Boston is taking another crack at trying to impose a 2% tax on big-ticket real estate transactions, which officials say is a necessary step to fund affordable housing development, but the proposal continues to face resistance from industry groups.
Mayor Michelle Wu appeared before Beacon Hill lawmakers for a second straight year on Wednesday to testify in favor of a home rule petition she filed in 2022, that would add a real estate transfer fee for sales that exceed $2 million.
The seller would incur the fee, with proceeds payable to the City of Boston. The city would then deposit the money into a neighborhood housing trust, for the purpose of furthering housing acquisition, affordability, creation and preservation, and senior-homeowner and low-income-renter stability, the legislation states.
“We’re doing everything we can at the city level,” Wu said, citing efforts to overhaul the city’s zoning code for more housing affordability, provide tax incentives for converting offices into residential buildings, and provide financial assistance to homebuyers.
“But the one powerful tool that remains out of reach without legislative and gubernatorial approval is a transfer fee,” the mayor added at a Joint Committee on Revenue hearing at the State House.
In her testimony for the proposed bill, H.2793, Wu cited statistics that show roughly half of renters, and more than 40% of households, are cost-burdened, meaning that they pay more than 30% of their income on housing costs.
Rising housing costs are “deepening racial and socioeconomic disparities,” she added, pointing to stats that show nearly 60% of renters of color are cost-burdened compared to 38% of white renters.
A “modest 2% transfer fee,” Wu said, would translate to $10,000 for a $2.5 million property sale. Based on 2021 data, the fee would have affected roughly 7% of sales that occurred that year, and generated up to $100 million in local revenue, she said.
“Revenue raised through this fee will help us build supportive housing and ensure that our seniors can stay in their homes,” Wu said. “It will help build new homes for families who have been forced out by skyrocketing prices and make it possible for more first-time homebuyers to put down roots and raise their families here in Boston.”
Testifying alongside the mayor was state Rep. Brandy Fluker Oakley, who filed the proposed legislation that grew out of Wu’s home rule petition, which was approved by the Boston City Council last year.
The bill was among a number of transfer fee petitions considered by the joint committee on Wednesday. Also lobbying for the fee were officials from Amherst, Arlington, Cambridge, Chatham, the Cape and Islands, Provincetown, Somerville, Truro, and Wellfleet.
Noting the Legislature’s past resistance to imposing a real estate transfer fee, Wu said Boston’s proposal differs from prior years, in that it would create a provision to increase the number of people eligible for the 41C senior property tax exemption, “nearly doubling the amount of seniors who could stay in their homes.”
The bill, which needs to be greenlit by the committee, faces strong opposition from industry groups. In its submitted written testimony, the Greater Boston Real Estate Board said a “new real estate tax will harm the economy, further constrain housing and is simply a bad tax policy.”
Such a tax would strip “hard-earned sweat equity” for sellers looking to put that money toward a down payment on a new home. Increasing the cost of selling a home would penalize existing residents who want to stay in their communities, and in some cases, price buyers of the market, the board’s statement said.
Further, the board states that Massachusetts cities and towns were already granted the authority to impose a property tax surcharge of up to 3% to pay for affordable housing, 22 years ago, through the Community Preservation Act.
Creating new taxes, especially on housing, in the wake of last week’s “historic” tax relief bill, “would move the state backwards,” Mark Kavanagh, government affairs committee chair for the Massachusetts Association of Realtors, added.
“Transfer taxes will harm our communities — they are unfair,” Kavanagh said. “In our opinion, taxing a small percentage of a population for the gain of an entire community sets a bad precedent.”
