Who benefits from the ‘mansion tax’? Marylanders deserve to know

Maryland, like much of the nation, faces a severe housing affordability crisis. As the dream of homeownership slips out of reach for more families, political pressure has intensified for elected officials to deliver solutions. Among the proposed remedies, an increasingly favored mechanism is a local “wealth” or “mansion” tax.

Currently utilized by Baltimore City, Montgomery County and Anne Arundel County, these surcharges on high-value real estate transactions are designed to fund affordable housing via dedicated housing trust funds. As of 2024, 17 U.S. localities nationwide had implemented such a tax, with roughly half earmarking the revenue specifically for affordable housing.

In 2021, the General Assembly authorized Anne Arundel County to levy an additional 0.5% tax when a home sells for more than $1 million; in Baltimore City, the rate is 0.75%. Because this $1 million threshold is not indexed for inflation, its reach automatically expands. For perspective, $1 million in May 2021 holds the purchasing power of roughly $800,000 today. Furthermore, the tax applies to the entire value of the property, not just the amount exceeding the threshold. For a $1 million home carrying an $800,000 mortgage, the effective tax rate on actual home equity is 2.5% in Anne Arundel County and 3.75% in Baltimore City.

While framed as a progressive levy on luxury real estate, the secrecy surrounding these funds obscures how and to whom revenue is distributed. Because demand for housing subsidies vastly outstrips supply, long waiting lists are standard, giving program administrators and developers potential discretion to pick winners.

Do all eligible applicants stand an equal chance? To answer this, we must examine the data: What types of households actually win these subsidies, some worth hundreds of thousands of dollars?

Currently, Anne Arundel County tracks the race, ethnicity, and sex of recipients, but omits two critical economic indicators: income levels and employers. Obtaining this missing information is virtually impossible. The housing trust fund is administered by Arundel Community Development Services (ACDS), an entity exempt from Maryland’s Public Information Act. Furthermore, county officials maintain that individual applications from both homebuyers and developers are private, shielding them from public oversight.

This opacity undermines accountability. Proponents pitch these funds as lifelines for low-income households. In Anne Arundel County, the Area Median Income (AMI) for a four-person family is $133,500, with eligibility capped at 80% of AMI. (It is 100% of AMI for a newer Moderately Priced Dwelling Unit Program, which was lobbied for by school and county employees and mandates new developments with 10 or more units set aside 10% of them at below-market prices, effectively paid for by the nonsubsidized units.) Standard AMI calculations exclude benefit and pension compensation, which can raise effective compensation by over 50%. Without reporting on actual beneficiary incomes, the public cannot verify whether funds reach those in greatest need.

Even more troubling is the absence of employer data. Proponents argued the tax would attract and retain essential workers. Yet this priority is not codified in law or detailed in outcome reports. Without open records, the concern that these funds disproportionately benefit politically powerful groups such as public sector workers remains impossible to independently verify. The same reasoning applies to the Moderately Priced Dwelling Unit Program.

Politically, the tax structure minimizes immediate voter pushback. Because it is collected only at sale, current homeowners feel no immediate pain—often not until long after the enacting lawmakers have left office. Meanwhile, the low visibility of the program will facilitate the growing influence of the already two most politically powerful groups in local government: developers and government unions.

Ironically, by adding friction to real estate transactions, transfer taxes discourage older residents from downsizing. This locks up existing housing stock, constrains supply and inadvertently drives up prices—undermining the affordable housing policy’s stated goals.

To ensure public trust, housing trust funds must be subject to rigorous transparency, which entails sacrificing some recipient privacy.  As a compromise between transparency and privacy, anonymized income and employer data could be used, although at a significant cost to public oversight. Transitioning to open, machine-readable public data, which would eliminate the need for costly, slow, and often improperly denied public records requests, would ensure Maryland housing policy serves the broader public rather than political insiders.