Transfer fee stripped from Senate housing legislation

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State house lawmakers heard testimony on housing legislation earlier this year. -Charlotte Hysen

Senate Democrats unveiled plans Monday to authorize more than $5 billion in borrowing to spur housing production, releasing a bill that would make numerous housing policy changes while not recommending a proposal to allow communities to tax high-value real estate transactions to pay for affordable housing.

The 17-member Senate Ways and Means Committee polled the housing bond bill Monday morning, teeing it up for debate Thursday.

The bill, based on legislation Gov. Maura Healey filed in October, is designed to address the state’s crisis of low housing inventory and unaffordable options. It would prompt the creation of 40,000 housing units, according to the Senate Housing Committee Chairwoman Lydia Edwards, chipping away at the 220,000-unit shortage Massachusetts is expected to experience by the end of the decade.

“The point of this bill, like I said — we can’t fix it all. Can’t undo it all. But it can course correct,” Edwards said at a press conference. She later added, “We would be naive to think we could do all of that in one bill, at one time, knowing to even build the units that we need it’s going to take 20 years. The housing conversation and the solutions and the tools that we need to build are just starting again.”

The bill authorizes $5.1 billion in long-term capital spending on housing, but the state is currently limited to about $400 million a year in capital spending on housing under its latest five-year capital budget. Bond authorization laws only add to the menu of spending options for executive branch officials to choose from, while operating within the constraints of an annual state bond cap.

Transfer Tax

The Senate Ways and Means bill leaves out a proposal to allow local-option real estate transfer taxes, which more than a dozen communities are seeking to tax high-dollar property sales within their borders and generate money for affordable housing. The House also did not adopt the policy, meaning it is likely dead for this session, though any senator could propose to add it through an amendment.

Local option transfer taxes have long been proposed on Beacon Hill, and the idea seemed to have legs this session — especially with a heavyweight in its corner, with the support of the governor. Healey and the Legislature are now more officially at odds over the idea, though the governor has been hesitant to publicly apply pressure to lawmakers over the policy. She has avoided directly answering when reporters have asked if she would still sign a housing bond bill that excludes the local-option transfer fee.

Sen. Edwards has also been a vocal supporter of the tax, and the housing bond bill sailed out of her committee earlier this year with the policy still included. Edwards sponsored an initiative in 2019 as a Boston city councilor to apply a 2 percent fee on real estate transactions above $2 million, which she said at the time could have raised $168 million for affordable housing in the city.

Asked by reporters why the fee wasn’t included in the Senate Ways and Means bill, Edwards said there are already a lot of existing housing production tools, and more would be created under the bill.

“Before we add an additional tax, we think it’s incumbent upon us to look at what we have already provided and tools in the toolkit for a lot of cities and towns, and to make sure they are sharpened to their best potential,” Edwards said.

One of those “sharpening” measures in the new bill that is a $50 million incentive for Community Preservation Act communities who have spent the state CPA dollars on housing, she said.

“196 cities and towns have a form of CPA, and that is an opt-in local option kind of tax. And it has not been working as well as it should have been,” she said. “And before we add an additional tax bill, we need to make sure that we’re right sizing and ensuring that those are working correctly.”

Asked by reporters last week if she personally supported allowing transfer taxes, Senate President Karen Spilka of Ashland said, “I’m getting a feeling from the members. That is, to me, what is the most important.”

Sen. Jo Comerford of Northampton, who filed a bill this session seeking to broaden the scope of transfer fees to allow lower-income communities to use the tool, said the bill will create a commission to study the idea, with a provision to include a rural perspective.

“We’ll be back to work on this again,” she said.

Amherst, which is in Comerford’s district, was one of the municipalities that filed home rule petitions this session seeking to implement a new tax on high-dollar transactions to pay for affordable housing.

“The Amherst town manager talked at length about the town’s extensive use of CPA funds for housing, they’ve dedicated ARPA funds, they’ve formed a housing trust fund. This is a community that is pro-housing, and they’re just asking us for another tool in this home rule petition. And I believe they should have that if they believe they can use it right,” she said.

More than 10 other towns in her district are also considering how transfer taxes could work for their communities, Comerford said.

“We want to be able to give communities the tools they’re asking for,” she said.

Sen. Julian Cyr of Truro was also a vocal supporter of the fee, as communities on Cape Cod and the islands of Martha’s Vineyard and Nantucket have sought to implement the policy. Housing advocates who support the proposal say it would be especially helpful in communities with a lot of tourism, such as the Cape and islands, where wealthy people buy property without living there year-round, pushing out locals. The tax on the expensive second-home sales would help fund affordable housing for local residents, they say.

“Of course, I’m disappointed that a local-option transfer fee was not included in the base bill, but I continue to see momentum on this,” Cyr said. “A revenue source that would work well for some communities, many of which I represent, would help those communities solve a very real problem and also stretch limited state taxpayer dollars elsewhere in the state, where this particular tool might not make sense.”

Cyr said there are policies in the bill that will help seasonal communities like the Cape and islands, and he’s hopeful that lawmakers will come back to the transfer fee in a future housing bill.

“I’m encouraged to hear this isn’t the only housing bill we’ll do for the next decade,” he said.

Cyr is a member of Spilka’s leadership team, and Comerford is the assistant vice chair of the powerful Ways and Means Committee.

Real estate lobbyists have been pushing for over a year to discourage lawmakers from allowing the local-option taxes.

“To overcome the housing crisis, leaders on Beacon Hill need to prioritize policies that reduce barriers to housing creation, which will in turn help generate production of homes across all price points,” Greg Vasil, CEO of the Greater Boston Real Estate Board, said in a statement on Monday. “We are thrilled that the Senate Ways and Means’ version of the Housing Bond Bill unveiled today embraces these efforts by including massive investments in affordable housing, as well as streamlined permitting of Accessory Dwelling Units (ADUs), while also rejecting flawed policies such as transfer taxes.”

Included Policies

One policy change seems on its way to becoming law, with support from the governor, the House earlier this month and now the backing of Senate Democrats. The Senate Ways and Means Committee proposed allowing for accessory dwelling units, or ADUs, by right in single-family zoning across the state. The administration previously estimated this could create 10,000 new housing units across Massachusetts.

ADUs are smaller, independent units located on the same lot as standalone houses, and frequently provide housing for elderly family members who want to downsize and live closer to their families, for adult children, or are rented out by homeowners.

A recent University of Massachusetts Amherst/WCVB poll found that 66 percent of residents supported allowing the smaller housing units in single family zoning districts.

In addition to ADUs, the bill adopts a number of proposals Healey recommended in her own bill, including: allowing tenants to seal previous eviction records in certain cases, expanding the designation to address housing availability in “seasonal communities,” and allowing a simple majority voting threshold for inclusionary zoning ordinances and bylaws at the local level.

Edwards sponsored the bill this session that would prevent an eviction from becoming a permanent mark on an individual’s housing record by sealing evictions from prospective landlords, who could use old cases to deny applicants housing.

When Edwards testified on this bill in 2021, she called it the “scarlet letter E.”

“The fact is, if you file a case, the moment you create an eviction record that is permanent for life,” Edwards said at the time, adding that people of color, particularly Black women, are more than twice as likely to be evicted and “not given a softer landing” in the courts.

As for seasonal communities, Cyr said the bill would expand this designation and create a greater policy toolkit for communities — like those in Cape Cod and the southern Berkshires — that have 40 percent or more of their houses as secondary properties.

It would allow a path for communities to implement a year-round deed restriction program, which would create financial incentives for homeowners to reserve their properties for year-round housing. This would apply to both houses that are rented and those lived in year-round by their owners.

“This is a crucial tool for us. We need to be able to preserve units for people who actually live here,” Cyr said. “Aspen, Vale and California towns around Tahoe have used this tool, and we’ll soon be able to if the Senate language prevails in conference … Police chiefs, fire chiefs and our schools have been reaching out to us to provide housing for our municipal workforce. This bill does that.”

In addition, the bill would raise the ceiling on year-round residential property tax exemptions, which Cyr also said is a lifeline for year-round residents on the Cape and islands, as it shifts a greater percentage of the property tax base onto second homeowners.

The Senate Ways and Means bill would add inclusionary zoning ordinances and bylaws to the list of zoning changes municipalities can pass by a simple majority instead of a two-thirds majority vote. Inclusionary zoning refers to local policy that requires or provides incentives to developers to set aside a fraction of newly constructed housing units to be affordable.

The bill would allow simple-majority inclusionary zoning votes for up to 13 percent affordable units, after which those votes could defer back to two-thirds.

“We had heard a lot of people voiced true concern about cities and towns being able to use that new power to block housing by saying, ‘Oh well, anything to be approved here has to have 80 percent of affordable housing,’ and so on and so forth,” Edwards said. “And so we wanted to meet both concerns and we thought that we threaded the needle by saying simple majority for up to 13 percent.”

Leah Robins, government affairs director at the Metropolitan Area Planning Council, said the agency was excited to see the inclusionary zoning measure included in the Senate bill, after the House excluded it from their housing bond bill earlier this month.

“A number of other zoning provisions are at a simple majority vote, and this puts it in line with many other zoning provisions, so that you don’t get to 51, or even to 64 percent, and not get to advance the measure forward,” she said. “So it says, ‘Let the majority rule’. What it does is enable cities and towns to say if you’re going to develop, we want to be able to say a certain amount should be affordable.”

Edwards also highlighted a policy that would require broker’s fees to be paid by landlords — rather than tenants.

Tenants are often required to pay first month’s rent, last month’s rent, a security deposit and a fee for the real estate broker who showed them the apartment when they first move into a new unit. Edwards said these costs can be between $12,000 and $15,000 on average, creating a barrier to housing for tenants.

“This would be incredibly impactful,” she said. “If a landlord contracts a broker, you’re paying for the whole fee. You’re not going to pass any of that on to your tenants.”

Exclusion of MWRA Expansion

The Senate bill also excluded the $1 billion bond authorization to expand the Massachusetts Water Resource Authority’s service area to the suburbs south of Boston, a priority for House Speaker Ron Mariano.

Mariano pointed to Weymouth, where he said 6,000 homes could be built at the former South Weymouth Naval Air Station if there was accessible clean water to the area.

Comerford, whose district includes some of the towns surrounding the Quabbin Reservoir which provides the water flowing east to the greater Boston area, said the Senate believed that there hadn’t been enough conversation about this topic.

She filed a bill this session that looks at recompense for the Quabbin communities for stewarding the clean water reservoir.

“It’s really important to remember that this is not an idea that has had a hearing, right? No one has really said this is a workable plan. In terms of state agency heads, we haven’t given any thought to this idea,” she said. “If the governor should authorize this, what would it do to the chances of any other community west of Worcester getting access? So there’s a lot of questions that haven’t been answered yet.”

Edwards pointed out that there are other infrastructure dollars for the expansion of water resources, including $100 million for HousingWorks to “make sure that access to water and infrastructure were part of our housing conversation.”

The Senate plans to debate and likely approve the bill on Thursday. The branches will then have roughly a month to negotiate the policy and borrowing gaps between their bills, before shipping it to Healey. Formal sessions end this year July 31.

Asked Monday if she was worried about how much time was left in the session, Edwards said both bodies were committed to getting the bill done. The legislation only started moving through the chambers this month, a year and a half into the session where many officials have called it their number one priority.

“I think both sides and the governor have a sense of urgency around this conversation, and I just know that we’re going to be dedicated to doing everything we can, both sides, to get this done,” Edwards said.

Sam Drysdale with State House News Service reported this story

16 COMMENTS

  1. Not sure what the details of the property tax exemptions are yet for real life Islanders, but that’s something that sounds good. You want a second home? Especially able to afford one at today’s prices, averaging over a one million dollars? You can afford to have the tax burden shifted, one would think, or don’t make the purchase? As for the last paragraph, about the legislators dragging their feet on what many have called their number one priority, that has me extremely worried. Let’s hold our applause until the governor signs this good bill. Sorry to the Housing Bank people, you gave it your best try. The real estate lobby is tough to beat and there are plenty here who regardless of how it would impact them, hate the idea of taxes, period, as if America should be free. I think it’s worth a hell of a lot.

    • Define a real Islander.
      Does three months a year in Florida count?
      Do you have to be born here?
      At least American Born?

    • So what about food ? Gas? Clothing ? Should some pay more because they “can afford it”?
      Higher tolls, excise taxes because you have a pricier car ?
      Tiered doctor and hospital co-pays because this will “shift the burden” to those who “can afford it”?
      All for affordable housing. Maybe rethink the land bank revenues. Hotel and rental tax receipts. But the tax-the-rich mantra has to be reconsidered.

  2. This is good news for the island as we do not need the housing bank tax burden put on all of us. We should be grateful for these second home purchasers as they do not overburden our school systems and other social services that eat up the lion share of our tax dollars. We continue to create affordable housing, and at a reasonable pace for this small island that is already facing extreme difficulties with infrastructure as it is.

    • Agree, except for the “reasonable pace” statement, can you even imagine that the pace is reasonable? I think those of us with houses find if a lot easier to say all these things. You make it sound like it’s an extra tax, this is 2% on every new purchase over 1 million (boohoo!) and does NOT apply to first time homebuyers. This is not a big deal if you are buying a million dollar house on Martha’s Vineyard, it is a reasonable suggestion. If it’s a big deal for someone, they shouldn’t spend one million.

    • Bob, I guess you didn’t educate yourself about the tax, it was not “on all of us” – it was on *none* of us. It was on homebuyers not home owners. Homebuyers who had already bought homes, if it was your first it wasn’t on you. If your home was more than a million dollars only. So, to recap

      1. Tax on buying a house, not on owning
      2. Exempt on first time homebuyers
      3. Tax only applies to homes sold for over 1 million.
      4. Not a tax “on all of us”

      Pretty light burden.

      • You may not think it is a tax on those of us who own homes but if it costs more to purchase a home, how do you think it will impact the price of your home when you sell? I built my home in Vineyard Haven 23 years ago. It is getting harder and harder to live here, especially if i want to ever retire. My property taxes went up $2500 for last year (my assessment went up $300,000) and my homeowner’s insurance went up $700. If I decide to sell, I now have to install a new septic system at a cost of 50-60K or pass that on to the buyer. If you don’t think that this is and will impact buyers from buying in Vineyard Haven, think again. Also, the land bank fee is exempt for first time homebuyers up to $900K no one is exempt from paying the housing bank because it is assessed on homes over a million so most will pay 2% up to a million and everyone will be paying 4% on anything over 1 million.

    • Bob, let’s build that bridge so we don’t have to suffer with extreme infrastructure difficulties.

    • “as we do not need the housing bank tax burden put on all of us.”
      Who should it it put on?
      Just second home buyers?
      Do we have enough affordable housing?

  3. I like the Times’ decision to utilize the thorough State House News Service report to provide us this information. Thank you

  4. Why should a young island couple who work their butts off working 2 or more jobs for years so they can buy an island home have to pay an additional 2% so that some lay about can finally move out of their mom’s basement into affordable housing. On what planet does this make any sense!

    • Earth and the vast majority of Islanders.
      The Island is so Liberal.
      Look at the election results.

  5. John, I’m not in favor of a 2% tax on real estate transactions above $2 million.
    The average house selling price is around $1.2 million, therefore, not affecting the average home buyer.
    Do you really believe the people who need affordable housing are “lay abouts?” Can we experience more compassion, please?

    • Mary–I agree with your sentiments, but
      those who live on planet MAGA actually do believe
      that anyone who needs any kind of assistance is lazy,
      Some MAGA governors are banning certain words and phrases,
      like “gay” and “climate change”. They might as well ban words like
      “compassion” and “sympathy”, unless of course you are talking about
      people who have been convicted of violently storming the Capitol
      building and assaulting police offers in the name of the Fuhrer.
      Certain people here will NEVER have any compassion for people
      who are not as privileged as they are.

    • You didn’t really address my premise. Why should hard working islanders be forced to pay an additional 2% when it’s already so difficult to afford a place to live. We worked several jobs at once for over 20 years in order to save up to buy a house. Another 2% would have taken us out of the market. That being said, at NO time did we think others should be paying higher taxes in order to provide us with “affordable housing”. A truly compassionate person would help those who need housing to find a way to better themselves financially

      • John, there’s a lot of different scenarios to consider in your question. If homeless people are exposed to the elements, their health is more vulnerable. Studies have shown that it is cheaper to house and provide routine healthcare rather than pay for the resulting crisis medical care otherwise.
        I’m not in favor of raising taxes.
        In another column someone said, “But for the grace of God, there go I.”
        That 2% tax was not made into law. If you want to see it not ever occur, write to your congressmen and the governor. This forum helps because it lets your neighbors know your preferences.
        I would also like to address why home prices are skyrocketing—short-term rentals are one culprit (I admit, there are other factors as well).
        You mentioned saving for 20 years to buy. Buying early is usually a good idea. Buying super small is also a good idea to avoid rent. I read a story about a couple who emigrated from the Philippines and they came with the clothes on their back. They rented a closet from an acquaintance and literally lived in a closet and saved every penny they earned until they could buy a business. They became millionaires in a few years. I’m not willing to live that poor to get ahead, but we literally compete with those types of people.

Comments are closed.