January 24th, 2019

Councilors seek tax on speculators

Transfer tax would raise funds for housing

Trea Lavery

Boston City Councilors Lydia Edwards and Kim Janey have proposed a home rule petition that would apply a transfer fee to real estate transactions, in order to discourage speculation.

A 6 percent fee would be applied to non-exempt real estate transfers. An additional 25 percent fee on properties sold within two years of purchase, payable by the seller, is aimed at real estate speculators. Funds raised would go to building affordable housing in the city, potentially raising hundreds of millions of dollars.

“We need to make sure that as a city we say that we are not for sale and our Boston housing market is truly for families, the middle class and folks trying to assure that they can live and work here,” Edwards said in a City Council meeting last Wednesday. “This is not the new stock market.”

Edwards explained that real estate speculation has resulted in both rising housing costs and the displacement of tenants across the city.

She noted a specific incident in East Boston, part of her district, in which a speculator purchased and flipped about 70 units of housing, evicting residents, only to have two walls fall down due to rushed renovations.

“We ended up displacing tenants in other buildings that were actually connected to those buildings which he didn’t buy because his work was so shoddy,” Edwards said. “This kind of aggressive flipping and this kind of speculation in our communities is something we cannot sustain.”

The law would exempt owner-occupants and transfers between family members, as well as sales under $2 million.

“I’m not talking about the average person who has a property, who’s bought it, who lived in it, and one day wants to make money off of that,” Edwards said. “Building wealth is important. It’s necessary. We’re talking about the people who are coming here only to make money and as much as possible, regardless of the pain that they make.”

Janey said that both she and Edwards held community hearings last year to get a sense of residents’ reactions to the proposal, and have overwhelmingly heard support for it.

“They want to see the luxury real estate market slow down, and more investment in affordable housing,” she said, adding that currently, many residents looking to purchase homes are being forced to look outside of the city for affordable prices.

Councilor Mark Ciommo, while supportive of the petition, reminded the rest of the council of a program run through Harvard University that purchases for-sale properties with the intention of reselling them to owner-occupants, and did not want to see similar programs harmed by potential fees.

He also warned that the fees may induce changes in the ways developers and buyers interact.

“We need to realize that taxes and fees impact behavior,” Ciommo said.

To go into effect, the petition would have to be approved by the council, signed by Mayor Martin Walsh and proceed to the state legislature.

Other cities in the state have proposed similar rules; Somerville had a 1 percent fee turned down last year, but has stated that it will try again, and Cambridge plans to send a similar petition to the state in 2019.

“We’re bringing speculators to the table, saying, ‘You need to pay for what you’re breaking,’” Edwards said. “You need to stop breaking our housing market, and breaking our backs.”