LAWMAKERS AND HOUSING ADVOCATES are starting to coalesce behind a new proposal that would allow municipalities the local option to assess a tax of up to 2 percent on real estate transactions above the statewide median sales price and up to 6 percent on more speculative property sales.
The group of over 30 housing groups, municipal leaders, and legislators call themselves the “2 Cents for Housing Coalition,” and said at a State House press conference on Wednesday that their new consensus or “compromise” bill would raise hundreds of millions of dollars for affordable housing.
The bill, which has not yet been filed, would give municipalities the option to charge a fee ranging from .5 percent to 2 percent on real estate transactions above the statewide median sale price for single family homes, which is currently $430,000.
A second fee of up to 6 percent could be imposed when houses are flipped, which the legislation defines as real estate transfers that exceed three times the statewide median sale price on single family homes (about $1.3 million currently) and occur within 12 months of a prior sale.
There are some key exclusions, including sales by owners relocating for work or family, or those liquidating assets to address urgent needs. In all cases, funds raised would go toward affordable housing in the municipality in which the property is located.
The transfer tax legislation, which Boston Mayor Marty Walsh is counting on to fund a number of housing initiatives, is likely to face strong opposition, particularly from realtors.
“It’s a sales tax on land,” said Greg Vasil, president and CEO of the Greater Boston Real Estate Board. “Like if you go to CVS and buy hand cream, it’s a sales tax on the price. It’s incredibly regressive and will drive costs up. Someone will have to pay more for the product.”
The Massachusetts Association of Realtors is also opposed to the transfer tax.
Several lawmakers, including Sen. Jo Comerford of Northampton and Reps. Dylan Fernandes of Falmouth, Liz Malia of Boston, and Mike Connolly of Cambridge, filed bills this session allowing municipalities to assess real estate transfer fees. Several municipalities, including Boston, Somerville, Nantucket, Provincetown, Brookline, and Concord, filed home rule petitions tailored to their specific needs.
Most of the lawmakers and municipalities are now backing the new bill language. “We took my bill essentially, made tweaks to it,” said Fernandes, who has asked the Legislature’s Revenue Committee to make the changes.
Rep. Mark Cusack of Braintree, the chair of the Revenue Committee, did not indicate where he stood on the legislation, but he said he has received calls from realtors opposed to a transfer tax.
Boston City Councilor Lydia Edwards, who spearheaded Boston’s home rule petition which would impose a tax on transactions over $2 million, supports the local option proposal in addition to the home rule petition.
“We will advocate for both, but you can think of Boston’s HRP as the guidelines for what we’d implement,“ she said of the city’s home rule petition. “If the local option were adopted, we would still use the $2 million threshold for Boston by exempting sales below that level.”
A major difference between the so-called consensus bill and Boston’s home rule petition is the higher tax on the sale of flipped house. Edwards included that element in her initial home rule petition filing, but it was negotiated out of the final version.
Chuck Collins, of the Institute for Policy Studies, said the higher tax on speculative sales is a key recommendation of his organization’s 2018 report about luxury housing in Boston. The report examined 12 luxury condominium buildings with 1,805 units having an average value of more than $3 million. The report concluded that over 35 percent of the units were owned by shell companies or trusts that obscure the real owners and beneficiaries.
Fernandes said the concern for new revenue, for him, is born out of the shortage of affordable housing in his district. “In Nantucket, the median home price is $2.3 million. It’s insane. We call it the Cape and Islands shuffle. People will stay in a cheap home for 10 months out of the year and for two summer months they’re kicked out and have nowhere to go,“ he said, noting that many people live out of their cars, on sailboats, or in the state forest.
