A controversial bill that would impose a transfer tax on any real estate transaction of $2 million or higher in the city of Boston has advanced in the Massachusetts House. The bill was first approved by Boston Mayor Michelle Wu and the Boston City Council in March of this year and would implement a transfer fee of up to 2 percent on qualifying transactions. Authors of the bill say the fees will generate close to $100 million annually, which would be used to create and preserve affordable housing in the city and reduce property taxes for low-income senior homeowners.
The bill was given a vote of initial approval by House members and will now move to another committee. If moved ahead there, another vote of approval from the House would send the bill on to the Senate. Wu said in a hearing that based on figures from 2021, the tax would have affected around 700 property sales in the city out of 10,000, or about 7 percent. Critics of the tax, including influential real estate trade groups like NAIOP, say the bill will drive up residential rents, exacerbate the devaluation of commercial real estate that has been happening since the pandemic began, and that funding affordable housing initiatives should come from other sources instead. “However well intended they may be, transfer taxes with the goal of generating revenue for affordable housing do not achieve their goals,” said NAIOP Massachusetts CEO Tamara Small.
Mayor Wu’s administration has been pushing several real estate-related issues since Wu first took office nearly a year ago. Last month, the city of Boston and the Boston Planning & Development Agency implemented a new policy requesting developers to disclose the diversity of their project teams on developments with more than 20,000 square feet. With the policy, the city hoped to push more firms to increase diversity in their ranks. The same month, Wu announced an executive order that would more strongly enforce a decades-old zoning rule requiring developers of large projects to invest in childcare facilities within their developments. Whether or not the transfer tax will be made into law, Boston’s affordable housing problem remains one of the biggest challenges for city and state officials, with Massachusetts now the third most expensive state for housing.