Boston City Council on Wednesday passed a measure by Mayor Michelle Wu that would expand tax breaks for seniors while imposing a new 2% fee on home sales of more than $2 million.
The measure, a Home Rule petition, must now be signed by the mayor and then approved by the state legislature and the governor before it becomes effective.
The new tax would not apply to the first $2 million of the sale, only the amount over that.
Councilor Ricardo Arroyo, who steered the proposal through the council, said the measure is estimated to generate nearly $100 million in new revenue each year, which would go into the Neighborhood Housing Trust Fund. He explained that the affected properties would be “mostly” multimillion-dollar condos and large commercial properties, most of which are downtown.
“We asked management to give us the direct number of properties that would have been eligible for this transfer fee this year and it was 704 properties,” Arroyo said.
Though the Neighborhood Housing Trust will absorb the funds, it currently lacks properly appointed trustees, according to the city. The Home Rules motion also gives the council the right to enter the housing-related expenditure fund with a separate regulation.
At the same time, the proposal would expand property tax breaks for older homeowners by adjusting income and wealth eligibility limits and increasing their potential total exemption from $2,000 to $3,000.
The Council approved the proposal by a vote of 10:1. Dorchester Councilor Frank Baker was the only one to vote against, insisting that the tax break and the new tax should be considered separately.
Arroyo said the proposal would hit those “flipping” homes that buy properties, give them upgrades, and then resell them at higher prices.
If implemented, the council will reassess the $2 million threshold every three years to monitor and adjust for inflation. The idea is to keep homeowners whose property values are rising from getting caught up in the pool of investment-related sales.
Certain transactions would be exempt from the fee, such as remittances between family members and remittances to the US government. Another category, transfers of purpose, which will be defined in a later Council regulation if the petition receives Legislative and Governor approval, would also be exempt.
Wu, who sent the proposal to the council earlier this year, is expected to sign it and send it to the legislature in the coming days.
