Proposals to charge taxes on property sales on Martha’s Vineyard and Nantucket have resurfaced, a year after those initiatives failed to win enough support at the State House.
The islands are seeking the state’s approval to charge property sellers a 1 percent fee to fund affordable housing. Chatham voters also have sent a home rule petition to the Legislature to impose a 1 percent tax on property buyers to help pay for the expansion of the town’s sewer system.
The bills will face stiff opposition from Realtors, who have fought similar transfer tax proposals in the past. Realtors say taxes that single out homebuyers and sellers to pay for community benefits – such as affordable housing or sewer systems – are inherently unfair and discriminatory.
“While we remain committed to finding a solution to affordable housing problems in Massachusetts, we don’t view putting a sale tax on anyone’s home as a reasonable solution,” said Stephen Ryan, government affairs director and general counsel for the Massachusetts Association of Realtors. “Singling out buyers and sellers – no matter how wealthy they might appear to be – doesn’t make this type of tax right.”
A bill to create real estate transfer fees on Martha’s Vineyard and Nantucket passed the Senate last year but failed to move forward in the House after a lengthy debate.
“I’m hopeful that this time we will win in the House,” said Sen. Robert A. O’Leary, D-Barnstable, who refiled the bill this year.
O’Leary said last year lawmakers were mindful of former Gov. Mitt Romney’s vow to veto any real estate transfer fee proposal. “[Romney] made it clear that he would veto this legislation, so we were focused on getting a veto-proof majority,” O’Leary said.
But this year, O’Leary believes the bill will get more backing from the corner office because Gov. Deval Patrick has expressed support of local option taxes. Patrick has filed a bill that would enable cities and towns to charge a tax of up to 2 percent on meals and hotel rooms. Patrick’s press office did not return calls seeking comment on his position on real estate transfer fees by Banker & Tradesman’s deadline.
“I think the political work needs to be done more so on the House side than the Senate side,” O’Leary noted.
Transfer taxes pop up from time to time as cash-strapped cities and towns struggling with budget shortfalls try to find new ways to generate revenue.
On Martha’s Vineyard and Nantucket, however, supporters want to use the transfer tax to create housing banks that will be used for affordable housing.
On Nantucket, the property seller would be able to exempt the first $2 million of the home sale price from the tax, while on Martha’s Vineyard sellers would be able to exempt the first $750,000. A seller who sold a $1 million home on Martha’s Vineyard, for example, would pay a 1 percent fee on $250,000 – a sum of $2,500.
Supporters say the measures are necessary because soaring home prices have made it extremely difficult for working and middle-class families to reside on the islands.
The median price for single-family homes sold on Nantucket during the first quarter of the year exceeded $1.7 million, according to The Warren Group, parent company of Banker & Tradesman. In Dukes County, the median selling price reached $642,525 during the first quarter, according to The Warren Group.
‘A Better Place’
While Realtors generally are opposed to transfer taxes, the proposals have won the support of many Realtors on the islands who believe that the fees can help create sorely needed housing that’s affordable to middle-class families.
The Nantucket Association of Real Estate Brokers last year voted to support the home rule petition and is supportive of it this year as well, according to Penny Dey, a real estate broker who serves as the association’s president.
“Our island is in a housing crisis largely because it is primarily a second-home market,” Dey, co-owner of Atlantic East Real Estate, said in an e-mail.
Edward Sanford, owner of Sanford Real Estate, said a community housing bank will help create housing for people who are working on the island but can’t afford to live there. Many of them commute to the island from their homes on Cape Cod.
“Nantucket will be a better place if it can house its own middle class,” said Sanford. “If you’re against it, you’re voting your kids off the island.”
All six communities in Martha’s Vineyard voted to support the transfer fee initiative but Realtors on the island are split, with some vehemently opposed and others strongly backing the bill. Supporters anticipate that a transfer fee could generate as much as $2 million annually.
Bart Smith, an agent with Wallace & Co. Sotheby’s International Realty in Edgartown and a director of the Cape Cod & Islands Association of Realtors, said a meeting of Realtors last year to discuss the issue showed that there wasn’t a clear consensus on the issue.
“I’ve heard nothing to make me think that the situation has changed,” Smith said.
“People have strongly held beliefs on this issue. They’re either really passionate that this is something that should happen or they feel really strongly that there shouldn’t be transfer taxes.”
Because Realtor opinion on the island is mixed, the Realtor association’s board of directors has not taken an official position on the subject.
Transfer tax ideas have emerged in other Bay State communities.
Rep. Sarah Peake, a Democrat from Provincetown, filed a bill in January that would enable Chatham to charge a 1 percent tax on the buyer of any residential or commercial property. The money will be used to pay for the expansion of the town’s sewer system and collection and treatment facilities, which is estimated to cost more than $300 million, said Peake.
Earlier this month, Provincetown voters at Town Meeting rejected a proposed 1.5 percent real estate transfer fee that would have applied to sellers. Year-round residents would have been able to exempt an amount from the fee equal to the median price of a home sold in Barnstable County in the previous year. According to The Warren Group, the median selling prices for a single-family home and a condominium in that county were $369,000 and $275,000, respectively.
Martha’s Vineyard and Nantucket already impose a 2 percent tax on homebuyers that is placed into a Land Bank for the acquisition of open space. Nantucket and four towns on Martha’s Vineyard also have the Community Preservation Act, which places a tax surcharge on property owners to pay for affordable housing projects, open space acquisition and historical preservation.
But Richard J. Leonard, a leader of the Martha’s Vineyard Housing Bank Coalition, said funds from the Community Preservation Act and federal and state programs are specifically for housing for the lowest-income households. What’s really needed, he said, is housing for people earning up to 140 percent to 150 percent of the area median income.
“This is a local community seeking an opportunity to solve its own problem rather than depending on the state to solve the problem for us,” said Leonard, president of the Martha’s Vineyard Cooperative Bank.
Leonard also pointed out that while home prices are falling in most parts of the state, Duke County’s median price actually rose during the first three months of the year. The median selling price for a single-family home is 10 percent higher than a year ago, according to statistics from The Warren Group.
Still, Realtors like Peter Fyler don’t feel that a transfer fee and community housing bank will help because other costs on the island are so high. Fyler, an exclusive buyer’s agent, pointed to a study by the Martha’s Vineyard Commission the revealed the cost of living on the island is about 60 percent above the national average and that housing costs are almost double.
“I don’t think [the transfer fee is] going to solve the problem in the long run. I think people have to be given a fair wage here – commensurate with the standard of living here,” said Fyler, owner of SplitRock Real Estate in West Tisbury.
Even if the state lawmakers pass the bill, the transfer fee would have to go before voters on Martha’s Vineyard and Nantucket for approval.
Hearings for the bills had not been scheduled as of last week.
