Boston Mayor Michelle Wu gave the state legislature perhaps her strongest argument yet to accept her transfer tax proposal last week.
A citywide audit turned up 1,200 municipally-owned properties totaling 9 million square feet. Most are tax-foreclosed lots that Boston’s Office of Housing hopes to turn into small-scale affordable housing opportunities. But a few are massive seas of asphalt that Wu hopes to see developed into housing, parks and more following neighborhood-level planning that, she told reporters last week, will move “as quickly as we can.”
A brief refresher: Boston is asking Beacon Hill for permission to put a 2 percent marginal tax on real estate sales over $2 million, meaning only the amount over $2 million will be taxed. The tax also applies to transfers of beneficial interest in corporate entities that own real estate, a common way to accommodate multiple investors commercial buildings. The money raised – projected at $100 million per year – would be deposited in the city’s independently-managed Neighborhood Housing Trust Fund and round out financing packages for developments containing affordable units.
Leaving aside whether the tax’s wording should be narrowed to more clearly focus on LLCs that exist chiefly to control property, opposition from the real estate industry falls into two camps: where the lower bar on the tax is set, and whether a transfer tax is just.
The former is a relatively simple question to litigate. Will the hit to people at the low end, like “mom and pop” landlords and neighborhood businesses, justify the benefit to the community at large? Could that pain be avoided by raising the floor at which the tax kicks in?
The latter is more complicated.
Some on Beacon Hill will doubtless find it easier to make up their minds with Boston’s new project in front of them.
By arguing the city should use its existing CPA authority to raise the same funds, the real estate lobby is essentially saying senior homeowners on fixed incomes bear just as much responsibility for funding affordable housing as a real estate investor or someone passively benefitting from appreciation on their South End townhouse.
That’s a tough call. Optics aside, would a careful analysis show that Boston seniors will be hurt by a CPA increase? Will the transfer tax – which, it must be noted, can’t be financed along with the rest of a property purchase – ding the commercial building values Boston’s budget relies on just as a recession feels about to set in?
But some on Beacon Hill will doubtless find it easier to make up their minds with Boston’s new project in front of them, powered as it is by the urgency of a 2024 deadline to spend the federal COVID aid Wu wants to allocate to jump-start development on the largest, most prominent city-owned parcels.
The money will boost specific and tangible projects, at a time when housing affordability is collapsing for both buyers and renters, and structural factors could well keep things that way for several years.
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