The Boston City Council on Wednesday passed a measure from Mayor Michelle Wu that would expand property tax relief for seniors while imposing a new 2% tax on real estate sales over $2 million.
The measure, a petition for home rule, must now be signed by the mayor and then approved by the legislature and the governor before taking effect.
The new tax would not apply to the first $2 million of the sale, only the top amount.
Councilor Ricardo Arroyo, who led the proposal through Council, said the measure is expected to generate nearly $100 million in new revenue each year, which would go into the Neighborhood Housing Trust Fund. He explained that the affected properties would “largely” be multimillion-dollar condos and large-scale commercial properties, most of which are located downtown.
“We asked the administration to give us the direct number of properties that would have been eligible for this transfer fee this year and it was 704 properties,” Arroyo said.
Although the Neighborhood Housing Trust Fund will collect the funds, according to the city, it currently lacks duly appointed trustees. The bylaws petition also gives council the right to draw from the fund for housing expenses with a separate ordinance.
Simultaneously, the proposal would expand property tax relief for senior homeowners by adjusting income and asset eligibility limits, increasing their total potential exemption from $2,000 to $3,000.
Council passed the proposal 10 to 1. Dorchester Councilor Frank Baker was the only one to vote against, insisting that the tax relief and the new tax should be considered separately.
Arroyo said the proposal would hit those “turning” homes, which buy properties, decorate them with upgrades and then resell them for higher prices.
If implemented, the board will reassess the $2 million threshold every three years in an effort to monitor and adjust for inflation. The idea is to prevent owners whose property values are rising from being drawn into the pool of investment-related sales.
Certain transactions would be exempt from fees, such as transfers between family members and transfers to the US government. Another category, transfers of convenience, which will be defined in a later council order if the petition wins legislative and gubernatorial approval, would also be exempt.
Wu, who sent the proposal to the council earlier this year, is expected to sign it and send it to the legislature in the coming days.