Ways & Means hears two bills proposing sales-tax relief for builders to lower housing costs

At a Ways & Means Committee meeting Friday, March 14, committee members heard presentations on two bills that would let certain builders recover or be exempted from sales tax on building materials, sponsor Rep. Ashley Bartley said.

The proposals aim to lower construction costs and encourage new housing, but members and witnesses flagged potential fiscal impacts — particularly on the state education fund — and said the Joint Fiscal Office had not produced a complete fiscal note in time for committee consideration.

Rep. Ashley Bartley described her bill as broad, covering building materials generally to reduce costs for builders statewide and to “start a conversation” about ways to make development more feasible. Bartley said the language had originally been included in an omnibus housing bill but was removed because sponsors and staff could not finalize a fiscal estimate in time and because of concerns about reducing revenue to the state education fund.

Rep. Jean Galfetti said her measure pursues the same goal but with narrower eligibility. Galfetti said she initially limited the exemption to mixed-use, mixed-income projects in designated downtowns, town centers, growth centers or neighborhood development areas, and said she also considered an alternative qualification based on a minimum sales-tax threshold paid by a project (she cited a tentative example of $10,000 in tax paid as an eligibility trigger). “It would kind of, you know, give that option, especially to a lot of the builders on bigger projects to apply for the refund rather of their sales tax,” Galfetti said.

Committee members and witnesses discussed trade-offs. Several members said they appreciated focusing incentives on downtown or infill sites where infrastructure already exists. Others warned the proposals could reduce revenue to the education fund and asked for firm fiscal estimates. A committee member recounted tax-department figures from 2021 showing roughly $353,000,000 in taxable purchases by residential-construction actors and about $21,200,000 collected in sales and use tax for that category in that year; the member said those figures predate current prices and would need updating.

Witnesses and members also raised broader barriers to housing supply beyond materials costs. Builders and lawmakers noted permitting complexity, land prices and labor shortages are large drivers of cost. A witness for Huntington Homes told the committee that the state's residential building energy standards that took effect July 1 last year added about $30,300 to the cost of an average 1,800-square-foot home, a figure members said must be weighed alongside any material-cost relief.

Committee members asked the sponsors and staff to work with the Joint Fiscal Office and relevant housing finance agencies to refine eligibility and produce fiscal notes. Rep. Bartley and Rep. Galfetti said the measures were intended to start conversations with the tax department, housing agencies and committees that will consider the mechanics and fiscal trade-offs.

No formal motion or vote on either bill was recorded during this session; committee leaders said fiscal notes and additional drafting work are expected before any action.

The committee paused the discussion to proceed to the floor and said it would return after the floor session to continue work on bills scheduled for the day.