Theresa Hatton

Massachusetts has a housing affordability problem. Families are struggling to buy their first home, renters face record-high costs and employers cannot find enough housing for workers.

The commonwealth is estimated to need more than 220,000 additional housing units to meet demand. State leaders have recognized this reality by passing landmark reforms, such as the MBTA Communities Act and the Affordable Homes Act, both designed to encourage more housing production, reduce unnecessary zoning barriers and support new development. Just last week, the state House of Representatives continued this work through provisions included in its  2026 economic development bill.

These reforms acknowledge a basic economic truth: Increasing supply is the only sustainable way to improve affordability.

Some municipalities, however, have proposed real estate transfer taxes – a tax imposed when a property is sold – as a way to generate funding for affordable housing. While the goal is commendable, the policy is misguided. A transfer tax would make it harder to buy, sell and build housing while doing little to address the root cause of our housing affordability crisis.

The Massachusetts Association of Realtors, representing more than 22,000 real estate professionals, opposes transfer taxes because they ultimately reduce housing opportunity rather than expand it.

The evidence increasingly shows that these taxes discourage mobility, reduce housing inventory, increase costs and undermine the very affordability they are intended to improve.

 Transfer Taxes Will Make Home Shortage Worse

Supporters often describe transfer taxes as targeting only high-value transactions, but housing markets, however, do not work in isolation.

In 2024, an economic analysis completed on behalf of the Massachusetts Real Estate Community Alliance, evaluated a potential transfer tax in the commonwealth. The study is especially important because it looks beyond the surface promise of new revenue and instead evaluates how people actually respond to a transaction tax in the housing market.

A transfer tax is triggered only when a property is sold, which means homeowners can avoid the tax simply by choosing not to move. The research finds that even a relatively small transfer tax significantly reduces home sales – approximately a 10 percent decline in transactions for every 1 percent tax.

In practice, this means families delay or forgo moves they otherwise would make. Empty nesters stay in homes that are too large, growing families remain in homes that are too small and workers are less able to relocate closer to jobs. Instead of improving housing availability, the tax discourages turnover and reduces the number of homes available on the market.

Massachusetts is already one of the nation’s most expensive housing markets. Nearly 80 percent of Massachusetts households cannot afford the median-priced home. Even relatively small increases in housing costs can push thousands of prospective buyers out of the market. The National Association of Home Builders estimates that every $1,000 increase in the price of a home puts hundreds of Massachusetts households out of homeownership.

A policy intended to make housing more affordable ultimately makes housing more expensive.

Transfer Taxes Will Hurt Local Tax Bases

Although the tax is levied on the transaction, the economic burden does not stay where the law places it.

Buyers anticipate paying the tax and lower the price they are willing to offer. As a result, the research found, the cost is pushed back onto sellers in the form of reduced property values – depressing home prices by about $1 for every $1 of tax.

Together, these effects shrink the bases of existing taxes so much that the new tax would actually lead to a net loss in tax revenue of $242 million per year.

The study concludes that the proposed tax would not only fail to generate reliable new funding but would also make it more difficult for Massachusetts residents to find housing that fits their needs, while weakening municipalities’ overall fiscal performance.

There Are Better Alternatives

Massachusetts already provides communities with powerful tools to support affordable housing through the Community Preservation Act (CPA) and short-term rental occupancy taxes.

The CPA allows municipalities to dedicate funding toward affordable housing, open space and historic preservation through a local surcharge matched by state funds.

Yet many communities requesting transfer tax authority have not fully utilized the tools already available to them. Affordable housing continues to represent only a fraction of CPA spending statewide and most short-term rental occupancy tax funds are just directed to general operating funds. Communities should maximize the resources they already possess, not look to tax housing.

More importantly, policymakers should remain focused on what has already begun to show promise: permitting more housing, modernizing zoning, streamlining approvals, encouraging accessory dwelling units, and supporting responsible residential development throughout the commonwealth.

If we are serious about solving the housing crisis, we should make it easier to build homes, easier to buy homes and easier for families to move when their lives change.

Taxing home sales accomplishes none of those goals.

 Theresa Hatton is CEO of the Massachusetts Association of Realtors.