The time has come for a real estate transfer tax

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Susan Gittelman

The need to create affordable and workforce housing in the Boston area continues to grow. In today’s market, even middle-class households and especially young workers and young families are struggling to find affordable housing.

The solution is to create new housing supply, and the optimal time to mobilize the necessary resources is when the market is strong and robust. However, attempts to link the two – the need to produce these homes and the financial means – have met with limited success in the past.

Now, in Boston and on Beacon Hill, the idea of ​​a real estate transfer tax to help create affordable housing is being revived.

Boston Mayor Michelle Wu recently filed with the Boston City Council what is called a Bylaws Petition which, if approved by councilors and state legislators, would allow Boston to impose a new commission paid by the seller on market real estate transactions. Proceeds would support affordable housing and the workforce.

In the past, the concept of transaction fees has been supported by affordable housing advocates, while it has long been opposed by the real estate community on the grounds that it would further increase already high housing costs and stifle growth. offer.

Boston proposal differs from past pitches

Wu’s proposal calls for a ‘transfer fee’ of up to 2% on commercial and residential real estate sales of $2 million or more, which the announcement says would generate ‘tens of millions’ of dollars a year .

“As the cost of housing has become increasingly out of reach for families, we must take urgent action to keep families in their homes and build a city for all,” Wu said.

An earlier Boston proposal passed the city council but languished in the legislature, which must approve bylaw petitions. Some other communities, including Somerville, Concord and Nantucket, have sought permission for transfer fees, set at various levels, but none have been approved.

Things may be different this time around.

Boston’s new proposal is more focused and has strong support from members of the legislature, including Boston City Councilwoman Lydia Edwards, who is also now a state senator. In 2019, Councilor Edwards presented a more aggressive proposal to city council, seeking to impose a tax of up to 6% on all real estate transactions over $2 million.

Wu’s new version is different and would only apply to the amount of a sale over $2 million, which would raise less money for affordable housing. It would exempt family purchases and protect senior homeowners. Public or affordable transactions would be exempt.

Additionally, private sector employers are increasingly interested in finding ways to address the affordability issue. It is a recognition that something must be done to address our housing market, which has become a significant barrier to recruiting and retaining quality employees.

The main employer supports the concept

Even before the pandemic and the Great Resignation, middle and middle-income professionals were being squeezed out in large numbers. The situation has worsened. The housing crisis has become such a hardship for many workers that it creates huge incentives for large employers to become active on the issue. And these employers have influence among state legislators.

As The Boston Globe reported days before Wu’s announcement, Mass General Brigham, the state’s largest private employer with about 80,000 employees, announced support for a plan that would apply to the across the state, saying the lack of housing not only creates health disparities, but also contributes to the shortage of hospital staff, as employees cannot afford the prices in the area.

In a joint statement, the chief executives of two Mass General-affiliated hospitals, The Nantucket Cottage and Marth’s Vineyard Hospitals, noted that Massachusetts “will not be able to maintain its status as a leader in health care if people cannot afford decent, quality housing”. .”

The Beacon Hill legislation would allow cities and towns to levy 0.5 to 2 percent on large dollar transactions. A sponsor told the Globe that the fees would help communities “capture just a tiny fraction of the incredible wealth created by the hot real estate market, as well as the historic boom in commercial real estate development”. The hope is that many would follow Boston’s lead and seize the opportunity to fund the creation of additional housing units.

Allowing municipalities to raise dedicated funds through a real estate transfer tax for investment in affordable housing and for the workforce is not a new idea. But given today’s circumstances, including a Greater Boston economy with no signs of slowing down, it’s time for the legislature to make it happen.

Susan Gittelman is the Executive Director of B’nai B’rith Housing, a nonprofit affordable housing developer currently working in Boston, Metrowest and North Shore.

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