Homeownership tax-break plan clears Senate In 2 neighborhoods, buyers would get 40% credit for 5 years

For faltering communities

Experiment would measure benefits of higher ownership

General Assembly

March 31, 1996|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Amid growing concern over the fate of faltering middle-class neighborhoods, state lawmakers want to test the power of the tax break.

A plan to entice long-term homebuyers to one neighborhood in the city and one in Baltimore County by offering 10 years of property and income tax credits has won Senate approval and is under consideration in the House of Delegates.

Proposed credits of up to 40 percent could save buyers hundreds of dollars each year. The bill, sponsored by Democratic Senators Barbara A. Hoffman of Baltimore and Thomas L. Bromwell of Baltimore County, has the support of both jurisdictions and local Realtors.

"We're looking at trying to keep the blight from spreading," Ms. Hoffman said.

A pilot program would be open to buyers in two neighborhoods for three years starting in July.

The proposal gives Mayor Kurt L. Schmoke and Baltimore County Executive C. A. Dutch Ruppersberger III authority to choose from neighborhoods containing 800 to 1,200 single-family dwellings, after public hearings.

A buyer would get 40 percent off a property tax bill for the first five years and a corresponding credit against state income tax. The credit would shrink by 5 percent each of the subsequent five years. For example, a homeowner would get a 35 percent credit in the sixth year and 15 percent in the 10th.

"That's a strong incentive for someone to move there, and it will fill up those neighborhoods," said Frank D. Boston III, director of government relations for the Greater Baltimore Board of Realtors. "It will keep those neighborhoods from going over the edge."

Ms. Hoffman said she hopes to test the theory that homeownership keeps neighborhoods stable, by evaluating ownership rates and changes in crime rates and school performance.

"The common wisdom is that neighborhoods with a preponderance of homeowners are more stable than neighborhoods with a preponderance of renters," she said. "This is an experiment."

Neighborhoods she and Mr. Bromwell had in mind "can still be solid homeownership communities but are showing signs of stress -- an unusual number of houses for sale and not a lot of buyers."

Revenue loss for the first year comes to less than $100,000 -- $46,000 from the state general fund, $24,000 from the city and $22,000 from the county, a state fiscal analysis shows. Such costs should be offset by stable or rising property values, Ms. Hoffman said.

Mel Knight, a real estate agent with city-based W. H. C. Wilson & Co., said the plan could help areas such as Hamilton or Gardenville, "two neighborhoods that represent the little of what's left of the middle middle-class in the city and where you see lots of problems popping up."

"If it truly targets neighborhoods like those, or Park Heights or some of the more suburban neighborhoods that are starting to show some decay, it could be a good thing," said Mr. Knight, a mem- ber of the Board of Realtors' legislative committee.

He cautioned that the program might add to disparities in the city, where some homeowners in affluent neighborhoods pay high taxes -- especially compared with surrounding counties -- while others pay little because of low-income tax-assistance programs.

"If we find a way to make taxes cheaper in Hamilton, is that going to send taxes higher in the more pricey neighborhoods?" he asked. "I think it's a good idea, but think a whole lot of unanswered questions should be resolved."

Neighborhoods being considered in Baltimore County include older rowhouse communities inside the Beltway that abut the city line and have had high ownership rates in the past, said Patrick Roddy, assistant county attorney.

County officials view the proposal as a test of whether local and state tax policy can be used to stabilize neighborhoods, he said.

"Clearly, in the older neighborhoods in Baltimore County, there has been a problem with the number of rental properties, and anything to increase homeownership is good for the community," said Patrick Welsh, an agent with O'Conor, Piper & Flynn Realtors in Dundalk.

As owners have moved to Perry Hall or Harford County, he said, many opted to rent properties they later found hard to maintain.

"This would provide an incentive for people to consider selling," he said. "For many people, it could make the difference between whether they can buy or not."

Pub Date: 3/31/96

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