A new bill that would give municipalities across the state the ability to institute a real estate transfer fee tax to fund affordable housing is gaining traction at the State House.
State Rep. Dylan Fernandes, D-Falmouth, is part of a coalition, made up of state and local elected officials and housing advocates, in support of the proposed transfer fee legislation.
If passed, the legislation would allow municipalities to levy a fee of up to 2 percent on large real estate transactions to fund workforce and affordable housing.
In January 2019, Fernandes filed a bill that would let towns impose a 2 percent fee on real estate transactions over $1 million. He found out that other state legislators filed similar transfer fee bills, and has been working with them to come up with comparable legislation that all parties could agree on.
“This gets at this massive issue on the Cape and Islands. Police officers, firefighters, and teachers can’t afford to live here, but also make too much money for ‘capital A’ affordable housing,” Fernandes told The Times in a phone conversation Tuesday. “This would be a way to equitably raise the revenue to provide affordable and workforce housing for people.”
The bill the coalition is backing is a local option, giving towns and cities the ability to vote at annual town meetings if they want to impose the tax. Voters would also choose how much of a fee they would want to levy, and decide at what price. Fernandes said this gives cities and towns more control, and it would allow a town like Nantucket, that has a 0.5 percent transfer fee for home sales over $2 million, to continue its home rule petition.
Somerville and Concord have approved similar transfer fee legislation. In December, the Boston City Council and Mayor Marty Walsh approved a 2 percent transfer fee on properties over $2 million. The proposed tax will now head to the state legislature for approval.
“This is voted on at town meeting, and they get to set their parameters on this,” Fernandes said. “We would give a lot of local control to decide what’s best for them.”
Revenue from the tax would be used for affordable and workforce housing. Affordable housing would be defined as housing 85 percent of the area median income (AMI), and workforce housing would be defined as 185 percent of AMI.
According to Fernandes, this would give towns on the Cape and Islands, which are high-cost areas, the ability to set their own parameters.
Fernandes also pointed to the Martha’s Vineyard Land Bank and the Nantucket Land Bank as examples of successful transfer-fee legislation. Both Land Banks impose a 2 percent fee on all real estate transactions.
Fernandes said this legislation is still in the beginning stages, and has a “long way to go,” and towns should continue to focus on other ways to tackle affordable housing issues.
“Right now on the Cape and Islands and [Martha’s Vineyard], in particular, we are reaching a really critical point, where the Island is becoming totally unsustainable in terms of housing,” Fernandes said. “This legislation would allow the town to create revenue on its own terms with community support.”
This sounds like a good idea to me, at least at first look. The attempt to coax the Land Bank to dedicate a part of its revenue apparently was unsuccessful, and the “Housing Bank” as it was put to the voters was not a good solution either, in my opinion. But the money to pay for affordable or workforce housing has to come from somewhere. Adding another 2% to real estate transactions of over $1 million adds $20,000 to the cost of that million-dollar home. While 20K is not a small sum, if one can afford to buy a home for 1 million, I would suppose that an add’l 20K, especially if amortized, would not be so burdensome, particularly if one remembers that one would be helping those who provide necessary services to the Islanders who are buying second or third homes.
Who pays the fee, buyer or seller?
Is this 2% on every dollar over $1MM or tax on the entire amount, if a $1MM or more? For example, $999,999, no tax…..$1,000,001, $20,000 tax.
Or $1,000,001, $0.02 tax (only tax $ over $1M). I suspect the legislators haven’t yet arrived at that level of detail, and even if they have, they will be debate it for hours before it’s final…
It is being reported elsewhere as “2% fee on real estate sales above the statewide median sale price, which is currently $415,000”
Maybe it’s time to split the land bank fee. 1% to land bank and 1% to affordable housing. Love the land bank properties and all the other open spaces – but at some point isn’t the land bank also contributing to the affordable housing shortage?
My thoughts exactly!
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