Tax on high-end real estate sales could generate hundreds of millions for Boston
A tax on sales of high-dollar real estate in Boston would generate an enormous amount of money for affordable housing, but could dampen the city’s real estate market and faces a long road to approval.
That’s what emerged from a City Council hearing Tuesday on a proposal that would levy a 6 percent tax on most homes, land, and office buildings that sell for more than $2 million, with the proceeds going to the city’s affordable housing fund.
A tax of that size would have generated $420 million last year, according to data from City Councilor Lydia Edwards, one of the bill’s cosponsors. Even a tax on commercial and industrial properties alone would have generated $189 million, nearly quadrupling the city’s current affordable housing budget of roughly $50 million.
“I would think those are numbers and money we certainly could use in the City of Boston,’ Edwards said.
Walsh administration officials — who have pushed for more affordable housing funding but taken no position on the transfer tax — didn’t disagree. Housing chief Sheila Dillon said Mayor Martin J. Walsh is “committed to the goals” of the legislation, but that it needs more study. Commissioner of Assessing Gayle Willett said she worried a transfer tax, and a related extra tax on sales of homes owned for less than two years, could hurt property values and make Boston’s housing market even tighter.
“I think that this would affect sales,” Willett said. “It would be in someone’s interest to get around these fees.”
Real estate industry leaders were more explicit: They don’t like the idea one bit. Greg Vasil, president of the Greater Boston Real Estate Board, said his members, who include major affordable housing developers, unanimously oppose the current plan. Should it pass, he said, the tax would simply be passed on to the people its supporters are trying to help: low-income renters and small businesses.
“Taxes like this trickle down an economy. They end up coming to rest with those who can least afford them,” Vasil said. “Companies will pay more in rent; people will pay more in terms of rent.”
But supporters, and there were many at City Hall Tuesday, point out those renters already face a financial crisis.
Erica Rothschild, an organizer with the Jamaica Plain Neighborhood Development Corp., said 3,000 people applied for apartments in a 39-unit affordable building her group opened in 2017. And Hillary Pizer, associate director of the Massachusetts Affordable Housing Alliance, noted that — for all of Walsh’s good intentions when it comes to housing — efforts to tackle the city’s mounting problems keep coming up against a tough barrier: money.
“We need to do something much bigger than what we’re doing right now,” Pizer said. “Every time we talk about doing something major, we’re told, ‘We’d love to. We just don’t have the money.’ ”
Councilors didn’t vote on Tuesday; they’ll hold more meetings and keep working on the bill. If the Council approves it, the bill will need to be signed by Walsh and then, as a home rule petition, head to Beacon Hill for votes in the Legislature and the signature of Governor Charlie Baker.
Edwards said she’s open to changes, and happy to talk with real estate industry leaders and city officials about the best way to design a transfer tax. But with the city facing a housing crisis even as big-time development booms, it’s past time, she said, to find new ways to help.
“This is the start of a conversation,” Edwards said.
“This is another tool we should consider quite seriously. We need help, and we need resources.”