Montgomery Council agreed Tuesday by a 7 to 4 vote to increase its recordation tax in order to generate more money for school construction, Montgomery County capital projects and rental assistance.
A recordation tax is imposed on those registering the purchase or sale of a property. It is not applied to those refinancing their homes as long as they don’t take any increased equity.
It is a one-time cost that applies to the principal amount of debt secured by a mortgage or deed of trust when a house or building is purchased. Often, the tax is split between the home buyer and seller.
Councilmember Kristin Mink and Will Jawando were cosponsors. Along with the sponsors, Councilmembers Laurie-Anne Sayles, Kate Stewart, Sidney Katz, Evan Glass and Natali Fani-Gonzalez voted in support of the increase.
Councilmembers Gabe Albornoz, Marilyn Balcombe, Andrew Friedson and Dawn Luedtke voted in opposition. They supported a smaller increase.
The new rates for the recordation tax are expected to bring into the county $187.3 million over the next six years, from Fiscal Years 2023 to 2028. The rate increase will enable the county not to delay work at Magruder High School one year, Damascus High School two years and Highland View Elementary School addition two years, as is currently proposed.
Councilmember Sayles expressed her support during the meeting, noting, “People are moving here because our schools are great, but they will not continue to stay here if our schools aren’t great.”
Added Fani-Gonzalez, “We need to have more funds. It’s a need.”
The tax is geared to hit those purchasing the most expensive houses the hardest. The recordation tax on homes between $600,000 and $750,000 will be charged $5.75 per $500. Homes valued at more than $750,000 to $1 million will be charged $6.33 per $500. Homes valued at more than $1 million will be charged $6.90 per $500.
These rates will be implemented as of Oct. 1.
Luedtke felt that the increase would hurt homebuyers. “We are not talking about a luxury home. We are talking about a very moderate home,” she said of homes valued at around $600,000.
She added, it is not right to “tax your way out of hard decisions.” The time to make choices on what gets done and what is delayed is during budgeting time, she said.
Glass supported the increase, noting, “I have heard from residents and parents across the county who share that too many of our school and transportation projects have been delayed for too long.”
Stewart praised the council’s vote of support. She noted that the council “took steps to ensure that we are able to fund and keep on track needed school construction, fire and police stations, recreation centers, libraries and transportation projects.”
While supporting the new rates, Katz acknowledged that taxes are “a forced payment” that no one like to pay. However, he said, “This is part of the difficult decisions we have to make.”
The Greater Capital Area Association of Realtors (GCAAR) criticized the increase, stating it “will put homeownership further out of reach for the average person.” The organization said councilmembers “voted to make housing less affordable.”
Together with a likely hike in property taxes, which the council is expected to enact soon, Montgomery County will “further exacerbate the affordability crisis,” GCAAR wrote in an email sent to MCM.
