Lawmakers Weigh Statewide Housing Solutions, While A Few Communities Seek Transfer Taxes
STATE HOUSE, BOSTON, OCT. 11, 2023…..A long-sought tax on pricey real estate transactions in Boston could generate tens of millions of dollars for affordable housing investments, but “remains out of reach” without the blessing of Beacon Hill, Mayor Michelle Wu told lawmakers Wednesday.
Wu was one of several local officials from communities across Massachusetts who urged lawmakers to grant them the ability to impose additional levies on the sale of property and buildings, an idea that top House and Senate Democrats have hesitated to embrace even in the face of a worsening housing crisis.
Like several of Wu’s other priorities, the fate of the proposed Boston real estate transfer tax hinges on whether state lawmakers and the governor give their approval, a dynamic she said has left her “impatient.”
“We’re doing everything we can at the city level — overhauling our zoning code for more housing and more affordability, restructuring our planning department to ensure we’re using every bit of land possible, providing tax incentives for converting offices into residential buildings, and providing down payment assistance and interest rate subsidies to homebuyers to accelerate wherever we can,” Wu told the Revenue Committee. “But the one powerful tool that remains out of reach without legislative and gubernatorial approval is a transfer fee.”
At least 10 cities and towns have voted in support of imposing additional transfer fees on real estate transactions in their communities, albeit with varying mechanics involved: Boston, Somerville, Cambridge, Arlington, Amherst, Chatham, Concord, Provincetown, Truro and Wellfleet.
Last session, the Revenue Committee favorably reported an earlier version of Boston’s home rule petition, but the measure never made it through the House or Senate.
Healey was noncommittal about the idea on the campaign trail last year.
Wu said this time around, she sees “the greatest shared urgency for getting housing costs under control that I’ve ever seen,” pointing to enforcement of a new law requiring multifamily zoning near MBTA service as a sign of state interest in housing affordability.
“It’s not only on the minds of residents who have been displaced for years and years now, but for the business community, for employers, for workers,” Wu told reporters after her appearance at the hearing. “I think there’s a shared sense from the city, from the Healey administration, from the state Legislature, that we have to do everything we can on housing.”
Healey created a standalone housing secretariat, and her deputies have signaled that a housing bond bill expected to be unveiled soon will propose a range of policy changes aiming to mitigate the problem.
Boston’s proposal, which the City Council approved unanimously, would impose a 2 percent tax on any real estate transfer over $2 million. It would only apply to the overage, so a $2.5 million sale would incur a fee of $10,000.
Wu said if the tax had been in place in 2021, it would have impacted about 700 transactions out of more than 10,000 total, generating up to $100 million in revenue for affordable housing initiatives.
The latest version features a provision that would make more older homeowners eligible for a senior property tax exemption, which Wu said will “provide peace of mind and stability to our elders.”
The proposals continue to draw opposition from major real estate industry groups, such as the Greater Boston Real Estate Board. The group, which represents members in 64 cities and towns, filed commentary with lawmakers warning that transfer taxes will “harm the economy, further constrain housing and is simply a bad tax policy.”
GBREB said communities that imposed an additional tax on property sales would likely increase costs, strip equity from buyers and sellers, and represent an “unstable source of revenue.”
“We remain focused on supporting legislation that focuses on enabling greater development of housing as the solution to affordability and housing concerns,” the group wrote. “A new sales tax on homes and real (estate) simply limits the incentive to invest in new multifamily housing, slows the production of new supply and only exacerbates the challenge of housing affordability.”
None of the communities that have approved home rule petitions seeking real estate transfer taxes can implement those policies unless and until the Legislature and governor give approval.
Rep. Mike Connolly, who is also pursuing a ballot question campaign to revive local-option rent control, filed legislation that would clear the way for any city or town to create a transfer fee without waiting for the elusive case-by-case legislative authorization.
Because state government gets a say over many local policies, several of Wu’s priorities for the city are stuck in limbo. She is similarly waiting for lawmakers to act on home rule petitions allowing Boston to bring back rent control within its borders and to expand the number of liquor licenses it can award. The city also cannot limit the use of fossil fuel infrastructure in many new buildings and major renovations unless the Healey administration will grant it admission into a pilot program.
Asked outside the hearing if that dynamic frustrates her, Wu replied, “I’m always impatient, even when it’s just actions that we can take at the city level alone.”
“Look at the headlines across any area of policy and challenge, and we’re not moving fast enough, whether it’s climate or housing costs or the MBTA or schools, so we’re always trying to do everything we can,” she said. “I accept the responsibility here to have to explain to folks who may not live in Boston what the situation is like on the ground here and also why Boston’s health and prosperity impacts the entire state. That is part of the responsibility of being the city we are, and so we accept that wholeheartedly and are going to continue pushing everywhere we can.”
Sky-high rents and mortgages continue to suffocate Bay Staters, and Wu said even if some industry groups oppose the idea of a transfer tax, businesses largely view the state’s lack of affordable housing as one of the most urgent issues.
When one member of the committee asked Connolly what the typical sale price is for a single-family home in his Cambridge and Somerville district, he replied that he’s “not in the market to buy a home.”
A Somerville housing official chimed in from the audience to make clear the median single-family home in their city sells for $925,000, which prompted Cambridge City Manager Yi-An Huang to add that his city’s median single-family home price is $1.8 million.
“I appreciate the question. I think it really raises a good point, because I’d love to emphasize the experience of being a renter in our community,” Connolly said. “We witness billions of dollars of investment that comes into our community, and then in the form of real estate transactions, we see billions of dollars of wealth that is created.”
“What we’re saying with this transfer fee is, as this wealth is being extracted out of our community, often by corporate investors or commercial real estate developers, can we just capture a tiny fraction of that wealth and put it into local affordable housing programs so more people can have an opportunity to remain?” he added.
Sen. Julian Cyr, a Truro Democrat who also represents Provincetown and Wellfleet, said the median home price in Barnstable County skyrocketed from $355,000 in 2015 to $638,000 in 2022, a trend that leaves many middle- and low-income residents floundering.
“I can’t afford to buy a home in the part of the district that I grew up in, where I live now, where I represent,” Cyr told his colleagues. “For the median home price in Truro, $400,000 is what a family has to make, so basically, my housing solution is I probably need to find a boyfriend who I turn into a husband who makes, I don’t know, $250,000 to $300,000.”
