The Virginia Association of Home Builders has recommended that the General Assembly remove the cash proffer system in Virginia and replace it with an impact fee. Their plan would extend the impact fee to all zoned but undeveloped land, implement a cap on the amount that could be assessed, and require localities to dedicate the funds for the new or anticipated infrastructure derived from the new development.
VAR will continue to support replacing the cash proffer authority with an impact fee.
The Home Builders have also proposed raising the grantor tax in localities where the impact fees would be effective and dedicating those tax revenues to new and existing infrastructure.
VAR supports making reforms to the cash proffer system, but opposes increases in the grantors tax.
Recordation taxes are paid by the buyer as part of a real estate transaction. The taxes are not financeable. Grantor taxes paid by the seller reduce the seller's proceeds and often affect the final selling price. They are paid each time a real property is transferred, even when the owners of the existing home already pay taxes to the locality to fund infrastructure. In essence, all real estate transfer taxes are paid by consumers and inhibit the General Assembly's efforts to promote affordable housing.
In the current housing market, sellers who are already at a disadvantage often must also absorb costs traditionally borne by buyers.
As can been seen at the state level and in many localities, when government relies too heavily on revenues from real estate transfer taxes, budgets will ebb and flow with the cyclical nature of the real estate market.
We have met with members of the House and Senate leadership, as well as members of the House Counties, Cities and Towns Committee and the Senate Local Government Committee, and we have sent a letter to all members of the legislature to explain our opposition to an increase in the grantors tax.