Op Ed: The Case for Reducing State Property Transfer Taxes


By Mia Burch

Burch is the 2021 President of the Delaware Association of Realtors

Delaware has the highest real estate transfer tax in the country. This means more money at the settlement table. This means fewer of our citizens can afford a home.

This means those selling a home have less equity to move forward on their own. And when that happens, it means our state’s economy takes a hit.

The Delaware General Assembly increased the state’s real estate transfer tax by 1% in 2017 to address a projected budget shortfall of $400 million.

This 33% increase made Delaware’s state real estate transfer tax, at 2.5%, the highest in the country. Add local transfer taxes to this and individuals may have to pay up to 4% of the property value at checkout, in cash. It’s the money needed to pay transfer taxes alone, in addition to settlement costs, making it difficult for Delawares to own a home and ultimately dealing a major blow to our state’s real estate market and economy. .

The tax is, in essence, a tax of deterrence. The taxes levied on cigarettes and alcoholic beverages are intended to discourage consumption, and the state tax does exactly the same thing. It increases the price of real estate, reducing affordability. Buyers must use cash resources otherwise intended for a down payment or home improvements to pay the real estate transfer tax. The seller’s cash reserves are also depleted, making it difficult to purchase a home or replacement property.

As a real estate agent in Delaware, I have personally seen the impact of the 4% transfer tax on the lives of buyers and sellers of property. When qualifying a buyer, that buyer may have good credit and the ability to make a monthly mortgage payment, but not have the cash to pay the tax to complete the purchase. Plus, in the current market climate, most sellers don’t even consider buyers who may need settlement assistance. The buyer is then forced to choose between not buying, buying something smaller at a lower price, buying something smaller at a lower price, or continuing to rent.

The impact is quite apparent when considering market activity following the tax increase as well as how Delaware compares to neighboring states. A 2019 study by Econsult Solutions Inc. (ESI) found that residential sales prices in neighboring counties in Pennsylvania and Maryland have exceeded sales prices in Delaware since the tax was increased in 2017.

Beyond the burden on homebuyers, our neighbors also enjoy a competitive advantage on economic development opportunities. The tax does not distinguish between residential and non-residential property. Thus, employers who evaluate real estate acquisitions in Delaware against Maryland, Pennsylvania, or New Jersey may not find Delaware attractive.

Consideration of the state tax should also take into account its sensitivity to market fluctuations. The real estate transfer tax is an extremely unreliable source of revenue for a local or national budget.

The Covid-19 pandemic, as many know, has had a huge impact on the property market nationwide, and there is a significant shortage of inventory; housing prices rise and homes stay on the market for shorter periods of time. The average home price in Delaware is up about 6.1% from 2019, which means most buyers have to pay more in property taxes. This puts the dream of owning a home out of reach for many.

The Delaware Association of Realtors believes that repealing the 1% real estate transfer tax increase this legislative session is the single most important step it can take to boost homeownership, secure that Delaware’s economy has a chance to stay vibrant, strengthen our communities statewide, and establish a fairer, more reliable source of funding for the vital programs and services everyone needs in the Premier State.

This is the third straight year of projected budget surpluses, and our state government is more solvent than ever. The opportunity to correct this situation puts us in front of the safest margins.


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