The onslaught of COVID-19 in the waning days of winter and the advent of spring had ramifications for the towns of Southampton and East Hampton never before experienced, not the least being for the real estate market spurred on by the migrations of people from the city seeking shelter from the deadly virus.
To gain some insights into how this phenomenon has affected conditions in these towns, I interviewed Assemblyman Fred W. Thiele Jr. who represents them in the New York State Assembly.
You have often spoken out on the need for affordable housing in Southampton and East Hampton Towns. Considering the increase in sales and rentals and at costs much greater than in the recent past, how will these new market conditions affect the ability to develop affordable housing?
More than 60% percent of the housing units east of the Shinecock Canal are second homes. The second home industry on the East End has contributed mightily to the tax base of the East End without demanding commensurate government services. Communities with large second home populations have consequently enjoyed lower tax rates than more year-round communities.
Does the ability of the towns to use Community Preservation Fund Tax (CPFT) revenues to purchase vacant land drive up the price of land for affordable housing?
The pandemic has accelerated a trend of second homeowners spending more and more time on the East End. Since March, most residential dwellings on the East End have been occupied full-time as residents escape the city. That is a trend that is expected to continue. The increase in demand for dwellings on the East End has accelerated sales, prices and rentals to record levels in the last six months. CPF funds demonstrate that fact. In the first seven months of 2020, the CPF has generated $61.1 million, the highest for that period in the 21-year history of the program, and 30.6 percent more than 2019.
Can the towns absorb the increase in population with respect to infrastructure, sanitary systems and schools?
There are consequences from this migration to the East. Tumbleweed Tuesday has been cancelled. Most notably, there will be impacts to our schools, transportation, and communications. Many schools are reporting increases in enrollments. Summer traffic may not abate after Labor Day
. Poor cell service and Wi-Fi, which is a way of life on crowded summer days, has become an everyday occurrence with the increased population and incidence of people working from home. Government officials will have to address these stresses on essential services. As for affordable housing, it is a long ago disproven myth that the preservation of open space adversely impacts affordable housing. These lands have environmental and infrastructure limitations that make them unsuitable for affordable housing. The greatest adverse impact on affordable housing has been the demand for second homes that competes with the need of local families to purchase a first home. The second home market has been a boon to the local economy. However, it has also had the impact of driving up prices and making housing unaffordable for many local families. The current demand of city residents for dwellings on the East End will only exacerbate that market impact.
What is the status of your proposal to use a percentage of the CPFT for the development of affordable housing?
We continue to pursue the state authorization to create a Peconic Bay Community Housing Fund. The fund would be financed by an extra 0.5 percent transfer tax coupled with an increase in the exemption for the transfer tax from $250,000 to $400,000. The combined impact of those two changes would generate more than $20 million for the production of affordable housing, while cutting the transfer tax for all transactions under $1 million. The bill passed the State Legislature, but was vetoed in December 2019. The governor has requested additional information from the towns. Unfortunately, these efforts were sidetracked in early 2020 by COVID-19. Work on the bill is again proceeding with hopes of passing the legislation in 2021.
John is a St. John's University graduate, licensed Real Estate Broker, DOS Certified Instructor, and real estate consultant. He previously taught at NYU, LIU, and The Cook Maran Real Estate School, which he helped found.
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