Tax increase to fund workforce housing amended, advanced

A measure intended to create a stable funding source for two Nebraska workforce housing programs cleared the first round of debate March 9.

LB1067, introduced by Syracuse Sen. Bob Hallstrom, would increase the documentary stamp tax on real estate transactions and split the additional proceeds between the Rural Workforce Housing Investment Fund and Middle Income Workforce Housing Investment Fund.

The programs, administered by the state Department of Economic Development, provide grants to nonprofit developers to build workforce housing in the state’s rural and urban communities.

Hallstrom said a 2022 Nebraska Investment Finance Authority report found that Nebraska needs 35,000 more affordable housing units by 2028 to meet demand. LB1067 would provide an “immediate, reliable” funding source to help address that shortage, he said.

The bill also would eliminate a provision allowing the Legislature to transfer money from the Affordable Housing Trust Fund to the state’s General Fund and other funds that receive documentary stamp tax proceeds.

Additionally, Hallstrom said, LB1067 would ensure that the proceeds dedicated to the two workforce housing programs could not be used by the Legislature for other purposes.

As introduced, the measure would increase the documentary stamp tax from $2.32 to $3.82 for each $1,000 in value.

A Revenue Committee amendment, adopted 38-2, instead would increase the tax to $3.32 for each $1,000 in value through Jan. 1, 2032, when it would return to the current amount. The additional revenue still would be split between the two programs.

Hallstrom said the amended proposal would generate approximately $8 million for each program annually. It would add $250 in taxes to the sale of a $250,000 house, an amount he said is unlikely to “squelch” closings.

Sen. Robert Dover of Norfolk supported LB1067. Funding additional housing would attract and retain workers, he said, helping Nebraska grow its economy and expand its tax base over the long term.

Lincoln Sen. Jane Raybould also supported the bill, particularly the provision intended to ensure that workforce housing funds could not be swept to help balance the budget. Increasing the state’s affordable housing stock is widely seen as a top priority among Nebraska business leaders, she added.

“We need to grow our workforce,” Raybould said, “but we can’t grow it without sufficient housing.”

Sen. Mike Jacobson of North Platte said he opposed the original bill but supported the amended proposal with its more “reasonable” tax increase. He said North Platte used funding from the Rural Workforce Housing Investment Fund for a successful housing incentive program.

Also opposed was Sen. Tanya Storer of Whitman, who said she is “not convinced” that a documentary stamp tax increase is the best way to fund the rural housing program. Although the program has benefited her district, she said, LB1067 would increase the cost of housing transactions.

The bill advanced to select file on a vote of 32-8.