Boston City Hall

The Boston City Council’s Committee on Government Operations held a virtual hearing on Mayor Michelle Wu’s proposed real estate transfer tax Thursday where councilors indicated broad support for the proposed transfer tax and senior property tax relief.

The proposed tax would apply to properties that sell for $2 million or more and would raise money for affordable housing via the city’s Neighborhood Housing Trust Fund. The real estate transfer tax has been paired by the Wu administration with an increase in the senior property tax exemption, raising income and asset thresholds to qualify more homeowners 65 and older for the tax break. The plan, if approved by the City Council, would require the state legislature to sign off on the so-called “home rule petition.”

But unlike the version that cleared the council in 2019 and died on Beacon Hill the tax would be only be assessed on the value of a property above $2 million, rather than the full amount.

If the legislature were to approve the home rule petition this year, the City Council would have to pass an ordinance to implement the policy, at which point decisions could be made on where to set the transfer tax rate up to 2 percent and whether to offer exemptions for non-profits, sales to affordable housing developers or other types of properties.

State Sen. Lydia Edwards, who continues to sit on the council after joining the Senate last month, also raised the possibility of scaling the transfer tax to apply lower rates to properties that sell for between $2 million and $3 million, for instance, with the top tax rate of 2 percent applying to only the most expensive properties.

“I think that would be helpful and maybe calm some in the real estate community,” Edwards said.

Tax Would Fall on Downtown Condo Owners

Based on 2021 sales data, city officials project the tax would generate $99.7 million annually, or about $28 million less than the previous iteration. The city budget currently allocates about $71.5 million for affordable housing programs.

Tim Davis, deputy director for policy and research for the city of Boston, said that in 2021 the transfer tax would have only impacted 704 real estate transactions, mostly in downtown neighborhoods and on the sale of high-end condominiums.

Nicholas Ariniello, commissioner of assessing, said the 2 percent transfer tax has been packaged with a proposal to increase the income and asset thresholds that qualify seniors for property tax exemptions in Boston.

Wu is proposing to increase the maximum exemption from $2,000 to $3,000 by increasing the income limits from $24,911 for a single filer and $37,367 for a married couple to $47,000 and $53,700 respectively. Asset limits, not counting the value of a senior’s home, would also double to $80,000 for a single resident and $110,000 for a married couple.

The income threshold would be tied in the future to area median income, and set at 50 percent.

“Really we’re changing all the elements of the program to be something that we think really makes more sense for the area,” Ariniello said.

While officials said it was difficult to estimate how many seniors would be impacted by the expansion of the property tax exemption program, Ariniello said based on just the income eligibility criteria Wu’s proposal could potentially double the application pool from 4,600 homeowners to 8,700 and increase program participation from about 500 to 1,000.

‘Broad Support’ for Measure

Councilor Ricardo Arroyo, who chaired the committee hearing, said there was “broad support” on the council to send the home rule petition to the State House, and the vast majority of councilors spoke up in favor of the proposal.

Councilor Frank Baker, however, questioned the decision to pair the transfer tax with senior property relief.

“We should be helping our seniors and having those conversations without attaching it to a transfer fee,” Baker said.

The Savin Hill resident said he doesn’t support the transfer tax because he believes it ultimately hurts smaller property owners.

“It’s going to be difficult for members of the State House to vote on a tax increase now in an economy where inflation is up around 7 percent and rates on getting money are going up,” Baker said.

Councilor Kendra Lara disagreed with Baker, saying she supports the strategy of trying to sweeten the petition for lawmakers by attaching senior property tax relief.

“I am supportive of keeping them together. I think it does make it a more attractive home rule petition,” Lara said.