The real estate transfer tax idea is not new. Mayor Marty Walsh has made it part of his housing agenda, which dates back to 2019. Other communities like Somerville and Nantucket have been trying to tap into real estate sales for years to secure more funding for affordable housing. But the route to that pot of money must be through Beacon Hill, and lawmakers have been reluctant to give communities that option.
However, Mayor Wu has developed a Boston-only proposal that is much more finely tuned than those previous efforts and with an added sweetener for low-income seniors trying to stay in their own homes.
Their plan provides for a transfer tax of up to 2 percent on real estate sales of $2 million or more (and exempting the first $2 million from tax on real estate over that amount). It exempts transfers between family members and leaves open the possibility of exemptions for nonprofit organizations and sales to developers who actually build affordable housing. The tax would be collected from the seller.
Based on home sales in 2021, city officials believe the tax could bring in $99.7 million a year and would have impacted 704 sales last year, according to city officials.
The added added attraction this time is an increase in the income and wealth thresholds for tax breaks for low-income homeowner seniors, with the goal of nearly doubling the applicant pool for those exemptions from 4,600 homeowners to about 8,600.
Income limits for that first year would increase from the current $24,911 to $47,000 for a single homeowner and from $37,367 to $53,700 for a couple. Wealth limits would increase from $40,000 to $80,000 for singles and $55,000 to $110,000 for a couple (not including the home value). And henceforth, instead of being a fixed number, income limits would be linked to the area’s annually adjusted median income.
If the Wu administration really wants to win over Beacon Hill, they should also index that $2 million sales number with a comparable asset base, or it will also quickly become stale and hit taxpayers in what was never intended to touch.
As the administration noted in its announcement, the tax would not only provide a pool of money for affordable housing, but would also “prevent rapid subsequent property sales.”
Yes, Flip This House isn’t just a TV show anymore — or as it turns out, the focus of at least 10 TV shows this year.
As the Washington Post recently reported, based on data from real estate firm Redfin, about 25 percent of home sales in 40 metro areas went to investors — people who had no intention of living in those properties. That was more than double the 2015 figure of around 12 percent.
Boston was not among the cities studied, but there’s no reason to believe it’s immune to the phenomenon. And before the pandemic, the city had already gained a reputation as a place for international investors to invest large sums of money in some of these new high-end condos. Millennium Towers also benefited early on from the influx of Chinese investors.
That market may have slowed for now, but it’s a market Wu will surely want to tap into on his inevitable return.
And recently, the idea of a real estate transfer tax garnered support from the state’s largest private employer, Mass General Brigham, who presented a statement in support of statewide legislation that would give communities the ability to charge a tax of between 0.5 percent and 2 percent on real estate transactions raise a possibility to finance affordable housing.
If such proposals become a reality, the next challenge for cities is to spend the money wisely, bearing in mind the dangers of piling up too many affordable housing in any one geographic area, which can lead to a concentration of poverty.
Boston’s bill is scheduled to be taken up by City Council early next month before it can be sent to the Legislature where the real fight begins. This year should be different – the bill is better than before and the need is greater than ever. Boston is willing and able to solve many of its own housing needs. That should be allowed.
Editorials represent the views of the Boston Globe Editorial Board. Follow us on Twitter at @GlobeOpinion.