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Informational hearing: senator pitches sales‑tax exemption on building materials to lower new‑home costs
Summary
Sen. Lucero held an informational hearing on a proposal to exempt sales tax on building materials for new homes, saying the change could shave roughly $9,000–$10,000 off a model 1,600‑square‑foot home's cost and expand homeownership opportunities.
Senator Lucero presented an informational proposal (Senate File 536) to exempt sales tax on building materials for new residential construction as a way to reduce the price of newly built homes and encourage greater supply. The measure was heard for informational purposes in the Senate Committee on Housing and Homelessness Prevention; it was not in the committee's tax jurisdiction and no committee action was taken.
Lucero and witnesses from the home‑building industry described how sales tax on materials—lumber, windows, shingles, cabinets, appliances, lighting and drywall—adds several thousand dollars to the cost of a new house. Legislative and industry estimates offered in committee suggested the exemption could reduce a model 1,600‑square‑foot home’s buyer cost by roughly $9,000–$10,000; Lucero demonstrated how a lower sales price translates into smaller monthly mortgage payments and lower interest over time. Mark Foster of Housing First Minnesota said a $10,000 reduction in cost could expand homeownership opportunities, estimating that every $1,000 in cost savings could make roughly 2,500 more families eligible for a mortgage under typical underwriting assumptions.
Committee members welcomed the idea but raised questions about targeting, fiscal tradeoffs and ensuring savings reach purchasers rather than increasing developer profit. Senator Mohammed and others asked how to ensure the savings were passed to homebuyers rather than retained by developers; Senator Lucero suggested disclosure mechanisms—such as a line item on a sales disclosure—could document the tax savings passed to buyers. Senators also suggested targeting exemptions to certain price bands, square‑footage thresholds or income tiers and requested a fiscal note showing the state revenue impact and potential options to limit the subsidy to starter or affordable homes.
Because the bill is in the taxes committee’s jurisdiction, senators described this hearing as soliciting feedback and noted they would pursue the policy further in appropriate committees. No formal committee action or vote was taken during the informational hearing.
