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Despite vociferous opposition from the Greater Boston Real Estate Board and the commercial developer trade group NAIOP-MA, Boston Mayor Michelle Wu told a Beacon Hill committee Wednesday that many in the real estate community actually support her proposed transfer tax on property sales over $2 million.
Wu was speaking at a hearing of the state legislature’s Joint Committee on Revenue that was reviewing Boston’s latest local transfer tax proposal, as well as numerous similar pitches from municipalities like Somerville, Cambridge and Concord. Municipalities need legislative and gubernatorial permission to enact such taxes on top of the existing state excise tax.
“If you ask anyone in Boston’s real estate community about how to stimulate [affordable] housing production, the need for public sector participation is incredibly high,” she said, noting that “conversations in the real estate community may not be reflected in the organizational representation.”
The city’s Neighborhood Housing Trust Fund is largely filled by so-called “linkage” payments, paid by new developments 50,000 square feet in size or greater, with labs paying $30.78 per square foot and other commercial uses paying $23.09 per square foot. Those payments were dramatically increased in 2021 by outgoing Mayor Marty Walsh after having sat stagnant for a number of years, and again in February by Wu to their current levels. The transfer tax haul, Wu said, would also help replace excess federal pandemic aid money her administration poured into the housing trust fund once those dollars are exhausted.
The trust fund is often a key stop for market-rate developers looking for funding to meet city mandates for affordable housing units in their developments, and for affordable housing developers looking to assemble their complex, subsidized capital stacks.
Wu said the additional money – had the tax been in place in the bustling, low-interest-rate real estate market of 2021 it would have generated $100 million on between 700 and 800 commercial and residential sales, Wu said – was necessary to provide more funding for affordable housing when rents and sale prices of existing homes and units in new developments are out of reach for many.
“Housing affordability is the make-or-break issue for Boston,” Wu said.
In written testimony to legislators, the Greater Boston Real Estate Board pushed back on Wu’s claims that transfer tax revenue in the city’s housing trust fund would help offer more financial stability to affordable housing developments.
“Very few office buildings have been sold in Boston since the pandemic with the commercial office market in distress,” the association said.
It also argued the tax would “strip equity” from homeowners who had paid off the mortgage on their houses and would increase affordability hurdles since buyers cannot finance the cost of taxes using their mortgage, and noted that many towns and cities have not levied the full 3 percent property tax allowed under the Community Preservation Act.
In response to a question from the committee co-chair, Braintree Rep. Michael Cusack, Wu noted that doing so would put and outsized burden on middle-class and lower-income homeowners in the city, and would require a lengthy and uncertain ballot campaign. Wu also noted that Boston already put most of the city’s CPA tax haul towards subsidizing affordable housing creation.
“We really are showing that the city is doing everything possible that we can ever do alone,” she told legislators.
