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Transfer tax would give communities one more weapon in the housing battle

Healey’s proposal would end a decade-long fight to tap high-end real estate sales for the greater good.

Homes on Martha's Vineyard in Oak Bluffs.Adam Glanzman/Bloomberg

The parade of local officials marching up to Beacon Hill, pleading not for a handout but for one more tool to be able to solve their own housing problems, has become an annual event — one that has been growing.

Some communities, like Martha’s Vineyard and Nantucket, have been at it for more than a decade — imploring the Legislature for the right to levy a tax when high-value real estate changes hands to fund affordable housing in places that have become increasingly unaffordable for such essential workers as teachers, first responders, and medical personnel. Martha’s Vineyard has been petitioning for a housing bank and the means to fund it going back to 2005. This year all six of its towns are on board.


Even Boston’s effort to get lawmakers to agree to a real estate transfer tax goes back to the Walsh administration — an effort now at the heart Mayor Michelle Wu’s pitch for a pool of funds that, as she testified recently, would have amounted to some $100 million for the city’s affordable housing fund had it passed in 2021.

“We’re doing everything we can at the city level — overhauling our zoning code for more housing and more affordability, restructuring our planning department to ensure we’re using every bit of land possible, providing tax incentives for converting offices into residential buildings, and providing down payment assistance and interest rate subsidies to home buyers to accelerate wherever we can,” Wu told legislators. “But the one powerful tool that remains out of reach without legislative and gubernatorial approval is a transfer fee.”

Now Governor Maura Healey, in her housing package filed last week, is proposing to give all communities the option of taxing real estate sales over $1 million or over the county median home sale price — whichever is greater — at rates ranging from 0.5 percent to 2 percent. The proceeds would be earmarked for affordable housing. The bill, which would levy the tax on the seller, provides exemptions for sales to low-income home buyers, first-time home buyers, sales involving affordable housing developments, transfers between family members, and intergovernmental transfers.


Whether Healey’s proposal sets the threshold at the exact right spot — this editorial board previously backed a $2 million cutoff indexed to inflation, to ensure the tax didn’t snag too many middle-class families — is something the Legislature will have to give careful attention to. But it shouldn’t simply dismiss the idea. The transfer tax debate on Beacon Hill has long been a tale of missed opportunities. The might-have-beens from the past few years of booming real estate sales in places like Boston, Cambridge, Somerville, Concord, and the islands and towns on Cape Cod, including Provincetown, Truro, and Wellfleet — all of which have filed local option transfer tax bills this year — are nothing short of frustrating for those communities. One estimate puts the loss from 2021 sales on the Vineyard at $14 million, Concord at $2.6 million, Nantucket at $6.4 million, and Somerville at $6 million.

A study by the progressive Institute for Policy Studies in Washington found that, had the Legislature approved a 2 percent transfer tax for Boston, the sales of all units selling at over $2 million in just six luxury buildings in 2021-22 would have brought in $19.8 million.


But for the communities involved, this isn’t just about money in the bank, this is about preserving a community in places where longtime residents, families, and essential workers are being priced out of the housing market. The consequences, particularly during the pandemic, were all too obvious. Even after the crisis subsided last year, facilities like Martha’s Vineyard Hospital, a Mass General Brigham affiliate with the island’s only emergency department, had trouble recruiting doctors and nurses as housing prices and rents skyrocketed.

Is it any wonder that MGB, the state’s largest private employer, signed on in support of a transfer tax last year?

And if even doctors can’t afford the rents, where will restaurants, hotels, and shops get the workers they need to keep tourist-dependent economies going on the Cape and Islands?

The idea of a so-called “mansion tax” isn’t new.

At least seven other states — including New York, where the tax was adopted in 1989; New Jersey; Vermont; and Connecticut — have implemented statewide taxes on high-value property. The taxes differ by percentage and structure and are often for broader purposes than housing. Los Angeles County has its own transfer tax on properties above $5 million, adopted by voters last year. It funds affordable housing initiatives, emergency rental assistance, and programs aimed at preventing evictions.

Healey’s proposal is modeled on the local option efforts already on the table. And it has encountered the same opposition previously leveled at those proposals from the real estate industry.


“While we support the goals of the [Healey housing] bill, we have deep concerns about the inclusion of a sales tax on real estate,” Greg Vasil, CEO of the Greater Boston Real Estate Board, said in a statement. “It’s an unstable source of revenue that would cause more harm than good at a time when people and businesses are leaving the state because it is just too expensive.”

He’s right on one score — the transfer tax will surely not be the cash cow it might have been a few years ago, especially in places like Boston, when new luxury high rises began dotting the landscape. It will fluctuate with the pace of real estate sales — and these are not the best of times for those sales.

But this proposal — like much of what is in Healey’s housing bill — is about securing the future. It’s about allowing cities and towns to shape the kind of communities they want to be — inclusive communities where more people have a shot at decent and affordable housing. The transfer tax is a small but integral part of that quest.

Editorials represent the views of the Boston Globe Editorial Board. Follow us @GlobeOpinion.