It was a huge win for District 1 City Councilor Lydia Edwards, her colleague Councilor Kim Janey and affordable housing advocates across the city.
On Monday, Mayor Martin Walsh signed Edwards and Janey’s Home Rule Petition to impose a real estate transfer fee of two percent on the purchase price of any private real estate sale over $2 million and dedicate all revenues to affordable housing. The two percent fee will be used to generate additional funding to create and preserve affordable housing in Boston. The City Council approved the measure by a vote of 10-3.
The signing by the Mayor now moves Edwards and Jayne’s Home Rule Petition to the Massachusetts Legislature for approval. If approved by the state, the City would have the ability to determine the final rate for the fee, collection method and any exemptions that would exist.
“Housing is the biggest economic challenge facing the residents of Boston and people across our region,” said Mayor Walsh. “That’s why it’s critically important that we do everything we can to support the creation of homes that are affordable, while also preserving our existing housing stock. I am proud to sign this home rule petition that is a significant step forward in our work, by giving Boston the ability to impose a modest fee on the sale of private property, which will collectively do a world of good towards our efforts to make Boston a more affordable place to live.”
According to the Home Rule Petition would authorize the City of Boston to impose a fee of up to two percent of the purchase price upon the transfer of property valued at over $2 million, with one percent paid by the seller and one percent paid by the purchaser.
The funding generated would be dedicated to the Neighborhood Housing Trust (NHT) or appropriated through the annual budget process to support the creation and preservation of affordable housing in the City. Since it was created by statute in 1987, the NHT has expended approximately $197 million to finance housing and supported approximately 12,887 units. The real estate transfer fee would, within a matter of two or three years, enable the NHT to dedicate more resources to housing than it has done since its creation.
Councilor Edwards, who chairs the Council’s Committee on Housing and Community Development, said those who generate wealth in our communities must be part of ensuring residents can remain in the neighborhoods they love.
“Today, Boston joins a growing coalition of municipalities asking the state for the power to ensure that the housing we build truly meets our residents’ needs,” she said.
This fall, the Walsh administration commissioned a study on the potential impact of transfer fees in the City of Boston and examine transfer fees across the country. The study found that “market actors do not appear to be fully incorporating the transaction costs…. Transfer taxes may have only muted impacts on real estate markets.” It also noted that a separate study of real estate commissions, another “point of sale” fee, had minimal impacts on residential housing in the Boston or on the days a property was listed on the market.
Municipalities such as Somerville, Concord and Nantucket have advanced home rule petitions to authorize a real estate transfer fee.
“It is absolutely imperative that we enact policies that will ensure our residents will have a safe and affordable home to live in for many generations,” said Councilor Janey, Vice-Chair of the Committee on Housing and Community Development. “When passed by the state legislature, this home rule petition will help curb speculative real estate practices and stands to bring as much as $169 million in revenue annually that can be invested in affordable housing.”
According to an analysis conducted by PFM Group Consulting, real estate sales in Suffolk County have ranged from approximately $3 billion to over $12 billion in the last decade. The City of Boston accounts for 86 percent of the county’s population and real estate activity. From 2009 through year-to-date, total private real estate sales have averaged $8.4 billion. Based on average sales in Suffolk County, estimates show that a 1 percent fee on all private-market sales would have raised $84 million per year over the last decade, and a two percent fee would have generated over $168 million, a significant increase on the City’s existing affordable housing investments.
“There is no question that in Boston we need to do everything we can to support the creation of homes that are affordable, while also preserving our existing housing stock,” said Walsh before signing the Home Rule Petition Monday.
Affordable Housing advocates, like JPNDC (Jamaica Plain Neighborhood Development Corp.) Executive Director Richard Thal, are elated by what they are calling a ‘monumental’ step in ensuring more affordable housing is built and preserved in neighborhoods like JP. “This initiative could be tremendously helpful in addressing the city’s affordable housing crisis. Just a few months ago, more than 2,500 households applied for 47 affordable apartments JPNDC is building on Heath Street,” said Thal. “Although we’re fortunate to live in a city that dedicates a lot of resources to affordable housing–in comparison to many other places–the funding simply isn’t enough. This new revenue could substantially reduce the amount of time between identifying a potential project and actually building it, which would be a great benefit to folks who desperately need an affordable place to live.”