A graphic showing estimated transfer tax revenue by municipality under Gov. Maura Healey's proposed local-option real estate sales tax to fund affordable housing. Image courtesy of the Executive Office of Housing and Livable Communities
A proposed tax on high-value real estate transactions to pay for affordable housing would add an estimated 3,210 affordable homes in Massachusetts over five years, according to the governor’s administration – a drop in the bucket of the state’s 200,000 housing unit shortage.
Despite only adding about 1.6 percent of the units needed to chip away at housing demand, the policy may be causing a delay in one of the biggest bills lawmakers are poised to tackle this session, which includes other proposed policies and capital funds that may do more for the state’s housing shortage.
Healey’s $4.1 billion housing bond bill – which she is marketing as the largest-ever state investment in housing in Massachusetts – includes the tax policy change in an outside section that would clear the way for additional local levies on property sales without any additional approval needed from Beacon Hill.
Towns Would Have to Opt In
Under the proposed local option, any city, town or regional affordable housing commission can adopt a real estate transfer fee between 0.5 percent and 2 percent on the portions of a sale above a certain amount with a vote of their local legislative body. The threshold would be either $1 million or the median single-family home sales price for the county, whichever is greater.
Revenue from the transfer tax would fund local affordable housing efforts and the preservation of existing public housing stock.
The administration’s estimate that this policy could generate 3,210 affordable housing units over five years is based on an assumption that 50 percent of Massachusetts’ cities and towns would adopt a 1 percent tax, then put that money toward subsidizing housing at about $350,000 per unit.
Based on fiscal 2022 transactions, the Executive Office of Housing and Livable Communities found that 53 municipalities in central and western Massachusetts had zero transactions above the $1 million threshold. Another 96 municipalities would have raised less than $100,000 in fiscal year 2022 for each 1 percent levied. Eighty-four communities could have raised over $1 million in fiscal 2022 with a transfer tax, including a dozen between $5 million and $10 million. Revere and Somerville could have raised $10 million to $12 million, Cambridge $28 million and Boston $70 million for affordable housing with a 1 percent levy.
House Speaker Cool to Idea
At least 11 cities and towns – Boston, Somerville, Cambridge, Arlington, Amherst, Chatham, Concord, Nantucket, Provincetown, Truro and Wellfleet – have sent the state legislature home rule petitions seeking permission to launch real estate transfer fees. Supporters say the measure is desperately needed to help more people to be able to afford to live and work in those communities.
Still, House Speaker Ron Mariano indicated last week the controversial real estate transfer tax has slowed down deliberations on the bill that Healey filed over seven months ago.
Mariano said the transfer tax is “not as popular as I thought it might be” within his chamber.
“I’ve been listening to a lot of members. A lot of comments about the taxation issue, around the transfer tax. And so it’s slowed me down a lot,” the speaker told reporters last week. “I’m gonna have to really weigh the measure of where that would, what would happen in the chamber if we brought that up.”
Driscoll: ‘It’s a Real Tool’
The News Service asked Lt. Gov. Kim Driscoll for a reaction to the speaker’s comments about the transfer tax as she left the Mass Union of Public Housing Tenants lobby day on Monday morning.
“I mean, we really support the affordable homes bill, all of the policy provisions that are in it, and we look forward to working with leadership and frankly everybody in the delegation to try and get it over the goal line,” she responded.
Asked how she would pitch the transfer tax to representatives who may not be on board, Driscoll noted that the policy is local-option, so cities and towns would not be forced to enact the new tax.
“We think it’s a real tool for local communities who want to be able to invest in affordable housing within their boundaries,” she said. “Having these resources is critical to that, and we frankly really appreciate the flexibility that communities will have to choose to accept this transfer fee. It will be a local option for cities and towns.”
Housing and Livable Communities Secretary Ed Augustus emphasized that revenue generated from the transfer fee could also be used to preserve existing housing.
“We think it’s an important tool, and today we’re talking to public housing tenants,” Augustus said in an interview after the Monday morning Mass Union of Public Housing Tenants event. “We specifically said in the legislation that communities that decided to opt into a transfer fee would spend it on affordable housing creation, preservation or public housing. And we see in some communities that there are great partnerships with their local public housing, and they make capital investments … So we think it can also be a way to preserve and improve the public housing stock in communities through the transfer fee.”
Spilka Won’t Weigh In
Senate President Karen Spilka sidestepped a question this weekend over whether she supports a local option transfer tax.
Spilka, asked in a television interview whether she supports Healey’s pitch to allow municipalities to impose the real estate transfer fee, said her chamber is “still debating it.”
“The housing bill hasn’t even come to the Senate yet. The House is doing it first,” Spilka said on WCVB’s “On The Record,” which aired Sunday. “We are working on some pieces, but I think that we need to look at whatever we do with the eye of ensuring that we continue to build housing in every corner of the state and make it more affordable for residents.”
Spilka, asked by OTR host Sharman Sacchetti whether the $1 million threshold for the transfer tax proposal was “set too low” considering the volume of Massachusetts homes that are worth more than that amount, did not directly answer.
“That will be a big discussion and debate among the senators, so I’m waiting to hear from the Senate,” Spilka said. “We haven’t had that debate and discussion yet, so we’ll see.”
State House News Service staff writer Alison Kuznitz contributed reporting.
