Mayor signs petition for real estate fee on sales over $2m; next stop: the Legislature

Mayor Walsh on Monday signed a home rule petition that would raise new revenue for affordable housing in the city by levying a new 2 percent tax on property sales over $2 million. Photo courtesy Mayor's Office

Last week, the City Council approved by a 10-3 vote a home rule petition filed by Councillors Lydia Edwards and Kim Janey that would authorize a real estate transfer fee of 2 percent on sales over $2 million and dedicate all fee revenues to affordable housing measures.

Under the measure, one percent of the fee would be paid by the seller and one percent by the purchaser.

This week, on Monday, Mayor Walsh signed the petition, sending it along first to the Legislature for its okay and then on to the governor whose signature would be needed to put the fee structure in place.

Home rule petitions, particularly those from urban communities involving considerable financial consequences, rarely sail through the Legislature; they often make for field days for lobbyists. But Walsh indicated on Monday that he’s ready to do his part in persuading state legislators to support the effort.

“Housing is the biggest economic challenge facing our residents in Boston, and across the region,” the mayor said. “We need to continue to push and move forward.” He added: “To have to battle for every little thing we need at the State House is unfortunate,” the mayor said. “The Boston delegation is on board . . . we need to convince the rest of the Legislature to vote for this.”

As they moved the legislation along, councillors said the fees could generate as much as $169 million in affordable housing funds in Boston with revenues deposited in the Neighborhood Housing Trust (NHT), which funds the creation and preservation of affordable housing.

Since it was created by statute in 1987, the NHT has expended approximately $197 million to finance housing and supported approximately 12,887 units. The proposed transfer fee, proponents say, would within two or three years enable the NHT to dedicate more resources to housing than it has done since its creation.

Walsh had signaled his support in a statement after the council’s vote, saying, “There is no question that in Boston we need to do everything we can to support the creation of homes that are affordable, while also preserving our existing housing stock. I am proud to support this proposal that gives Boston the ability to impose a modest fee on the sale of private property, which will collectively do a world of good towards our efforts to make Boston a more affordable place to live.”

Added Edwards, who serves as Chair of the Council’s Committee on Housing and Community Development: “Housing is a public good and common responsibility, and those who generate wealth in our communities must be part of ensuring residents can remain in the neighborhoods they love.”

Not everyone on the council agreed with the petition sponsors. Frank Baker, Althea Garrison, and Mark Ciommo casting the dissenting votes.
Baker, who represents Dorchester’s District 3, was outspoken in his disapproval of the petition before the vote.

“If this starts at two percent, where is it going to be in ten years? Is it ten percent then?” asked Baker, who continued, “when do we find other solutions? If this money were going to actually build buildings, I would be in. But it’s not. It’s going to go into the housing trust, and funds are going to get swallowed up in fees. I’m not going to be voting for this here today, I don’t think this is the way to do it, by taxing people that are putting money into our economy and doing the hard work in these neighborhoods, and some of the neighborhoods need some work.”

Edwards offered a clarification – “What we pass today is the maximum, it won’t ever go up to ten percent — the two percent is the maximum, period.” – to which Baker responded, “Once the camel is under the tent it’s under the tent. It’s never going to be enough.We need to figure out a different way to build with the private market with the millions and millions of dollars that we have.”

After the role call was recorded, Ciommo— who is leaving the council at the end of the year, added, “I really think the worst way to make housing more affordable is to tax it more, and I’m going to leave it at that.” 

During the fall, the Walsh administration commissioned a study on the potential impact of transfer fees in the city and examined their effects across the country. The study found that “market actors do not appear to be fully incorporating the transaction costs…. Transfer taxes may have only muted impacts on real estate markets.” It also noted that a separate study of real estate commissions, another “point of sale” fee, had minimal impacts on residential housing in the Boston or on the days a property was listed on the market.

Municipalities such as Somerville, Concord, and Nantucket have advanced home rule petitions to authorize a real estate transfer fee, and state legislators, including Reps. Liz Malia, Dylan Fernandes, and Mike Connolly, and Sens. Joseph Boncore and Joanne Comerford have introduced legislation to authorize communities to support local transfer fees. 

Once signed by the mayor, the proposal will move to the Legislature and the governor for approval. If approved, the city would have the ability to determine the final rate for the fee, a collection method, and any exemptions. 


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