Throughout the pandemic, the real estate market on Martha’s Vineyard has been red hot. The significant rise in real estate prices and flurry of weekly transactions have generated high revenues for the Martha’s Vineyard Land Bank.
Established by an act of the state legislature in 1986, the Land Bank’s income comes from a 2 percent real estate transfer tax on most land transactions. There are 13 exemptions under the Land Bank’s transfer fee regulations, such as transfers to the government, gifts without consideration, and for first-time homebuyers.
The first-time homebuyers exemption threshold, known as the M exemption, is set at the first $595,000 for 2021.
In an email to The Times, Land Bank executive director James Lengyel did not respond to specific questions regarding the transfer fee, but instead sent The Times minutes and a section of the Land Bank’s housing policy. The bylaws, posted on the Land Bank’s website, show the exemption incorrectly as $400,000. Tisbury commissioner Nancy Weaver told The Times in a text message the commission would work on updating the website.
The Land Bank Commission determines the threshold for its M exemption each December for the following calendar year. The commission decides on the threshold amount by tallying all M-exemption transfers in the past two years, and all “uncharacteristically high” transfers in that same time period are removed. The mean and median of the remainder is then calculated, and the threshold is selected at the commission’s discretion, before it notifies the town advisory boards and local attorneys and banks of the result. Under Land Bank law, the threshold is not allowed to go under $300,000.
First-time homebuyers that have received an M exemption have a lien recorded at the Dukes County registry of deeds against their property. The lien is to ensure the Land Bank will be notified if the owner attempts to sell the property before a five-year residency requirement has been completed.
“Sales within the five-year period will trigger the fee to become due and payable to the Land Bank, which may also include interest and penalties,” the Land Bank’s website reads.
According to minutes from a Dec. 21 meeting, commissioners unanimously approved an increase based on the 2020 mean value for M-exemption homes being $585,000 and the 2020 median value being $600,000.
From January through September, there were 37 property transactions that qualified for the first-time homebuyer M exemption. In 2020, there were 79 transactions that qualified when the threshold was set at $565,000.
Last week, The Times covered how the Land Bank had collected more than $2 million through its transfer fee in two weeks — bolstered in part by the sale of a $25 million property in Chilmark.
Speaking to The Times by phone, commission chair Sarah Thullin said the commission sticks to its formula when deciding on the threshold. “We’ve discussed the importance of the M exemption, and tried very hard to work with people who are granted the M exemption,” Thullin said.
Land Bank revenues from January through September were $17 million, with its highest monthly total in April at $2.6 million, and its lowest in January at $1.4 million. In that same time period Land Bank expenses were $17.25 million, of which $7 million will be paid over time via a promissory note. The median sale price for homes on Martha’s Vineyard in 2020 was $1.15 million.
The Nantucket Land Bank also gets its revenue from a 2 percent transfer fee, but its first- time homebuyer exemption threshold is much higher.
In December, the Nantucket Land Bank increased its M exemption threshold from $600,000 to $850,000. This allows first-time, year-round homebuyers who intend for their home to be their primary domicile to be exempt from paying the Land Bank’s 2 percent transfer fee on the first $850,000 of the price of their home. Someone purchasing a home at the threshold amount saves $17,000.
In an email to The Times, Nantucket Land Bank executive director Jesse Bell said the Nantucket Land Bank increases its exemption threshold based on an analysis of previous exemption statistics.
This is the fifth time the M exemption has been raised on Nantucket. Commissioners have the ability to change their exemption threshold annually by vote.
In 2017, the Nantucket Land Bank added an O exemption, which fully exempts deed-restricted affordable housing units.
“Yes, there is a slight loss in revenue with the threshold change, but due to current market conditions, the commission wanted to raise the exemption to make homes more accessible for first-time purchasers looking to make Nantucket their permanent home,” Bell said.