Tax Real Estate Sales To Build More Below-Market-Rate Housing, Left-of-Center Advocates Say

Printed from: https://newbostonpost.com/2020/01/08/tax-real-estate-sales-to-build-more-below-market-rate-housing-left-of-center-advocates-say/

Below-market-rate housing advocates want the Massachusetts Legislature to allow cities and towns to add up to a 2 percent transfer tax on higher-end real estate sales in order to build more so-called affordable housing.

The fee would apply to sale prices above the statewide median sale price and to certain property sales defined as “speculative.”

Left-leaning state legislators and below-market-rate-housing supporters presented the plan at the Massachusetts State House in Boston on Wednesday, January 8, according to State House News Service.

The transfer fee would range from 0.5 percent to 2 percent, according to a proposal that supporters are dubbing a “compromise.”

The median sale price for pending single-family homes in December 2019 was $415,000, according to the Massachusetts Association of Realtors. That’s a 10.7 percent increase over the median sale price in December 2018, which was $375,000.

The below-market-rate housing proposal — which is designed to help people who earn less than the median income in their area — would also authorize cities and towns to charge a fee of up to 6 percent for so-called “speculative sales” — which refers to property that sells for more than three times the state median sale price within one year of the previous purchase. The proposal provides an exemption for home sellers who need to move for work or for family reasons.

Supporters say the proposal would help people struggling to afford a place to live in Massachusetts. Opponents say it would stick it to one segment of the population, including people trying to move up in the housing market, and may hurt home sales more generally.

State Representative Dylan Fernandes (D-Falmouth), who filed a bill last year that would allow a transfer fee on sales over $1 million, said the pro-transfer-fee group drafted its plan with high-priced real estate in mind, but chose the state median as a threshold so the option would be available to communities that like the idea but don’t have many million-dollar homes. He said he expects interested municipalities would set higher thresholds, like the $2 million level proposed in Boston.

“We recognize that there’s 351 very distinct towns in the state,” Fernandes said in an interview Wednesday, January 8, according to State House News Service. “All of them for the most part are in some sort of housing crunch, but they may look very different in terms of where they are, so we wanted to make sure that local communities can tailor it in a way that fits their housing market, so that’s why we chose the median sales price.”

Along with Fernandes, the language is backed by state Representatives Liz Malia (D-Jamaica Plain) and Mike Connolly (D-Cambridge), state Senator Jo Comerford (D-Northampton), and the home-rule petition filers:  state Representatives Sarah Peake (D-Provincetown), Christine Barber (D-Somerville), Tami Gouveia (D-Acton), Tommy Vitolo (D-Brookline), and Denise Provost (D-Somerville). State Senator Julian Cyr (D-Provincetown) also spoke at Wednesday’s press conference, according to State House News Service.

The Massachusetts Association of Realtors generally opposes transfer taxes, said its chief executive officer, Theresa Hatton. Hatton said a transfer tax “is not good tax policy” because it is not broad-based and asks one specific buyer or seller “to take care of the common good.”

Hatton said that a transfer tax that targets the upper end of the housing market could ultimately have a “greater impact on getting people into the starter home market.” She said a transfer tax “puts this pressure on people who are in these starter homes and want to move up, but can’t” because of the added cost.

The transfer fee plan comes as lawmakers, backed by Boston Mayor Martin Walsh, are also weighing proposals to generate new revenue for transportation by allowing communities or regions another local option — to pass binding transportation project and financing ballot questions.

Walsh and Somerville Mayor Joe Curtatone each mentioned their city’s transfer tax proposals in speeches this week.

In his annual State of the City address on Tuesday, January 7, Walsh said a fee of up to 2 percent on sales above $2 million, is one avenue the city hopes to use to fund an “unprecedented investment” of $500 million over five years to create new housing. Curtatone, in an inaugural address Monday night, January 6, mentioned the transfer fee that Somerville officials passed as among the housing-related ordinances the city is waiting for the state to approve.

“We cannot wait for the state to approve each community’s request, one by one,” Curtatone said Wednesday, January 8. “Our residents are being priced out now, and we need action now. We need the ability to raise funds for affordable housing now and we need that flexibility that the compromise local option transfer fee legislation would give communities to make policy that works for them.”

Boston City Councilor Lydia Edwards said her city’s housing market has become like a stock market, where “units are traded like commodities today, and the residents are being displaced.”

Home rule petitions for transfer taxes in Nantucket (Massachusetts House Bill 3637), Truro (Massachusetts House Bill 4208), Provincetown (Massachusetts House Bill 3691), and Concord (Massachusetts Senate Bill 2318) are all before the Joint Committee on Revenue of the Massachusetts Legislature, as is the Somerville bill (Massachusetts House Bill 2423). Brookline Town Meeting members in December approved a transfer fee proposal that noted neighboring communities are moving forward with the concept.

Fernandes’s office said that the communities asking the Massachusetts Legislature to approve a transfer tax are among the areas with the highest home costs.

The petitions take various approaches to the fee. Nantucket’s bill would have the seller pay half of a percent, with the first $2 million of the sale price exempt. In Concord, the buyer would pay 1 percent of the portion of the purchase price over $600,000.

State Representative Connolly said the language introduced Wednesday is a set of “common principles” that lawmakers will use to try to find consensus among their colleagues. He told State House News Service his “absolute goal” is to see it included in a broader housing bill that also includes measures like tenant protections.

“In my district, in Cambridge and Somerville, there are sites, there are properties, where the value has doubled, tripled, maybe even quadrupled, over a 10-year period and if an owner or a developer is seeing the value of their property skyrocket, I think most reasonable people don’t feel it’s too much to ask if we could just capture 2 percent or so of these massive transactions to dedicate to local affordable housing programs,” Connolly said during the press conference, according to State House News Service.

While activists and others have been clamoring for years for passage of legislation addressing the “housing crisis” in Massachusetts, Democratic legislative leaders have been unable to assemble and advance any major housing policy changes to address the situation, or boost housing production.

 

[Editor’s Note:  Portions of this story are taken directly from a State House News Service story published online Wednesday, January 8, 2020.]

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