HELEN BABCOCK
‘Bad’ for town
Real estate leaders are vowing to fight a plan in Winchester to charge a transfer tax every time a home or any other property in town is sold.
Winchester voters passed a warrant article earlier this month to charge a 2 percent tax on the sale of any property in town. The homebuyer would have to pay the tax, which would be based on the home’s selling price, to the town before the real estate transaction can be completed. The tax measure, sponsored by the School Committee, must go to the state Legislature for approval.
“I think it’s going to very bad overall for the town,” said Helen Babcock, a 30-year resident of Winchester and longtime Realtor. “I understand where the School Committee is coming from. Every town is really hurting from the local aid being cut. They’re looking for ways to generate money … But to do this by taxing 3 percent of the population to pay for town services is to me a quick fix. It’s not the right fix.”
Babcock, who is the manager of Carlson GMAC Real Estate in Winchester and has been selling real estate in town for about 20 years, said the measure will discourage builders and homebuyers from purchasing property in town.
“Winchester has always been a town where people have moved within the town. This would make people look at whether they want to do that. It’s going to make builders look at the town differently,” said Babcock, who attended the Town Meeting where the vote was taken and was prepared to speak against the tax but wasn’t given the opportunity.
She added, “I think we’re taking a great risk … I think they’re gambling on the fact that people will not mind spending an extra $16,000 on an $800,000 house.”
The median sales price for a single-family home in Winchester last year was $569,950, according to statistics compiled by The Warren Group, Banker & Tradesman’s parent company.
Winchester’s tax measure comes at a time when communities throughout the commonwealth are struggling to preserve services in the face of deep state cuts in local aid. Some city leaders, including Boston Mayor Thomas M. Menino, are urging state lawmakers to allow them to impose local taxes to boost municipal budgets.
Last week, Senate leaders unveiled a plan that would allow cities and towns to charge local taxes on meals and a variety of other services, but only if voters in those communities agree to the tax hikes. House leaders, meanwhile, approved a municipal relief package that did not include such taxes.
Winchester town officials are estimating that the real estate tax will generate an additional $3 million in revenue. That money would be used for education and general municipal expenses. The transfer tax warrant was approved about three months after an $800,000 tax override proposal was rejected by Winchester voters.
With the exception of a $4.3 million override for capital expenditures and a building stabilization fund approved last year, other proposed overrides in Winchester during the last several years have been rejected.
‘Gated Community’
Peter J. Haley, a School Committee member who supports the real estate transfer tax, said the town receives a “relatively small amount of local aid” from the state and doesn’t have a commercial base on which it can rely for revenue. When local aid was cut further this year, the town’s alternatives were to raise property taxes, seek a Proposition 2½ override, raise taxes in another way or “accept lower quality municipal and education services,” he said.
Raising property taxes wasn’t palatable to many Winchester residents, especially those concerned about senior citizens, many of whom are on fixed incomes but whose property values are rising.
The median sales price of single-family homes in Winchester rose 42.5 percent between 1999 and 2002, according to statistics from The Warren Group. The median in 1999 was $400,000.
“It’s [increasing property taxes] not fair because it imposes a burden without regard to their [homeowners’] ability to pay,” said Haley.
But critics argue that real estate transfer taxes unfairly penalize homebuyers by having them pay extra for town services that benefit the entire community. At a time when home prices have escalated beyond the reach of many young people, they say, towns should not be imposing more fees on homebuyers.
“That is a wholly unacceptable way to tax people. It’s incredibly discriminatory,” said Peter P. Casey, president of the Massachusetts Association of Realtors. “This is one of the most onerous things that we have ever seen. It circumvents the Proposition 2½ override process … It clearly raises the price of homes without adding any value and in the process exacerbates a tremendously serious problem of housing affordability in the commonwealth.”
Casey said MAR leaders have already met with House Speaker Thomas M. Finneran and Senate President Robert E. Travaglini to lobby against the Winchester tax proposal.
“It’s so offensive to me. There are very logical reasons why this won’t work and hopefully the state Legislature will agree,” he said.
“If you tax homebuyers 2 percent of the purchase price of a home, you’re singling out a small amount of people to pay for services that are for the benefit of all of the community,” said Joy Conway, senior vice president for government and industry affairs for the Greater Boston Real Estate Board.
“We are watching very closely to see if other towns follow Winchester’s lead,” said Conway. “We’re very concerned. We’re certainly going to work hard to persuade the state Legislature that this is bad tax policy and that this [should] not be approved.”
Both Conway and Casey said Winchester’s proposal is a flawed tax policy because real estate is cyclical. Even though the town’s residential real estate market has been booming in recent years, past market slumps have occurred and are likely to crop up again in the future, Casey said.
If the market softens, unemployment rises and the economy worsens, “the town might realize substantially less from transfer taxes than they anticipated,” he said.
The tax measure would also create another bureaucracy in town by forcing homebuyers to pay the tax and then obtain a certificate as proof that the tax was paid before proceeding with the real estate closing, according to Conway.
To Conway, that amounts to forcing a homebuyer to get approval from the town in order to complete a home purchase.
“It’s not just another step in the process of buying a home. It’s a step that requires government approval for the transaction to be completed. That’s a major step that concerns us deeply,” she said.
Several other communities have considered real estate transfer taxes over the last few years. In fact, the Community Preservation Act, which enables communities to impose a surcharge on homeowners’ annual property taxes to pay for affordable housing, open space and historic preservation projects, evolved out of failed real estate transfer tax proposals.
Currently, homebuyers in Nantucket and Martha’s Vineyard have to pay real estate transfer taxes, which are collected and put into a land bank that is used to purchase and preserve open space.
Winchester’s proposal, which was modeled after Nantucket’s, will send its tax proposal in the form of a home rule petition to the state Legislature once Town Meeting completes is business. Another session of Town Meeting is scheduled today. If state lawmakers approve the home rule petition, the town must present it to voters as a ballot referendum question.
Some supporters of the tax have argued that other states charge real estate transfer taxes. But opponents point out that such taxes are statewide measures – not limited to a single town.
“You don’t have one town having an entrance and exit fee,” said Babcock. “That’s called a gated community. That’s fine for private associations, not for a town.”
