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Baltimore affordable housing deal saved by last-minute negotiations

Destiny Watford was working Friday afternoon at United Workers’ offices in a play area without air conditioning when she received a phone call.

Activists and officials from Mayor Catherine Pugh’s administration recently had agreed on parameters for a deal to nix a proposed charter amendment compelling the city to subsidize Baltimore’s Affordable Housing Trust Fund. The agreement came just in time: Monday marked the deadline to submit petition signatures to the Board of Elections to place the question on November’s ballot.

“We thought we were on the same page,” Watford said.

The deal, however, wasn’t final. Organizers wanted to be certain the petitions were ready in case the deal went south, and dozens of residents were still counting signatures. The call Watford received put the agreement, hammered out through months of intense negotiations, in danger of falling apart.

The administration wanted revenues in excess of $13 million generated by increasing transfer and recordation taxes to go to the city’s general fund. Watford, a lead negotiator, and other activists believed their deal put any additional revenue from a tax increase in the trust fund.

Watford stood her ground. Ultimately, both sides agreed if a proposed tax increase generated more than $16 million in revenue in a given year, the excess would be split evenly between the general fund and the Affordable Housing Trust Fund. That cleared the way for Pugh’s office to announce that a deal —with help from City Council President Bernard C. “Jack” Young — was in place to eventually provide $20 million for the trust fund annually and keep the charter amendment off the ballot.

Activists from organizations that make up the Housing for All Coalition and the Baltimore Housing Roundtable still need to sign a memorandum of understanding with the city for the deal to be official. It’s also contingent on the Baltimore City Council amending and passing legislation increasing the city’s transfer and recordation taxes.

But nearly two years after voters approved creating the Affordable Housing Trust Fund, backers have a deal for funding. The money, activists argue, will empower Baltimore communities to provide permanent affordable housing, and redevelop neighborhoods without pushing existing residents out.

“I’m happy we reached this agreement, but the fight doesn’t end here,” Watford said, adding there’s still work to be done to make sure the money going to the fund is properly used.

Seeking funds

Baltimore voters approved a charter amendment in November 2016 creating an Affordable Housing Trust Fund without a dedicated revenue stream. Activists have since pushed to subsidize the fund. Those efforts, which included attempts to secure general obligation debt and increase taxes, failed.

Odds of securing funding, however, gained a significant boost in April.

Councilman John Bullock sponsored legislation, with unanimous support from council members, raising transfer and recordation taxes by 1 percent. That increase was expected to provide $20 million to the fund annually. But action on the so-called “Fund the Trust Act” was slow coming, delayed by the city’s budget process that took priority because a budget must be approved by July 1.

Activists, who felt burned previously by commitments that never materialized, started collecting petition signatures in May to place another charter amendment before voters. The amendment called for directing 5 cents of every $100 of assessed property value in the city to go to paying for the trust fund.

By pushing the charter amendment, activists made it clear they were playing hardball with the city. Activists knew the mandated spending, and the likelihood of the amendment passing, would force the Pugh administration to negotiate. While a tax increase wasn’t a priority for Pugh, it was more palatable than having hindered the flexibility to push funds to executive priorities.

The Baltimore City Council’s Taxation, Finance, and Economic Development Committee in July scheduled a hearing on the “Fund the Trust Act” for Sept. 27. But coalition members had already gathered more than 12,600 signatures at that point, and were set on pushing the charter amendment as leverage in negotiations.

But as the amendment appeared destined for voters, news about the deal leaked Thursday evening. Pugh’s office then said Friday the plan would reduce the tax increase in Bullock’s legislation and promises funding via general obligation debt.

Under the agreement, the bill will be altered to include a 0.6 percent excise tax on the transfer of real property valued at $1 million or more, and 0.15 percent on recordation instruments for properties worth $1 million or more. The deal also requires funding, via the ordinance of estimates or legislation, starting with $2 million in fiscal year 2020 and increasing gradually to $7 million starting in fiscal year 2023.

“This agreement proves again that the solutions to complex challenges are within our grasp and we can face these challenges with equitable and inclusive solutions that meet current needs and work against displacement of long-time residents,” Pugh said in a statement announcing the agreement.

Builders object

The deal is not being warmly received by everyone.

Josh Greenfeld, vice president of government affairs at the Maryland Building Industry Association, said his organization discussed the consequence of raising city taxes with the Pugh administration. The real estate and development industry in the city are committed to providing affordable housing, he said, but he called increasing taxes that are already highest in the state bad policy.

“Research and our past experience here in Baltimore city shows raising transaction costs…. have a negative overall effect on property tax revenues,” Greenfeld said.

There’s some research to support claims higher transfer taxes hurt high-end real estate sales. A 2015 survey by the National Bureau of Economic Research on New York’s so called “Mansion Tax” found the transfer tax on properties worth $1 million or more managed to eliminate nearly 1 percent of transactions.

Another study, conducted by researchers at the University of Oregon, the University of Michigan and Goldman Sachs, found changes to the transfer tax in Washington didn’t impact the amount of sales or how long a property stayed on the market but did reduce sales prices.

Matt Hill, of the Baltimore Housing Roundtable, called concerns raised by opponents of the deal “typical fear mongering.” The tax only impacts transfers of sales, he said, that happen on average once a decade.

“We’re very confident this is a great deal for Baltimore, the residents of Baltimore, and we look forward to development that benefits neighborhoods in the city,” said Hill, who credited Young with making the deal possible.

Lester Davis, Young’s spokesman, said the council president was happy with the agreement and downplayed the last-minute negotiations. While getting all stakeholders on board took “quarterbacking” from the council president, Davis added, an agreement was reached because all sides want to solve affordable housing issues.

“He was pretty clear (from the start) what he wanted was for Baltimore to address its affordable housing crisis in a real way,” Davis said.

Activists on Monday said the agreement is only one step. Residents are currently being pushed out of their communities, and facing homelessness.

Watford, a Curtis Bay resident, said the promised money funds tools to fight a pattern of development that only produces two outcomes for neighborhoods: Communities are left to either suffer from disinvestment and neglect, she said, or endure new development raising rent and pushing poor residents out.

“People are being pushed out of their homes and being pushed out of the neighborhoods that they love,” she said.

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