A report by a state university research department found that a transfer fee on luxury real estate would make a minimal impact on the Martha’s Vineyard market, addressing the main concern from opponents of a proposed affordable housing funding mechanism for the Island.
The study, conducted by the University of Massachusetts Amherst Donahue Institute (UMDI) at the request of the Martha’s Vineyard Commission (MVC), found that a transfer fee could add $10 million annually to affordable housing projects and initiatives, like rental assistance, on the Vineyard.
On an Island where many year-round residents are burdened by housing costs, over half of the units that exist are seasonally-owned, and the median home price is well over $1.4 million, a transfer fee on luxury real estate has been one way legislators and housing advocates hope to balance the scales.
“Our economic impact analysis suggests that using proposed transfer fee revenues to support a balanced portfolio of programs has the potential to strengthen both the housing market and the local economy,” the report stated.
Dr. Kerry Spitzer, the lead author of the report and senior research manager at UMDI, said in an interview with The Times that the Vineyard’s year-round community, when compared to other areas with similarly robust seasonal tourism economies, ultimately faces one big challenge: affordability.
“The seasonal communities in Massachusetts, they’re all unique,” Spitzer said. “But they’re all kind of facing these similar dynamics, where there’s been increasing prices and just real struggles with being able to have a year round workforce and have a diverse community in terms of income.”
The institute joined with the MVC and the Nantucket Planning and Economic Development Commission to take an in-depth look at how a transfer fee could work in seasonal communities. But Spitzer said it’s still up to the people who live in those areas to clarify their needs using the data.
“This will help inform decisions going forward, which really need to be community decisions,” Spitzer said of the findings.
The option to create a fee on real estate purchases is currently being proposed legislatively through multiple bills in seasonal communities like Martha’s Vineyard and Nantucket. The bills, filed by Cape and Island’s State Sen. Julian Cyr and State Rep. Thomas Moakley, would introduce a one-time fee on real estate purchases over $1 million.
On the Vineyard, that fee is being proposed at 2% of the total sale, which is to be added to the final price. The revenue from that additional one-time fee would then be funnelled into a housing bank to be used for housing initiatives.
Spitzer used data from the Island and Nantucket and compared it to another resort area: the Hamptons, where a transfer fee was introduced in 2023 on luxury real estate.
“We had a hunch that demand in these markets is strong and less sensitive to changes in price. And so I think that’s what that Hamptons data showed, is that these markets are different than other markets,” she said.
The report acknowledged that in “urban and national markets there is evidence of modest negative impacts of fees on transaction volume, sale prices, and in turn property tax revenue,” which led some residents in Massachusetts to oppose the transfer fee.
“However, there is evidence that real estate transfer fee impacts vary depending on housing market conditions and that in resort markets with limited supply and inelastic demand, like the Islands and other seasonal communities, effects on transactions and prices will be minimal,” the report reads.
Also included in the report was a survey of 242 Vineyard businesses. Half of business owners said they don’t supply housing assistance to their workers. And 51 percent said they have lost employees in the past two years because of a lack of housing and high costs.
When business owners were asked about the summer economy and housing, The Times found there was a significant shortage of affordable seasonal workplace units and that managers and business owners feared what losing employees could mean for their sustainability.
“Housing is the biggest issue that we face,” Spring Sheldon, owner of S&S Kitchenette, told The Times in early May.
“There’s no question that the Island needs the staffing, and we have insanely limited housing,” Larkin Stallings, owner of the Ritz Café and president of the Oak Bluffs Association, said in an interview this spring.
One local group, the Coalition to Create the M.V. Housing Bank, has been advocating for this funding stream for over five years. Their first effort failed to pass in 2024, largely due to pushback from real estate brokers in Massachusetts who said the fee could impact the market.
Many Vineyard town representatives, including planning, select boards, and affordable housing committees have submitted letters in support of the initiative. If passed, it could create a funding stream for affordable housing projects.
But, the goal isn’t just to build more. Those involved say the revenue stream would be used to diversify existing housing stock, provide rental assistance to Islanders, and purchase deed-restrictions to ensure housing is affordable and year-round in perpetuity. Plus, programs like Lease to Locals, which gives cash incentives to seasonal homeowners to rent to year-round residents, could be bolstered. The program is underway in Chilmark and just started in West Tisbury.
“The islands’ geographies and environmental concerns mean that the housing supply is largely fixed,” the report stated of Martha’s Vineyard and Nantucket.
The report pointed to the many year-round residents who are having to leave the Island due to the rising cost of living. Almost one in two households on the Vineyard feel cost-burdened by their rent or mortgage, meaning they spend a third or more of their income on housing alone.
“A consequence of rising housing costs in seasonal destinations is that essential workers, are
frequently priced out. This has negative consequences for the individual residents and the community,” the report found.
While the effects of a transfer fee were the focus of the report, other data about the affordability of housing emerged as well. The researchers found that an average Islander needs to make $321,000 to purchase a home, three times the Dukes County annual median income of just over $150,000.
“I’m just hoping that this report helps to inform these debates over the legislation,” Spitzer said.