A Boston tax proposal hit the House floor on Monday in a late-session advance over the controversial idea of imposing a new charge — up to 2% — on real estate transactions over $2 million. in the most populous city in the state.
The House gave the bill (H.4637) an initial approval vote after a positive report from the House Steering, Policy and Planning Committee chaired by Boston Rep. Kevin Honan.
The bill aims to direct new revenue into affordable housing, while opponents have said there are other sources of funding available and the cost of a top-up on transfers would be passed on to tenants.
The Boston City Council and Mayor Michelle Wu approved the legislation in March before it was introduced in the Legislative Assembly by Rep. Brandy Fluker Oakley. The revenue committee, chaired by Rep. Mark Cusack of Braintree and Sen. Adam Hinds of Pittsfield, extended its review of the measure until July 31 before awarding it a favorable report.
But the final approval in the House is not yet done. Opposition from any lawmaker gains momentum after July 31. The two branches must meet for the remainder of the term in informal sessions, where only one lawmaker can oppose consideration of a prosecutorial bill.
At least two senators could oppose the bill
Revenue Committee reports on several local transfer tax proposals featured dissenting votes from Sen. Ryan Fattman of Sutton, according to the House calendar, and a Boston senator backed the idea of the transfer tax. transfer at a hearing in June.
Sen. Nick Collins of South Boston called the proposal a “tax hike” during his testimony before the Revenue Committee in June, while adding that he supported “the spirit of the bill” and the ” intentions of the funds”, which the city would direct towards affordable housing.
In a year when calls for tax relief echoed across the state, Collins warned against “taking a step in the wrong direction of tax increases, instead of prioritizing our spending or to see what we have room to do in terms of revenue generation which is already the authority of the municipalities.
Asked about his feelings on the bill’s progress on Monday, Collins told the News Service that “my priority is really to focus legislative efforts, at the state level, to help the City of Boston resolve the crisis at Melnea Cass and Mass. Ave. Everything else is secondary at this point.
The bill now goes to the House Committee on Bills for third reading. If the chairperson, Rep. Denise Garlick of Needham, withdraws the bill from that group, another favorable House vote would send it to the Senate.
The money would fund affordable housing
At the revenue commission hearing, Wu cited housing costs as “the number one challenge and stress our residents raise with me” and said the proposed tax “would have a huge impact”.
“Based on 2021 numbers, this would generate up to $100 million in local revenue to address our housing crisis, and would only affect about 700 real estate sales citywide out of nearly 10,000 transactions, or about 7% affected,” Wu said. “…It’s not about increasing upfront costs, it’s not about adding to the burden as developers seek to reconcile licensing costs and get through the process. It adds very small transaction fees at the point of sale, when the resources are there, to be able to have a huge impact in our city.
The transfer tax would add to a “very small list” of funding sources to support affordable housing, Marc Draisen of the Metropolitan Area Planning Council told lawmakers.
“A number of our towns and villages, as well as towns and villages in other parts of the Commonwealth, are looking to do their part to solve the housing crisis, and they need more funding to do so,” said Draisen to the Revenue Committee. “The only way to fix this is to increase the overall supply of housing and ensure that a reasonable percentage of that housing is affordable for low- and middle-income households. We can’t do one or the other. We have to do both. And both, but especially to ensure affordability, require funds.
Other transfer duty bills are pending in the early stages of the legislative process, such as the Somerville (H.3938) and Brookline (H.4567) bills which have both been favorably flagged by the Revenue Committee and are currently pending on the House calendar. The Senate gave initial approval in March to a Concord transfer tax bill (S.2437), which has since sat on the Senate Committee for Third Reading.
RE groups rather encourage to increase the CPA
Greater Boston Real Estate Board Director of Government Affairs Patricia Baumer told the News Service on Monday that Boston’s bill is “quite broad,” different from other local transfer tax proposals, and “sort of an attempt unprecedented for the City of Boston to impose taxes”.
“In addition to being a sales tax on real estate, if you look closely, it also captures the transfer of a controlling interest in a property,” Baumer said. “So it really gives the Boston City Council – it gives them unprecedented authority to define, by ordinance at the local level, what constitutes a taxable controlling interest and how the taxable controlling interest transfer is going to be calculated.”
She said her association was concerned that the tax would apply to “nominal” transactions and the “transfer of a controlling interest in a trust, LLC or other entity with a direct or indirect interest in property located in the Boston city. .”
Baumer and Dawn Ruffini of Mass. Association of Realtors both pointed to the Community Preservation Act (CPA) on Monday as a source of funding for affordable housing projects, and Baumer said the legislature considered a real estate transfer tax in the 1990s but “didn’t realized that the CPA is a much more stable source of income.