Massachusetts property transfer fee plan eyed for affordable housing
Massachusetts cities and towns would have new options for funding local affordable housing under a proposal rolled out Wednesday - a fee of up to 2% on real estate sales above the statewide median sales price, and a higher fee on certain "speculative" property sales.
Progressive lawmakers joined advocates and a handful of local officials at the State House to promote the plan, calling it another tool for municipalities seeking to fight back against the high rents and mortgages, displacement and evictions that the state's housing crisis is bringing to their residents.
The proposal, touted as a "compromise" agreed to by the sponsors of various local option transfer tax bills and the filers of home rule petitions for transfer taxes in specific communities, would allow municipalities to impose a fee of between 0.5% and 2% on real estate transactions above the statewide median sale price for single-family homes.
The Massachusetts Association of Realtors reported the same day that the median sale price for pending single-family homes hit $415,000 in December, a more than 10% increase from the $375,000 in December 2018.
It would also authorize municipalities to charge a fee of up to 6% for "speculative sales," defined as property sold for more than three times the state median within one year of purchase, unless the sale is because of a need to relocate for work or family reasons.
Money generated by the transfer fee would be deposited into the community's affordable housing trust fund. Cities and towns would have the ability to decide if the fee would be paid by the buyer or seller, or split between the two, and local officials could also set exemptions from the fee and establish a sunset provision.
Rep. Dylan Fernandes, who filed a bill last year that would allow a transfer fee on sales over $1 million, said the group drafted its plan with high-priced real estate in mind, but chose the state median as a threshold so the option would be available to communities that like the idea but don't have many million-dollar homes. He said he expects interested municipalities would set higher thresholds, like the $2 million proposed in Boston.
"We recognize that there's 351 very distinct towns in the state," the Falmouth Democrat said in an interview. "All of them for the most part are in some sort of housing crunch, but they may look very different in terms of where they are, so we wanted to make sure that local communities can tailor it in a way that fits their housing market, so that's why we chose the median sales price."
Along with Fernandes, the language is backed by Reps. Liz Malia and Mike Connolly, Sen. Jo Comerford, and home-rule petition filers Reps. Sarah Peake, Christine Barber, Tami Gouveia, Tommy Vitolo and Denise Provost. Sen. Julian Cyr also spoke at Wednesday's press conference.
The Massachusetts Association of Realtors generally opposes transfer taxes, its CEO Theresa Hatton said. Hatton said a transfer tax "is not good tax policy" because it is not broad-based and asks one specific buyer or seller "to take care of the common good."
Hatton said that a transfer tax that targets the upper end of the housing market could ultimately have a "greater impact on getting people into the starter home market." She said a transfer tax "puts this pressure on people who are in these starter homes and want to move up, but can't" because of the added cost.
The transfer fee plan comes as lawmakers, backed by Boston Mayor Martin Walsh, are also weighing proposals to generate new revenue for transportation by allowing communities or regions another local option, to pass binding transportation project and financing ballot questions.
Walsh and Somerville Mayor Joe Curtatone each flagged their city's transfer tax proposals in speeches this week.
In his annual State of the City address Tuesday, Walsh said a fee of up to 2% on sales above $2 million is one avenue the city hopes to use to fund an "unprecedented investment" of $500 million over five years to create new housing. Curtatone, in an inaugural address Monday night, mentioned the transfer fee that Somerville officials passed as among the housing-related ordinances the city is waiting for the state to approve.
"We cannot wait for the state to approve each community's request, one by one," Curtatone said Wednesday. "Our residents are being priced out now, and we need action now. We need the ability to raise funds for affordable housing now and we need that flexibility that the compromise local option transfer fee legislation would give communities to make policy that works for them."
Boston City Councilor Lydia Edwards said her city's housing market has become like a stock market, where "units are traded like commodities today, and the residents are being displaced."
Home rule petitions for transfer taxes in Nantucket (H 3637), Truro (H 4208), Provincetown (H 3691) and Concord (S 2318) are all before the Revenue Committee, as is the Somerville bill (H 2423). Brookline town meeting members in December approved a transfer fee proposal that noted neighboring communities are moving forward with the concept.
Fernandes' office said that the communities asking the Legislature to approve a transfer tax are among the areas with the highest home costs.
The petitions take various approaches to the fee. Nantucket's bill would have the seller pay 0.5%, with the first $2 million of the sale price exempt. In Concord, the buyer would pay 1% of the portion of the purchase price over $600,000.
Rep. Connolly said the language introduced Wednesday is a set of "common principles" that lawmakers will use to try to find consensus among their colleagues. He told the News Service his "absolute goal" is to see it included in a broader housing bill that also includes measures like tenant protections.
"In my district, in Cambridge and Somerville, there are sites, there are properties, where the value has doubled, tripled, maybe even quadrupled, over a 10-year period and if an owner or a developer is seeing the value of their property skyrocket, I think most reasonable people don't feel it's too much to ask if we could just capture 2 percent or so of these massive transactions to dedicate to local affordable housing programs," Connolly said during the press conference.
While activists and others have been clamoring for years for passage of legislation addressing the "housing crisis" in Massachusetts, Democratic legislative leaders have been unable to assemble and advance any major housing policy changes to address the situation, or boost housing production.