The real estate boom that has brought jobs and prosperity to the towns of Columbia and northern Dutchess counties over the past five years has also claimed a serious economic casualty: an increasing number of employed and retired residents are unable to afford homes of their own.

As rural towns struggle to meet the affordable housing needs of their citizens, they find themselves caught between dwindling aid programs from state and federal governments and the costly incentives required to lure developers willing to build lower-priced units. While planners in a few towns, including Copake and Northeast, are exploring projects to supply mixed income rental apartments, efforts to provide a fuller range of housing options that might gain wider acceptance in the community are hampered by an acute lack of funding.

An initial review of various financing methods used by state and local governments across the U.S. suggests an appropriate and timely solution may be found in a town-approved “real estate transfer tax,” a small, additional levy on all property sales in the town which is reserved to fund affordable housing, land preservation, public parks and other community improvement programs.

As practiced by towns in New York and other states, the transfer tax of 1-2% of a property’s sales price, has proven advantages: 1) it can raise significant amounts of money that often attract even larger matching funds from other public and private sources; 2) it gives local voters the final say in approving the tax and assigns their elected town officials the job of implementing the programs; and 3) it shifts most of the financial burden to the housing developers and property sellers who are reaping the greatest profits from the recent boom.

A transfer tax of 2% ($2,000 on every $100,000 of sales value) would have raised about $10 million for towns in Columbia County last year alone, according to data supplied by the County Clerk’s Office. Leveraging the towns’ contribution with matching funds from state, federal and private sources could have raised the total amount of funds available to more than $25 million.

The use of transfer taxes to fund affordable housing was pioneered by Vermont, which for 17 years has dedicated a portion of its statewide transfer tax receipts to subsidized housing projects and land preservation, according to Jim Libby, General Counsel for the Vermont State Housing and Conservation Board which administers the funds.

“People were worried about whether their kids would ever be able to live in their own community,” said Mr. Libby whose board has supplied some 7,000 Vermont families with rented and owned housing.

Designating the funds for a dual mission—to subsidize housing as well as to preserve farms and open space—has bolstered the tax plan’s political popularity.

“State politicians had never seen a coalition like this before,” Mr. Libby recalled. “You had low-cost housing advocates sitting next to the green-sneaker Nature Conservancy types and the farmers and the historic preservationists, and they were all asking for the same thing. It was hard to say no.”

The lesson in building political alliances could come in handy in Albany where the New York State Legislature is currently considering a bill that would allow towns to vote in a 2% transfer tax on properties sold within their borders. The real estate industry has scuppered similar bills before, in New York and other states, on the grounds that a transfer tax damages an otherwise healthy housing market. A quick survey of red-hot real estate prices in towns that already have transfer taxes makes short shrift of that argument.

The current Albany bill, however, would leave low-cost housing out in the cold, limiting use of the tax proceeds to land conservation, historic preservation, parks and recreation projects.

“There is a lot of merit to allowing a portion of the money to be used for affordable housing,” said Assemblyman Fred Thiele, who obtained special state approval in 1998 for towns in his eastern Long Island district to levy a 2% transfer tax dedicated to preserving farmland and open space.

Mr. Thiele is “guardedly optimistic” the Legislature will pass a transfer tax bill this year, though he doubts it will be revised to include affordable housing in its mission.

“There is fear when a program designed for specific purposes suddenly takes on other purposes,” he explained.

Assemblyman Thiele said he expects to amend his own towns’ transfer tax program to include lower-cost housing programs, a trend begun in his home county of Suffolk last November when voters overwhelmingly approved a $75 million bond to finance farmland preservation along with subsidized housing.

Readers interested in the progress of the transfer tax debate in Albany should contact their state representatives.