Somerville real estate transfer fee to fund affordable housing

Mass Innovations, From The Beacon, September 2018

Somerville has submitted a home rule petition to the Legislature to institute the first targeted real estate transfer fee in Massachusetts specifically to fund the creation and protection of affordable housing.

Owner-occupants selling their homes and buyers who will be owner-occupants are exempted from the proposed fee. Instead, the city would impose the 1 percent fee only on those profiting from real estate business in Somerville, such as investors, developers and landlords who don’t live in the property they’re renting.

“The final version of the home rule petition was designed in this way in response to substantial community feedback and input, including calls not to penalize longtime owners selling after an extended period of homeownership,” said Michael Feloney, director of Somerville’s Housing Division.

Transfer fee revenue would go into the Somerville Affordable Housing Trust Fund, which helps fund the development and protection of homeownership and rental housing in Somerville for low- and moderate-income households.

Somerville could see between 880 and 970 new residential sales per year through 2026, with a total sales value ranging from $668 million to more than $910 million, according to an analysis conducted for the city by RKG Associates. The transfer fee could yield between $6.6 million and $9.1 million in annual revenue to support affordable housing in Somerville, according to the report.

“It’s no secret that Greater Boston is in the midst of a housing crisis,” said Mayor Joe Curtatone in a statement. “The goal of implementing a transfer fee is to create a sustainable source of revenue to both pursue new affordable housing units and preserve the character of our neighborhoods by helping people remain in their homes.”

The idea for a transfer fee came out of a 29-member Sustainable Neighborhoods Working Group formed by Mayor Curtatone in February 2015 to recommend ways to address housing affordability in the city.

The group filed recommendations in December 2015, noting that Nantucket and Martha’s Vineyard both received permission from the state in the 1980s to impose real estate transfer fees to establish land banks, which are used to acquire land for an array of public benefits.

“While the purpose of existing local transfer fees in Massachusetts is to generate revenue for public uses, real estate transfer taxes have also been proposed to discourage detrimental real estate speculation,” the working group report’s said.

Since 2010, Somerville has seen the creation of 1,139 new housing units, 245 which are affordable, as part of the city’s SomerVision comprehensive plan, which calls for creating 6,000 new housing units by 2030. Still, the regional housing crisis continues to have an adverse impact on the city.

According to the city’s most recent housing needs assessment, more than 73 percent of the city’s households cannot afford the average monthly rent for apartments. Eighty-two percent of these households cannot afford the average monthly cost of a condominium, and almost 89 percent cannot afford the average monthly cost for a single-family home.

Mayor Curtatone submitted an initial draft of the home rule petition to the Board of Aldermen for approval in January. After debate and revisions, the board approved it on May 24.

The petition, bill H. 4662, was reported favorably out of the Legislature’s Joint Committee on Revenue on June 27 and referred to the House Committee on Steering, Policy and Scheduling.

A similar bill, which would allow any municipality to adopt such a fee, introduced by Rep. Mike Connolly, is currently before the same House committee.

For more information, contact Somerville Housing Division Director Michael Feloney at 617-625-6600, ext. 2565, or mfeloney@somervillema.gov.