Republican Gov. Charlie Baker has earned a reputation for — usually — letting local leaders do what they think is best for their communities.
Because of this, Baker, now in his senior year in office, often signs home rule petitions asking state legislatures to pass ordinances and amendments passed at the local level that only affect that community.
But on Thursday, Baker outlined a notable exception to his approach: his rejection of Mayor Michelle Wu’s property transfer tax heading toward Beacon Hill.
“I don’t usually support things like that,” Baker said on GBH’s Boston Public Radio. “And I especially wonder why we’re doing this at a time when we have billions of dollars available for housing and the city of Boston has hundreds of millions of dollars available for housing.”
The petition, which the city council approved on Wednesday and which Wu signed on Friday, aims to collect a tax on $2 million in Boston real estate sales. The fee would total nearly $100 million annually, which Wu said would fund affordable housing initiatives.
The petition also includes expanded property tax cuts for low-income seniors by rewriting eligibility criteria in the city’s 41C program, which provides tax assistance to residents over the age of 65 who live in their own homes. The changes would allow several thousand more homeowners to become eligible based on their income.
But Baker opposes the tax, saying the city and state already have significant funds to support housing efforts thanks to Washington’s COVID-19 response, the American Rescue Plan Act.
“We still have billions of dollars of available resources under ARPA that we haven’t spent, and we have a significant government surplus,” Baker said. “There’s a lot of money to support housing and the City of Boston I believe got $550 million in ARPA funding. I think they spent about $150 million of that.
“Those are huge numbers, folks,” he continued. “And the City and the Commonwealth should put a lot more of them into housing initiatives.”
In particular, the petition is only the last to be sent to the State House. A similar proposal, backed by former Mayor Martin J. Walsh, failed to convince state legislatures, as did numerous similar proposals from communities across the Commonwealth.
But Wu revisits the idea with a few changes.
On Friday, the mayor said this is the moment for the city to “ensure sustainable, long-term financing for affordable housing,” indirectly rebuking Baker.
“Now some might say this is a moment of tremendous support from the federal government. We have a unique opportunity to spend these funds,” Wu said before signing the petition. “This is an opportunity [in which] We will make the most of every single dollar.”
In fact, the city has already done so, Wu said, pointing to a $40 million investment to create hundreds of affordable units.
Still, these funds will “only just begin to address the real estate crisis that Boston has been facing long before COVID-19,” Wu said.
“Now is not the time for us to say, ‘We have a little hope, so let’s give up the can,’ but now more than ever to lean in and say, ‘Look what with what we already have “It’s possible. We’ve seen that we can get by on these amazing federal funds that might last a year, maybe a little bit longer, but not much longer,” Wu said. “We can’t wait right now to take this opportunity to really charge a very, very small transaction fee at the point of sale… That impact will go well beyond Boston.”
Wu said if Boston had already implemented the tax, the city would have more than doubled its funding for affordable housing over the past year.
Such a tax would have brought the city $99.7 million in 2021.
“This is about making sure we have the resources we need, whether the federal government invests in us or not,” said State Senator and Councilwoman Lydia Edwards. “It’s sad because if we had that money, $100 million, during a pandemic, you could think of the people we could have saved, the homes we could have saved.”
City officials said the law will generate funds for the city’s Neighborhood Housing Trust, which creates and maintains affordable housing, and also advance programs that strengthen the resilience of older homeowners and low-income renters and address disparities in access to housing.
The law would also prevent rapid, repeat sales of property, officials have argued. Tax exemptions would include remittances between family members, and more exemptions could be added later.
However, Baker is not the only critic of the proposal.
This week, the Greater Boston Real Estate Board, which has 12,000 members who are professionals in various aspects of the industry, expressed “strong opposition” to the tax.
In a statement, GBREB argued that the country’s existing Municipality Preservation Act already allows municipalities to levy up to a 3% property tax surcharge. In return, officials can choose to allocate up to 80% of CPA funds to housing issues.
Boston voters passed a local CPA in 2016. The city now levies a property tax surcharge of 1%.
“We wonder why the city of Boston needs a new tax agency to pay for affordable housing when it has it now,” the GBREB said in its statement.
GBREB members supported passage of the CPA “because it was fair,” the board said.
But the Home Rule petition now before lawmakers would single out a select segment of the population to pay for a community-wide problem, the group argued.
In addition, the tax is levied on the real estate market, which is “very sensitive,” especially during tough economic times, the organization said.
“Increasing the tax burden when a home or property changes hands will simply drive up transaction costs and will certainly lead to a drop in residential property,” the GBREB said.
Although Baker opposed Wu’s proposed tax, he once pursued a similar funding path.
In 2019, the governor proposed raising taxes on real estate transfers to raise money for projects to protect communities from climate change, but state lawmakers never acted on the bill.
Baker said Thursday his proposal is different from Wu’s as he seeks a small increase in an existing tax.
“The amount was dramatically different … and it was tied to an existing tax that hadn’t been collected since 1986,” Baker said.
Wu’s tax would target high-end sales, with a threshold of $2 million — significantly higher than the average local transaction.
In January, the median selling price of a single-family home in Suffolk County was $675,000, while the median condo price was $597,117, according to a report by The Warren Group, a data analytics firm.
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