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Boston’s leaders hope a new tax will enable the city to benefit more from an ongoing building boom.
The Boston City Council Wednesday voted 10-3 in favor of a 2% real estate transfer tax on transactions exceeding $2M. The transfer tax needs, and is expected to receive, Boston Mayor Martin Walsh’s signature before heading to the Massachusetts legislature for final approval. The tax would be split between the buyer and seller and is expected to raise $168M for affordable housing, CommonWealth reports.
Creating more affordable housing remains a hot topic in Boston real estate circles while the city continues to be one of the most expensive places to live in the U.S. Boston is the third-most-expensive place to rent in the world — following San Francisco and New York City — according to a November PropertyClub report.
The transfer tax’s sponsors, councilors Kim Janey and Lydia Edwards, emphasized the passed tax rate is the result of a lengthy negotiation and compromise process with stakeholders. Initial proposals included a 6% tax rate and a fee on house flippers, but the rate was reduced and the flipping fee eliminated.
NAIOP Massachusetts CEO Tamara Small lauded the transfer tax compromise from the development community, but she also said a tax on a volatile industry like real estate shouldn’t be a foundation for affordable housing creation.
“We are concerned with the sheer number of transfer tax proposals at the State House right now,” Small said to Boston 25 News. “Communities are looking to transfer taxes to fund anything from education to climate change and affordable housing. Unfortunately, a transfer tax alone cannot solve all of those problems.”
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