The Massachusetts Senate has effectively quashed a plan to allow cities and towns to impose a fee on the sales of high-end properties, dashing the hopes of housing advocates but pleasing the powerful real estate industry that had lobbied hard against the idea.
The local option for a transfer fee was omitted from the Senate’s $5.2 billion housing bond bill unveiled Monday, a measure that also includes billions for affordable housing, tax credits, and plans to remake statewide zoning rules. The fee proposal, championed by both Governor Maura Healey and Mayor Michelle Wu of Boston, was also left out in the House’s version of the bill earlier this month.
The sweeping bill touches many other areas of housing policy, from addressing a shortage of housing in rural parts of the state to supporting a fair housing office. But Senator Lydia Edwards, who chairs the housing committee, said the goal of the bill is to act as a “course correction” instead of a salve. The intractable housing crisis in which the state is enmeshed is too big to address in one swing, she said.
The state needs at least 200,000 new housing units by 2030 to accommodate new growth and maintain a healthy vacancy rate, officials said at the end of 2023, but the bill released Monday would only address 40,000 of those.
“The bill can’t fix it all,” the East Boston Democrat said. “We cannot undo decades of neglect, of racial discrimination, of just not knowing the science about climate change . . . and horrible zoning as well.”
While it mirrors the House’s bill in leaving out the controversial fee, the Senate’s version of the bill diverges from the House version in a number of ways.
The Senate’s bill proposes $5.2 billion in borrowing, a cost that comes out well below the House’s $6.2 billion version — a difference that excludes the $1 billion the House proposed in borrowing to help expand the Massachusetts Water Resources Authority’s water service area beyond the existing 60 cities and towns. A lack of clean-water supply is an obstacle for many communities to develop more housing, and expanding the MWRA is a priority of House Speaker Ron Mariano.
The Senate measure would create a commission to recommend policies, programs, and investments centered on affordable housing for seniors, and proposes to sharply reduce a fund for paused mixed-income projects from the House’s proposed $250 million to $50 million.
Additionally, the Senate’s bill removes a clause backed by the House that would afford renters the opportunity to buy their unit if their landlord wants to sell.
Affordable-housing advocates celebrated a number of victories in the bill that was released Monday, including a new multifamily zoning incentive fund and an inclusionary zoning proposal.
The legislation would allow cities and towns to pass inclusionary zoning rules, which require new market-rate developments to include a certain ratio of affordable units, by a simple majority instead of a two-thirds vote. Real estate groups argue that such rules slow the pace of development and raise market rents because affordability requirements make housing more expensive to build.
Even though the bill authorizes the state to spend money on the specified items, it doesn’t necessarily mean the money will get spent.
Although advocates were generally pleased with the progression of the housing legislation from the governor, the House, and the Senate, they expressed frustration over some notable exclusions.
Very few tenant-protection policies have made it into any version of the Senate bill, for example, and the House notably stripped away a measure that would have allowed for the sealing of renters’ past eviction records in some cases. (The Senate added it back in.)
And there are very few resources dedicated to homeownership, a pivot from a few years ago when the state was pouring millions in pandemic funds into programs dedicated to first-time homebuyers.
“It is challenging because so much needs to be in this bond bill to start chipping away at this devastating crisis,” said Symone Crawford, executive director of the Massachusetts Affordable Housing Alliance. “But excluding funding for homeownership programs is a huge oversight.”
The Senate’s exclusion of the transfer fee was a particularly tough blow for a broad coalition that included affordable-housing advocates, some business leaders, realtors, and local officials from dozens of towns.
The fee was largely felled by an aggressive campaign from the real estate industry. The Greater Boston Real Estate Board sent out mailers, mass texts, and websites that framed the proposal as a “new tax” that “will be a drag on your wallet and our economy.”
The Greater Boston Interfaith Organization, which has been out in force in support of the transfer fee this year, voiced its disappointment over the final product in an impassioned statement.
“This omission means that our cities and towns have been denied a real fighting chance,” GBIO said. “Why is it that [advocates] have had to fight tooth and nail for this measure to even be considered, while monied entities like the Greater Boston Real Estate Board were able to trigger a knee-jerk reaction in the final stages of the legislative session?”
Business and real estate groups, however, celebrated the Senate’s decision.
Greg Vasil, CEO of the Greater Boston Real Estate Board, said he was “thrilled” that the bill, among other things, rejected “flawed policies” such as the transfer fee.
Paul Craney, spokesperson for the Massachusetts Fiscal Alliance, said, “It’s mystifying that this tax hike on housing was even being considered in the first place.”
Healey’s version of the housing bond bill would allow municipalities to voluntarily impose a fee of 0.5 percent to 2 percent on property sales over $1 million, or those above the county’s median home sales price in places where that exceeds $1 million.
Wu’s proposal, which the City Council approved in 2022, would have allowed Boston to impose a fee of up to 2 percent on high-dollar real estate transactions, a cost that would be borne by the seller. The fee would be levied only on transactions of $2 million or more, with the first $2 million exempt from the fee.
Wu testified in 2023 that if the city’s home-rule petition for a transfer fee had passed in 2021, the tax would have collected $100 million for the city’s affordable-housing fund. In 2020, then-Mayor Martin J. Walsh supported a measure that would have assessed a 2 percent tax on sales worth more than $2 million in Boston. The proposal died on Beacon Hill.
“Third time was not the charm for the city on this front,” Wu told reporters at an unrelated event Monday.
Boston is not the only city that has pushed for a transfer fee to fund affordable-housing efforts. Nantucket has been pushing for a version of the proposal for at least a decade, and Somerville, Concord, and Brookline have also proposed transfer fees, among other municipalities.
Healey told reporters at an unrelated event at the State House that “the Legislature is still very much in the midst of its process,” and that her administration will keep engaging on strategies to boost housing and lower costs.
Like the House’s version, the Senate bill allows for accessory dwelling units — also known as ADUs or granny flats — to be built by-right in all neighborhoods zoned for single-family development across Massachusetts, embracing a measure Healey has pushed.
After the Senate votes on its version, leaders will hash out their differences with their House counterparts.
“I think both sides and the governor have a sense of urgency around this conversation,” said Edwards.
Samantha J. Gross can be reached at samantha.gross@globe.com. Follow her @samanthajgross. Andrew Brinker can be reached at andrew.brinker@globe.com. Follow him @andrewnbrinker.