UPDATE: Thanks to the help of Iowa REALTORS®, legislators are no longer considering an increase to the transfer tax to 2005.

STOP THE TAX ON HOMES AND OUR ECONOMY

Transfer Tax Background:
A real estate transfer tax is a state tax assessed on real property when ownership of the property is exchanged between parties. All types of real property, including residential, commercial, and agricultural, are subject to the transfer tax. Although the tax is generally levied on the value of the property, it is assessed only on the sales transaction instead of on an annual basis like the general property tax. Transfer taxes are the responsibility of the seller, but the buyer and seller may negotiate terms which allow the payment of the transfer tax to be divided between buyer and seller. Iowa currently imposes a transfer tax of $1.60 per thousand with the first $500 exempt.

Recent Developments:
The Iowa Legislature is currently discussing the possibility of increasing the transfer tax on real property by more than three times its current rate in an effort to provide some property tax relief for Iowa homeowners. These discussions are primarily being held in the Iowa House of Representatives and this call to action will be sent only to Iowa House leadership and Ways and Means Committee members.

Key Message:
Whether as a general or earmarked revenue source, the real estate transfer tax can be a major burden to buyers and sellers, particularly at time of closing. This tax greatly reduces a seller's equity. Additionally, this tax has a negative impact on housing costs and, therefore, economic development. Finally, because of its extreme volatility, this tax is a particularly poor revenue source for the general operating budget of local government. The Iowa Association of REALTORS® opposes any increase in the real estate transfer tax.

Transfer Tax Talking Points:

• This is a TAX INCREASE – the proposal would cost Iowa homeowners an additional $60-$120 million
• The proposal would increase the current real estate transfer tax from .16% to .5%or possibly even a staggering 1% of the purchase price.
• The real estate transfer tax is due at closing and cannot be added into a mortgage. Up front costs are the single biggest constraint on home ownership.
• The proposed tax would heavily impact homebuyers “in transition” such as growing families, downsizing senior homeowners, or transferred employees.
• A real estate transfer tax will apply to a very narrow base.
• A transfer tax can be an unreliable source of revenue, particularly when events such as an increase in the lending rate or other factors slow home buying.
• This proposal may give some temporary tax relief to current property owners if the legislature enacts some other form of tax relief, but will create a permanent tax increase for homeowners in Iowa.
• This tax is just another form of property tax, but rather than a more broad-based approach, the transfer tax penalizes people for buying and selling homes.
• Real estate taxes are double taxation on property owners who pay property taxes each year and then must pay part of their equity when creating the opportunity for others to buy their home.

It would Add to the Housing Affordability Crisis

• Real estate transfer taxes are regressive because the tax burden is higher for lower income households.
• Increasing real estate transfer taxes worsens our shortage of affordable homes, which has a devastating effect on first-time homebuyers, middle class families, senior citizens and those on fixed incomes.
• Real estate taxes can increase closing costs and potentially increase the income required to qualify for home loans. It shuts potential homebuyers out of the market.
• According to the National Center for Real Estate Research (NCRER), for every 1% of an increase in a down payment 48% fewer moderate and low income renters would qualify for a home.
• Young people trying to buy their first homes - our own children and grandchildren - will be hurt by increases in real estate taxes.

And Hurt Our Economy

• Real estate sales and the pride of homeownership have helped energize a stagnant economy over the last few years, and Iowa cannot afford to lose this economic boost.
• Any legislative action that puts the brakes on real estate, will have unintended, but easily recognizable, consequences. An increase in the transfer tax will slow real estate sales, and the recognizable consequence is a slowing of our economic recovery.
• Commercial businesses, also affected by the real estate transfer tax, can't afford increased taxes. They already shoulder a huge tax burden in Iowa.
• Businesses are attracted to communities with affordable housing choices for their workers. Making housing more expensive makes our state less competitive!
• If the transfer tax increase becomes law, Iowa will have one of the highest transfer taxes in the nation. This distinction could contribute to the “brain-drain” effect and will be a detriment to attracting out-of-state homebuyers to Iowa.

REALTORS® - Protecting homeowners …
and everyone who wants to be!

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