After a similar proposal failed last session on Beacon Hill, Boston Mayor Michelle Wu and supporters on the City Council hope that by pairing a proposed tax on home sales to support affordable housing with senior property tax relief they can entice lawmakers this year to support the local initiative.
Wu has put forward a plan that would allow Boston to levy a tax of up to 2 percent on real estate transactions to generate close to $100 million for reinvestment in the creation and development of affordable housing in the city.
The real estate transfer tax has been paired by the Wu administration with an increase in the senior property tax exemption, raising income and asset thresholds to qualify more homeowners 65 and older for the tax break. The plan, if approved by the City Council, would require the Legislature to sign off on the so-called “home rule petition.”
“I think both issues are very, very important to the administration so we thought packaging them would make it a more popular home rule and more popular piece of legislation to vote on,” said Sheila Dillon, the city’s chief of housing.
The idea of using real estate transfer fees to generate revenue has been popular in recent years in some corners of the Legislature, but has failed to gain traction among top House and Senate Democrats to the point that even a local option could pass.
Gov. Charlie Baker once proposed using an excise tax of property transfers to generate $1 billion over 10 years for climate resiliency projects, while the House voted down an amendment to an economic development bill last session that would have given municipalities the option to impose real estate transfer taxes.
Sen. Lydia Edwards, who continues to sit on the council after joining the Senate last month, said the real estate transfer tax would create a “sustainable source of funding to ensure that no matter what happens as long as developers were making money the city would have sustainable funding to subsidize affordable housing.”
The Boston City Council’s Committee on Government Operations held a virtual hearing on Wu’s petition Thursday where councilors indicated broad support for the proposed transfer tax and senior property tax relief.
Wu’s proposed transfer tax would apply to properties that sell for $2 million or more, but unlike the version that cleared the council in 2019 and died on Beacon Hill, the tax would be only be assessed on the value of a property above $2 million, rather than the full amount.
Based on 2021 sales data, city officials project the tax would generate $99.7 million annually, or about $28 million less than the previous iteration. The city budget currently allocates about $71.5 million for affordable housing programs.