Dozens of Massachusetts lawmakers, municipal representatives, and residents at the State House Wednesday urged the state’s Joint Committee on Revenue to approve legislation concerning local-option real estate transfer fees to help alleviate the impacts of the statewide housing crisis.
At least 10 towns across the commonwealth have already submitted home-rule petitions seeking authorization to collect tax from high-priced real estate transactions in order to stimulate local production and preservation of year-round housing.
Martha’s Vineyard’s proposed fee seeks to impose a 2 percent tax on most real estate transfers over $1 million, and would serve as the funding mechanism for a housing bank.
Despite overwhelming local support for the transfer tax, municipalities can’t implement the fees until granted approval by the legislature and the governor.
According to the State House News Service, Gov. Maura Healey’s office is working on a housing bond bill consisting of new policy changes aimed at housing issues. That program is expected to be unveiled soon.
As of now, without even the option to collect that money, a number of town reps and attainable housing advocates say they just don’t have the resources to adequately address their communities’ housing needs. It’s a problem that extends to each corner of the state of Massachusetts.
In Boston, nearly half of the city’s households are spending more than they can afford on housing costs, Major Michelle Wu said at Wednesday’s hearing, adding that the problem has far-reaching consequences, including an exacerbation of racial and economic disparities.
In nearby Concord, where a median home listing is $1.5 million, town risk and compliance manager and intergovernmental relations coordinator Chris Carmody said the town has been experiencing growing cases of homelessness as a result of skyrocketing housing prices.
“We’re hearing more frequent requests for financial assistance for residents forced to choose between rent and heat, or clothing, or health insurance, or food,” he said.
This is Concord’s second attempt to enact a real estate transfer fee to fund affordable housing, the trust for which currently has no stable revenue source. With the transfer tax, the town estimates a projected revenue of close to $2 million per year.
In Cambridge, where rental prices exceed $3,400 per month for a two-bedroom apartment, 6,000 people living or working in the city currently sit on waiting lists for the 400 recent affordable units made available through the city’s housing authority.
“Housing production, especially affordable housing, has not kept up with demand,” city manager Yi-An Huang said in his testimony Wednesday, calling the disparity a “travesty.”
The imposition of a onetime local transfer fee would be “a nominal cost to the wealthy,” Huang said. “But it would generate a significant contribution to benefit low-income families who desperately need affordable housing.”
Cambridge expects the tax would generate more than $20 million of annual revenue.
Ben Ewan Kampen, president of the Somerville City Council, says due to the lack of public funding for affordable housing development projects, the town is forced to “triage” requests in order to better strategize which ones to support.
Despite local efforts, “we’re really nowhere near on track to build the amount of affordable housing that we need,” Kampen said.
For Somerville, the real estate transfer fee would provide “a steady resource revenue of conservatively $6 to $10 million.”
State Sen. Julian Cyr (D-Truro), the sponsor of proposed legislation that would give Martha’s Vineyard the ability to collect from a real estate transfer fee, told the joint committee Wednesday that the statewide housing crisis is “actually worse at the extremities of the region” — specifically, the Cape and Islands.
With Nantucket and Martha’s Vineyard home prices upwards of $2 million and $1.3 million, respectively, “we are in very dire circumstances,” he said. “Our communities here are eroding.”
Unable to afford to buy a home in Truro, where he grew up and currently resides, Cyr said that when state senators need financial assistance for purchasing a home, “there is something deeply, deeply wrong with our real estate market.”
It shows that the region’s communities are going to need a way to subsidize housing for those who are not just below median income, but also far above it, he said.
In terms of the resources needed to be able to spend tens of millions of dollars for housing production and preservation, “I don’t know where that money’s going to come from,” Cyr said. “I don’t know how we do that without a transfer fee.”
But, he said, “If we do not change course, we will not have a year-round community.”
Though city and town representatives and affordable housing advocates expressed support en masse, not every entity present at Wednesday’s hearing shared the sentiment.
Mark Kavanagh, testifying on behalf of the Massachusetts Association of Realtors, shared that the group “staunchly opposes” the taxation, calling it “unprecedented” and “unfair.”
He said that the proposed bills, of which there are several (catered to each town’s specific needs) could negatively affect communities by pushing home prices further out of reach of prospective homeowners, and create greater competition for properties below the tax threshold.
“Taxing homes increases income stratification, constrains diversity and inclusivity, and enforces existing patterns of de facto segregation,” Kananagh said.
He also questioned how much towns could benefit from the transfer fee revenue when home prices are already so high. For places like Concord, he said, the estimated annual revenue would be only a little bit more than a Concord house at market price. “It’s a drop in the bucket,” he said.
Kavanagh argued that some towns that are seeking approval of their home rule petitions and the enabling legislation are also lacking in their efforts to produce and preserve affordable housing. Part of that, he said, is that towns aren’t using all resources available to them, including Community Preservation Act (CPA) funds.
In that respect, in his testimony, Sen. Cyr acknowledged that more could be done on a local level.
His bill, S.1786, “An Act relative to a local option real estate transfer fee to create and preserve housing,” says that municipalities have to demonstrate progress on housing production to be able to have a local-option transfer fee.
While some towns, like Nantucket and Provincetown, have been leading the way with those efforts, allocating tens of millions of dollars annually to housing initiatives, not every community has done enough to show their commitment to the cause, Cyr said. “It’s important that communities are doing their part here,” he said. “We cannot solve our housing crisis on Beacon Hill.”
In order to be able to enact the transfer fee, towns must provide evidence that they’ve maximized CPA funds, and have dedicated at least 50 percent of room occupancy tax to housing, wastewater, or infrastructure, among other requirements.
“Yes, our communities desperately need revenue to address the housing crisis,” Cyr said. “But also I believe that our communities should have skin in the game.”