BALTIMORE — A tax credit designed to encourage the construction and purchase of new homes in Baltimore City is ending, at least for now. The Maryland General Assembly did not renew the credit last session so it ends June 30.
"It's not a great situation," said Sen. Bill Ferguson.
Ferguson said he wishes he had found out sooner that the newly constructed dwelling property tax credit was due to expire.
"Unfortunately we didn't find out until the second to last day of session which would have been impossible," said Ferguson.
He said they look to the Mayor's Office, which would have been Catherine Pugh's administration, to put things like that on their radar in the fall.
"Local tax credits are things that we generally rely on the local jurisdiction to bring to our attention," said Ferguson.
The tax credit is often advertised on listings as an incentive to move in. Monument Sothby's International Realty Realtor Alex Lerner said it's basically the ability to have a decreased tax amount for the first five years of owning a new construction home, so it makes building and buying in the city more appealing.
He said take for instance a $227,000 assessed home. The credit totals around $7,600 over five years. The loss of the credit means people looking to buy newly constructed homes in Baltimore over the next six months could lose out on thousands of dollars in tax credits, plus Lerner said it could impact new development and push people towards the resale market or out into the county.
"We definitely have people who look for new construction tax credits just because taxes are higher in the city to begin with so when you are making your monthly budget on what you can afford, this definitely impacts it. For instance, doctors who may not be making as much now but in the future may be able to make that, so for the time being they can afford these new construction homes and then in the future be able to afford it as well," said Lerner. "Taxes have always been an issue in the city, and I think most people have recognized that so any incentive or help that people can get in those taxes has been a huge help, not only for homeowners but for developers in the city as well, just knowing that the city is behind them to help them to lower taxes and bring more people in."
The credit has been in place for more than 20 years. Ferguson said realistically, the legislature won't be able to take it up until 2020, so it will impact home buyers and developers in the meantime.
"You’ll see more people leaning towards the resale market and more towards a CHAP tax credit," said Lerner. "Construction prices will start to drop a little bit if you don’t have a lot of people buying. More so for the lower end than for the higher end as lower end, most people will be on that strict monthly budget."
Ferguson said they are looking into retroactively applying the credit, but it's complicated administratively. For right now, if your property is assessed before June 30, then you can get the tax credit, Lerner said, assuming everything is in order and processed correctly. If you haven't started that process yet, even if you close on a property today, Lerner said it would be very tough to get everything done before the end of the month.