SAINT PAUL — A pair of bills moving through the Minnesota House would provide tax relief to first-time homebuyers by exempting sales tax on construction materials used to build their homes. The bills, authored by Tonka Bay Republican Representative Andrew Myers, focus on making homeownership more affordable.
“If you look at a $500,000 home, roughly one-third of that is going to go towards materials and what this bill does is giving a sales tax exemption to those materials. If you have a $500,000 house, roughly $165,000 would be exempt from sales tax,” Myers said.
Mark Foster of Housing First Minnesota estimates that potential savings could reach up to $10,000.
“While $10,000 may not seem like a ton of money for every $1000 in cost savings, approximately 2500 more Minnesota families can afford that home. So a $10,000 reduction would mean 25,000 more families would be able to afford that mortgage,” Foster explained.
However, some lawmakers are skeptical about the bill’s impact. DFL Representative Michael Howard questioned whether providing tax breaks to buyers rather than builders would increase the supply of affordable starter homes.
“No arguments for me that housing supply and producing affordable starter homes is a need. But if the goal is to help builders build starter homes, a little more affordable way, I think there’s other ways to do that and ways that don’t actually cost state tax money, which could be a hefty price tag here,” Howard said.
Key construction materials subject to sales tax include lumber, windows, cabinets, and millwork. Both bills are now headed to the House Taxes Committee for further consideration.
