State Senate Cuts Transfer Tax From Housing Legislation

The Massachusetts State Senate’s version of Governor Maura Healey’s housing bill will not include a local option for a transfer fee on real estate transactions to fund affordable housing, dashing local housing activists’ hopes that this could finally be the year the proposal, which Nantucket has asked for repeatedly for years, would pass.

“The legislature needs to come back to the table and give us the right for a transfer fee on luxury real estate sales for places like Nantucket and the Vineyard where this goes beyond simply an affordable housing issue and is a public safety matter,” said former Nantucket Housing Director Tucker Holland, who has remained deeply involved with the fight for the transfer fee. “It's an education crisis. It’s a healthcare crisis. Nantucket cannot continue to be a safe and healthy community if we don't have enough police officers and firefighters and healthcare workers and teachers. The legislature needs to realize that we have an emergency, and they need to act.”

Advocates of the transfer fee, which would allow municipalities to impose a small tax on real estate transactions over $1 million to fund affordable housing, had their hopes raised last fall when Healey unveiled a housing bond bill that included the fee. But both the House and now the Senate opted to exclude the provision, despite the efforts of Healey’s office and the Cape and Islands’ legislative representatives Dylan Fernandes and Julian Cyr.

“Before we add an additional tax, we think it’s incumbent upon us to look at what we have already provided in tools in the toolkit,” Senate Chair of the Joint Committee on Housing Lydia Edwards told the press Monday. “One hundred and ninety-six cities and towns have a form of [the Community Preservation Act, which gives local communities the ability to impose an additional property tax of up to 3 percent for housing, open space, and historic preservaiton], and that is an opt-in local option kind of tax, and it has not been working as well as it should have been.”

While Senate Democrats estimate that their version of the bill will create 40,000 housing units, that’s only one-fifth of what Healey’s office contends the state needs over the next decade, and some housing activists on Nantucket believe the crisis cannot be solved without the transfer fee. Advocates including Holland and his successor Kristie Ferrentella have been deeply involved in the fight to pass the bill, pushing legislators to support the opt-in provision for years to little avail.

“There's kind of a narrative that this isn't going to help every community because some communities obviously aren't as highly populated with $2 million plus homes,” Holland said. “I fully get that. I get that this tool doesn't solve the problem in every municipality in the state. But guess what? There isn't one tool.”

Healey's bill would have allowed municipalities and regional affordable housing commissions to adopt a transfer fee between 0.5 percent and 2.0 percent on real estate sale proceeds over $1 million or the county median home sales price, whichever is greater. The funds generated by the fee would be required to be used for affordable housing development. It is a concept first floated by Nantucket more than a decade ago, and now supported by communities across the state, including Boston.

But the Massachusetts Association of Real Estate Brokers, among other groups, has lobbied hard against the legislation. Although Nantucket passes the local option transfer fee as a home rule petition at Town Meeting every year, it cannot go into effect without state approval, and the legislature has repeatedly stymied Nantucket’s efforts.

"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."

There is still time for supporters of the transfer fee, such as Cyr, to propose an amendment to the Senate bill seeking to add the transfer fee back into the text of the legislation, but they will have to act fast, as the Senate hopes to vote on the bill Wednesday.

“The fight is not over. Senator Cyr and others are working overtime on just how important it is that this provision be available in particular to places like Nantucket,” Holland said, suggesting an amendment is still possible.

Ferrentella suggested another way the transfer fee might go into effect this legislative session. The Senate opted to keep language in the bill creating a seasonal communities designation for communities with a large fluctuation in population over the year. The designation could allow access for greater technical assistance or designated funding streams for those communities.

“It’s very much still in concept and being worked through,” Ferrentella said.

But if the transfer fee were to be included through that designation, it could blunt the criticism from some opponents that the fee isn’t right for every community and so should not be adopted at all.

“It’s a possibility that it could be added while it’s on the floor,” Ferrentella said. “I’m hopeful up until it’s signed on July 31st.”

Even if they do propose an amendment, supporters would then have to win a floor vote in favor of it and convince the House to accept the modification in the ensuing negotiation process between the two chambers. It’s a long shot, and barring something unexpected, it looks like the transfer fee will have to wait at least one more year.

"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 told the Statehouse News Service. "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."