More cities consider real estate transfer fees to mitigate housing crises
Rendering | Courtesy of WP East Acquisitions, LLC
A rendering of the proposed Alta Seven Hills apartment complex, which is slated for the former site of the Our Lady of Mount Carmel Church in Worcester
The mayor, city councilors, city housing officials and almost the entire legislative delegation from Somerville turned out for a Revenue Committee hearing Monday to continue the city's quest to be able to apply a fee to certain real estate transactions, something other municipalities have similarly been clamoring for.
"It is not new information that Somerville, like many other municipalities across the commonwealth, is facing really a worsening housing emergency in the midst of this ongoing public health crisis," Mayor Joe Curtatone told the committee as he testified in support of a bill (H 3938) that would allow the city to impose a transfer fee of up to 2 percent on real estate transactions for the purpose of generating revenue specifically for affordable housing creation and preservation. He added, "This home rule petition has received unanimous support from the Somerville City Council ... This is both needed and wanted by the residents of Somerville. I want to be clear about that -- this is what our community wants and needs."
Underscoring that message was the presence of the entire Somerville House delegation and a clutch of city councilors and officials at Monday's virtual hearing.
The fee, which would not apply in the event that a property owner plans to occupy the property themselves, is projected to raise between $6 million and $10 million annually for Somerville, the mayor said. That money would fund affordable housing development and complement the city's other efforts, like its property acquisition program, its Office of Housing Stability and affordable unit minimums for new developments.
"But even with all those steps that we're taking and policies in place, we are still losing our most vulnerable residents to unaffordable rents and rapidly escalating home prices, and they are falling prey to increasing speculation from out-of-town and out-of-state investors," Curtatone said. "The local transfer fee revenue could change that, more so than any other one piece of legislation."
Real estate transfer fees, supporters say, can serve as important new tools for municipalities looking to push back against the high rents and mortgages, displacement, and evictions that the state's housing crisis is bringing to their communities. The idea has generally been supported by groups like the Metropolitan Area Planning Council and opposed by the Massachusetts Association of Realtors. Opponents liken the fee to a tax that will just further drive up housing costs.
Though municipal governments have signed off on the idea, getting support on Beacon Hill for home rule petitions or a statewide approach has been a slog. In different forms and with different provisions, real estate transfer fee policies have been approved at the local level in recent years for Somerville, Boston, Brookline, Nantucket, Truro, Chatham, Provincetown, Concord and others.
"As you know, this is not the only home rule petition for a transfer fee on today's agenda. Our colleagues in Boston, Chatham and Provincetown also have transfer fees under consideration. This is in addition to towns and cities, such as Brookline or Nantucket, that are also actively advancing this concept," Rep. Mike Connolly, who filed the Somerville bill, told the Revenue Committee. "And it really speaks to what we are seeing in our communities. We see properties where someone will come in, pay cash to buy a property, not necessarily even do much to that property, and then a few years later potentially double their money, walk out of our community, extracting hundreds of thousands, if not millions, of dollars in profit simply because they were privileged enough to have that cash on hand to make that investment."
The Legislature has been cool to the idea of local transfer fees. During last year's economic development bill debate, Connolly proposed an amendment to empower cities and towns to create their own local real estate transfer fees -- 29 reps voted in favor of the amendment and 130 rejected it. Home rule petitions dealing with transfer fees have routinely stalled out short of the Beacon Hill finish line.
Monday's docket for the Revenue Committee also included Rep. Kevin Honan's bill (H 2942) authorizing a new real estate transfer fee to fund affordable housing in Boston, a Rep. Sarah Peake bill (H 3966) establishing a real estate transfer fee in Provincetown, and a Peake bill (H 4060) establishing a real property transfer fee in Chatham.
Chatham Select Board Chairman Peter Cocolis told lawmakers that his town is also facing a housing crisis, but one with some differences that are unique to its status as a vacation destination and hospitality industry hotbed.
"For instance, our school enrollment dramatically declined over the past year. Year-round employees with decent incomes are being evicted, as you have heard from other places, because of rentals that are sold and become seasonals. Employers in all sectors struggle to find sufficient employees," he said. "And, most importantly, housing is not only out of the reach of the neediest but of those stably employed with higher incomes."
While some municipalities have proposed their own ways of applying a transfer fee to real estate transactions, Curtatone and others on Monday also threw their support behind legislation (S 868/H 1377) before the Housing Committee that would give all municipalities the option of imposing their own transfer fee, though not at the expense of the Somerville-specific bill.
"I think we can do both and we have to do both," Ellen Shachter, Somerville's director of housing stability, said. "The reason I say that is because much of those state funds, ultimately and rightly so, ended up being geared to gateway communities, to communities where it's a little bit less expensive to build affordable housing. And unfortunately, it doesn't answer the municipal crisis that we see every day in the Greater Boston area. Even if we were to look and say everybody got an even distribution in the state of those funds, it simply would not be enough to really significantly help us get out of our current crisis."
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