Healey housing bill includes real estate transfer fee for cities, towns

Healey housing bill includes real estate transfer fee for cities, towns

Healey housing bill includes real estate transfer fee for cities, towns

By Greg Ryan

The Healey administration on Wednesday is expected to put forward sprawling $4 billion legislation meant to narrow the massive supply-demand gap in housing in Massachusetts, a bill that includes a controversial proposal to empower cities and towns to impose a fee on real estate transactions over $1 million.

Gov. Maura Healey and her housing secretary, Ed Augustus, are using the housing bond bill taken up by the state every five years to pursue unprecedented levels of investment, much of it targeted toward public and income-restricted housing. The long-awaited package also includes dozens of policy initiatives, a handful of them far-reaching in their attempts to spur housing production, such as the legalization of accessory dwelling units, or ADUs, in single-family zoning districts statewide.

The legislation comes with housing production sagging in Greater Boston and home prices continuing to rise even as the number of sales sink to levels not seen in decades. Officials peg the number of homes that would be created, preserved or rehabilitated under the bill at 65,000.

“Stealing the old Rahm Emanuel line about a crisis is a horrible thing to waste, maybe this consensus about the crisis we’re in is an opportunity to … get things done that previously would have been politically challenging to do,” Augustus told reporters in a briefing Tuesday afternoon.

One of the policies is a local option for transfer taxes, a tool coveted by Boston Mayor Michelle Wu and other municipal leaders, especially on the Cape and Islands, as a way to generate revenue for affordable housing. Business and real estate groups like the Greater Boston Chamber of Commerce and NAIOP Massachusetts oppose transfer taxes, arguing the added costs are passed onto renters and make residential development less desirable.

Under the proposal, cities and towns could charge up to 2% on sales over $1 million or the median home sales price for a county, whichever is higher. Only the portion of the sale over $1 million would be taxed. The fees collected would go toward affordable housing development. The tax includes some narrow exceptions, including for affordable-housing deals.

Augustus fought back against the claim the tax would hurt housing production.

“We’re not talking about local municipalities taking that money and spending it on childcare or spending it on education,” he said. “They are spending it on affordable housing production or preservation, so there’s really no way that it could slow that down.”

Accessory dwelling units, or ADUs, in Massachusetts

The unleashing of ADUs statewide has long been sought by Massachusetts housing advocates. Similar measures have been in place in other states for years. Under the proposal, ADUs — small housing units built on an existing residential property or created in spaces like a garage or basement — could be built in all cities and towns without requiring a special permit. The proposal would head off steps that local officials might take to discourage ADU construction, including prohibiting owner-occupancy requirements and parking mandates near public transit. The administration projects 10,000 ADUs could be created over five years.

Other policy proposals include the creation of a special designation for “seasonal communities” like those on the Cape and Islands and the Berkshires, akin to the Gateway Cities designation, as a first step to creating initiatives to help residents in those places meet their housing needs.

The legislation hits multiple items on housing advocates’ wish list, though it does not extend the type of zoning requirements in the two-year-old MBTA Communities law to other parts of the state outside the transit system’s reach. Other than the ADU provision, it largely avoids chipping away at local control, stopping well short of California-type measures like overhauling single-family-only zoning statewide.

New $50M MassHousing ‘momentum fund’

While the administration is using the bond bill as the vehicle to tackle its housing policy ambitions, the legislation’s main function historically has been to provide funding for low-income and income-restricted housing. The proposed $4.1 billion tab far outstrips the $1.8 billion bond bill five years ago, with this version’s $1.6 billion in capital investments in public housing tripling previous levels, according to Augustus.

Among the many funding proposals is a new $50 million MassHousing “momentum” fund meant to help get shovels in the ground for permitted mixed-income multifamily projects sidelined by high lending and other costs. The agency would expect a return on investment, but a lower return than the typical private investor.

“We think it’s a way to help take equity positions in some of these deals,” Augustus said.

State officials hope pension funds, endowments and other institutional investors with an interest in social impact investing contribute to the fund.

Separately, a $275 million green housing initiative would look to support innovative development like the office-to-residential conversion Wu is seeking to encourage in Boston.

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