A tax on property sales in Maine is generating increasing revenue, supporting a range of affordable housing initiatives. These include programs designed to assist first-time homebuyers and prevent foreclosures. Lawmakers are currently considering expanding the use of these funds to include support for homeless shelters.

The Real Estate Transfer Tax: A Growing Revenue Source

The real estate transfer tax, collected from both buyers and sellers during property transactions, is projected to bring in $57.4 million this year. The state’s Revenue Forecasting Committee anticipates this figure will rise to $68.6 million by 2029, up from $51.9 million in 2025. This growth is attributed to Maine’s strong housing market and recent changes to the tax structure.

Tax Rate Changes and Revenue Impact

In late 2023, the Maine Legislature adjusted the tax rate for properties sold for over $1 million after November 1, 2025. The standard rate applies to the first $1 million of the sale, with a higher rate of $6 per $500 of value above that threshold. For example, a $3 million property would now generate approximately $28,000 in taxes, a significant increase from the previous $13,000.

How Funds Are Currently Allocated

The revenue generated from the transfer tax is directed towards various affordable housing programs. These include paying down housing bonds, supporting foreclosure prevention programs, and funding Maine’s Home For Good initiative, which provides housing and support services for individuals transitioning out of homelessness. Historically, the tax was intended to compensate counties for recording property deeds.

A Shift in Funding Priorities

In the early 2000s, transfer tax revenues were split between the state’s general fund and the HOME Fund. However, as revenues have increased, a larger portion has been allocated to dedicated housing initiatives. A temporary tax on foreclosed properties, implemented in 2010, also generated $1.5 million for foreclosure prevention efforts.

Debate Over Future Allocations

The increasing revenue stream has sparked debate about how best to address the state’s housing needs. A recent bill proposed diverting funds from county governments to support homeless shelters. This proposal, L.D. 2124, aimed to increase county contributions to shelters, which currently receive $68,000 annually from counties compared to $7 million from the state.

County Concerns and Alternative Solutions

County administrators and municipal groups opposed the bill, expressing concerns about potential future raids on the funds and questioning why the burden should fall on county governments. Some lawmakers suggested utilizing funds from the state’s general fund to support shelters directly, rather than impacting existing housing initiatives or county budgets. The debate highlights the complexities of prioritizing funding in a rapidly evolving housing landscape.

Ron Rakow, a fellow at the Lincoln Institute of Land Policy, noted that transfer tax revenue can be volatile, fluctuating with market conditions. Maura Pillsbury, a tax policy analyst for the Maine Center for Economic Policy, argued that the increased tax rate on higher-priced homes effectively raises revenue without impacting those who can afford the additional cost.