Legislators push for broader housing transaction tax plan
Photo | Courtesy of Commonwealth of Massachusetts
Massachusetts State House
The structure of Gov. Maura Healey's transfer tax plan could box out lower-income communities from using the local-option policy as a tool to generate money for affordable housing in their cities and towns, according to a lawmaker who hopes her alternative approach will land in the Senate's version of a major housing bill.
"I've heard from communities that are excited about this as an option, but are concerned because it wouldn't work for them," said Sen. Jo Comerford of Northampton.
Comerford and Rep. Mike Connolly of Cambridge filed a bill (H 2747 / S 1771) seeking to broaden the scope of which real estate transactions could be subject to a potential tax on property transfers.
Under the governor's plan, the local legislative body of any municipality could adopt a fee on housing transactions of between 0.5 percent and 2 percent of the portion of a sale above a certain amount. The threshold would be $1 million or the median single-family home sale price for the county where the community is located, whichever is greater.
The proposal has the potential to lift housing options in high-value markets like Boston, Martha's Vineyard and Nantucket, but may not help many other communities, says those unsure about Healey's plan. House Speaker Ron Mariano recently expressed hesitation about a transfer tax, which he previously said he was open to, because he said it would only materially benefit wealthy communities.
In central and western Massachusetts, 53 municipalities had no transactions above the $1 million threshold in 2022. Under Healey's bill, only a handful of areas would raise major sums -- in the tens of millions of dollars -- for new affordable housing.
The lawmakers' proposal allows municipalities to choose between a threshold of sales above $1 million or sales above the county median, which for lower-income counties could mean bringing in significantly more revenue. The median home sale price in most counties is below $1 million, so this distinction would allow them to choose a lower threshold, as opposed to Healey's proposal which forces a higher minimum.
"To be able to benefit only on that first dollar over a million, for a community in Franklin County -- it would box them out entirely from this tool," Comerford said, though she said it was "gutsy" for the governor to include any transfer tax in her housing bill.
In Greenfield, located in Franklin County, Healey's plan would have yielded $648,254 in 2022 from a 2 percent fee, while Comerford and Connolly's proposal could have generated $1,117,235, according to an analysis by the Metropolitan Area Planning Council (MAPC).
"In western Massachusetts, the four western counties, there's about a 19,000 unit housing gap," Comerford said. "In our communities the kind of affordable housing development that could be transformational doesn't necessarily need to be the 100- or 200-unit developments. Maybe if we build a dozen senior housing units, and it can unlock 12 homes for individuals or couples or families ... that would be unbelievable for young people who want to live here."
Amherst Town Councilor Ana Devlin Gauthier said that "even with the most aggressive option in the governor's proposal," a 2 percent fee on transactions, the estimated revenue for the municipality would be only $149,928 -- compared to $1,033,654 under the lawmakers' proposal, according to the MAPC analysis.
"When you factor in the cost to administer this program, the benefit we would see is even more negligible," she said. "From our perspective, a floor of the average median sale price with a fee applied only on the amount exceeding that number would enable communities like Amherst to move the needle further on funding our affordable housing needs."
MAPC also conducted this analysis for municipalities outside of western Massachusetts. In Lawrence, Healey's transfer tax would have generated $2,955,617 on a 2 percent fee in 2022, compared to $3,501,274 if allowed to collect fees on properties above the county median home sale price. In New Bedford the difference is about $1.2 million more under lawmakers' proposal, and in Salem the city could generate an extra $900,000.
These estimates assume that, in line with Healey's proposal, only value above the threshold would be subject to the fee.
In Comerford and Connolly's bill, however, cities and towns would have the option to apply the tax to the full sale price of a housing transaction. That option would allow communities to generate even more revenue off of each transaction, while also adding to the cost of more housing transactions.
It remains to be seen whether the version of the bill the House eventually debates will include the transfer tax policy at all, but Comerford is hopeful that the Senate will take up a bill with her vision of a more regionally and economically inclusive policy.
"[Housing] Chairlady Edwards has just been so unbelievably supportive to look at potential changes to the language," she said. "I'm hopeful, not only because of Sen. Edwards, who is a spectacular chair, but I've also been heartened by the Senate president and chair of Ways and Means who have a continued understanding that the Senate must embody regional equity in our policies."
The Local Option for Housing Affordability Coalition, the coalition that worked in consultation with Comerford and Connolly on the bill, is hosting a virtual briefing on their preferred local-option transfer tax on Thursday at 1 p.m.
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