After Gov. Baker criticizes Boston’s proposed real estate transfer tax, Mayor Wu digs in
'Now is not the moment for us to say, 'We have a brief bit of hope, and so let's kick the can down the road,' Wu responded.
Republican Governor Charlie Baker has built a reputation for — usually — deferring to local leaders to handle the business of what they think is best for their communities.
It’s why Baker, now in his final year in office, often signs off on home rule petitions, which call on state lawmakers to adopt ordinances and amendments passed at the local level that affect only that community.
But on Thursday, Baker outlined a notable exception to his approach: his opposition to Mayor Michelle Wu’s real estate transfer tax that’s headed to Beacon Hill.
“As a general rule, I don’t support these sorts of things,” Baker said on GBH’s “Boston Public Radio.” “And I especially wonder why we’re doing this at a point in time when we have billions of dollars available to us to spend on housing and the City of Boston has hundreds of millions of dollars available to them to spend on housing.”
The petition, which the City Council approved on Wednesday and Wu signed Friday, seeks to levy a tax on real estate sales in Boston over $2 million. The fee would amount to nearly $100 million annually that Wu says would fund affordable housing initiatives.
The petition also includes expanded property tax cuts for low-income seniors by rewriting eligibility criteria in the city’s 41C program, which gives tax assistance to residents over the age of 65 who live in homes that they own. The changes would allow for several thousand more homeowners to become eligible based on their income.
But Baker is opposed to the tax on the grounds that the city and the state already have substantial cash to support housing efforts, thanks to Washington’s COVID-19 response, the American Rescue Plan Act.
“We still have billions of dollars of available resources under the ARPA law that we haven’t spent yet, and we have a significant state surplus,” Baker said. “There is a lot of money around to support housing, and the City of Boston got $550 million, I think, in ARPA funding. I think they’ve spent about $150 million of that.
“These are huge numbers, folks,” he continued. “And the city and the Commonwealth ought to be putting a lot more of them into housing initiatives.”
Notably, the petition is only the latest to be sent to the State House. A similar proposal backed by former mayor Martin J. Walsh failed to win over state lawmakers, as have numerous comparable proposals from communities across the Commonwealth.
But Wu is embracing the idea anew, with a few tweaks.
On Friday, the mayor said this is the moment for the city to “secure sustainable, long-term funding for affordable housing,” and indirectly rebuked Baker.
“Now, some might say that this is a moment of tremendous support from the federal government. We have a once-in-a-generation opportunity to spend that funding,” Wu said before signing the petition. “That is an opportunity [in which] we will make the most of every single dollar.”
The city actually already has, Wu said, pointing to a $40 million investment to create hundreds of affordable units.
Still, those funds will “just begin to chip away at the housing crisis that Boston has been facing since long before COVID-19,” Wu said.
“Now is not the moment for us to say, ‘We have a brief bit of hope and so let’s kick the can down the road,’ but more than ever to lean in and say, ‘Look what’s possible with what we’ve already seen we can do with these amazing federal funds’ that will last potentially a year, maybe a little more but not not much longer than that,” Wu said. “We cannot wait in this moment to take the opportunity to really add a very, very small transaction fee at the point of sale … That impact will flow far beyond Boston.”
Wu said if Boston already had the tax in place, the city would have more than doubled its affordable housing funding last year.
Such a tax would have generated $99.7 million for the city in 2021.
“This is about making sure that we have the funds that we need regardless of whether the federal government invests in us or not,” said state Senator and City Councilor Lydia Edwards. “It is sad because if we had that money, $100 million, during a pandemic, you can think of the people we could have saved, the housing that we could have saved.”
City officials have said the law will generate funding for the city’s Neighborhood Housing Trust, which creates and preserves affordable housing, and would also fuel programs that bolster senior homeowner and low-income renter stability and housing access disparities.
The law would also discourage rapid, repeat sales of properties, officials have argued. Exemptions to the tax would include transfers made between family members, and more exemptions may be added later.
Baker, however, is not the only critic of the proposal.
This week, the Greater Boston Real Estate Board, which boasts 12,000 members who are professionals in various aspects of the industry, voiced “strong opposition” to the tax.
The GBREB argued in a statement that the state’s existing Community Preservation Act already allows municipalities to raise up to a 3% property tax surcharge. In turn, officials may elect to use up to 80% of CPA funds on housing issues.
Boston voters adopted a local CPA in 2016. The city now charges a 1% property tax surcharge.
“We question why the City of Boston needs new taxing authority to pay for affordable housing when they have it now,” the GBREB said in its statement.
GBREB members supported the passage of the CPA “because it was equitable,” the board said.
But the home rule petition now before lawmakers would single out a select portion of the population to pay for a community-wide issue, the group argued.
Additionally, the tax will be levied on the real estate market, which is “highly sensitive,” particularly in troubling economic times, the organization said.
“Increasing the tax burden when a home or property changes hands will simply drive-up transaction costs and will most certainly lead to a decrease in residential mobility,” the GBREB said.
Baker, although opposed to Wu’s proposed tax, once pursued a similar funding avenue.
In 2019, the governor proposed hiking taxes on real estate transfers to raise money for projects to protect communities from climate change, but state lawmakers never picked up the bill.
Baker, on Thursday, said his proposal was different than Wu’s in that it sought a small increase for an existing tax.
“The size of it was dramatically different … and it was tied to an existing tax that had not been raised since 1986,” Baker said.
Wu’s tax would target high-end sales, with a $2 million threshold — significantly higher than the average local transaction.
In January, the median sales price of a single family home in Suffolk County was $675,000, while the median condo price tag was $597,117, according to a report from The Warren Group, a data analytics firm.
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