 5% or 7% figure. Builders are subject to several taxes, which are passed on either directly or indirectly to homebuyers. These collectively amount to about 7% of the sales price in New York City and 5% elsewhere in the State. They include mortgage taxes on the construction loan and permanent loan and city and state sales and transfer taxes.

Under the tax deferral program, a $159,000 townhouse in New York City would sell for $148,428. A 10% down payment would be $1,117 less; a 90% mortgage $10,055 lower; and closing costs several hundred dollars less. The qualifying household income, for mortgage purposes, would be $45,000, not $49,000.

Precedent exists for the repayment provision. In the New York City Housing Partnership/HPD Homeownership Program, homebuyers, at the time of resale or refinancing, repay the subsidy, in accordance with program guidelines. The same applies to the FHA Section 235 program, where homebuyers obtain a very low-interest rate FHA mortgage, and the interest "subsidy" is repaid.

The mechanics of the tax deferral program are simple. A builder would decide whether or not a project is feasible for the program, and file an "application," including appropriate documentation, with the State Department of Finance. The application would include a recordable instrument creating a subordinate lien of 5% or 7% or the greater of the property's original purchase price, final resale price, or appraised value upon resale or refinancing. This recorded lien would appear on the title report when the home is resold or refinanced. The owner would apply for a lien satisfaction to the Department of Finance, which would be filed, together with full payment with the county recording officer, who would cancel the lien and forward the money as appropriate. The lien would prevent the home from being sold or refinanced without the payment of the deferred taxes.

The tax deferral program would operate on a strictly "as-of-right" basis, with the State Department of Finance accepting and approving applications from builders. The homes would be purchased by first-time homebuyers for owner occupancy.

The tax deferral program can work all over New York State. Let's give it a chance.