Idea #275 – Real Estate Transfer Fees

Report Status: Fully Reviewed

Researched by: Joe Bernard

Original Idea as Submitted

Impose a real-estate transfer tax. This tax would apply to real estate sales in Belmont and could be paid by the buyer. It could apply evenly to the whole sale or it could be graduated stepped – e.g., a “mansion” tax of 1% or 2% of the sale price over $1 million. Belmont would need state legislative approval to do this, but Brookline and other towns are pushing for similar taxes. The money could even be earmarked for affordable housing or the schools. This is being considered at the state level now.

Other ideas included in this report

  • #343 [paraphrased]: Has Belmont considered pursuing a home rule petition to implement a transfer tax on high-end real estate sales, along the lines of what Boston is now attempting, as a possible mechanism to increase funding for affordable housing. There may be some momentum building state-wide.

Idea intent

Additional revenue could be raised by implementing a real estate transfer tax

Weighted Final Score: 57 (Financial Impact: 6, Operational Impact: 2, Time Scale: 2, Ease of Implementation: 1)

Background Information

There are several municipalities in Massachusetts that have submitted locally approved petitions to the state legislature to allow them to impose real estate transfer fees. Among them are Arlington (H.4295), Brookline (HD.3571), Cambridge (H.4282), and Concord (S.2437). As the House Representative for the 24th Middlesex district—including Belmont, part of Arlington, and part of Cambridge—Rep. Dave Rogers is a petitioner for H.4295 and H.4282.

Although the particular calculations differ in each of these home rule petitions, there are several shared characteristics. They all specify a minimum dollar threshold, which effectively exempts lower-value transactions. They all contain other specific exemptions, most commonly for property subject to an affordable housing restriction and for transfers to charitable or religious organizations, if used for affordable housing. They all specify that funds shall be deposited into an affordable housing trust fund.

In addition to these home rule petitions, there is a proposed bill that would insert a section into state law that expressly empowers cities and towns to impose a fee on certain real estate transactions to support affordable housing (S.868). This would eliminate the need for municipalities to petition for state authorization one by one.

The proposed state legislation includes the following parameters: (1) transfers for less than the state median sale price of a single-family home are exempt; (2) the amount of the transfer fee can be between 0.5% to 2% of the purchase price, or up to 6% in the case of a speculative sale; (3) the municipality can designate whether the fee shall be paid by the buyer, seller, or an allocation from each; (4) all fees shall be deposited in a Municipal Affordable Housing Trust Fund, or otherwise designated exclusively for affordable housing purposes. The proposed legislation provides for several exemptions—including those described in the home rule petitions above—and further provides that any city or town may adopt further exemptions.

The most recent sales list available from the Belmont Assessors’ Office is for calendar year 2020. According to real estate analytics firm The Warren Group, there were 61,732 single-family home sales in Massachusetts in 2020; the year-end median sale price was $447,000. Of the 299 home sales in Belmont in calendar year 2020, two would have been exempt under the proposed state legislation on the basis of being less than the state median sale price of a single-family home. With the limitation that we don’t know for sure how many of the remaining 297 transactions might have been exempt for other reasons, we can apply the range of possible transfer fees (0.5% to 2% of the purchase price) to the 297 remaining transactions to estimate a range of possible revenues to fund affordable housing in Belmont.

Recommendations

  • If Bill S.868 passes state legislature in 2022, Select Board to prepare a warrant article for Town Meeting to vote adoption of a real estate transfer fee program as defined by state law

  • If Bill S.868 does not pass state legislature in 2022, Select Board to prepare a warrant article for Town Meeting to seek a home rule petition modeled upon existing home rule petitions that have been passed by nearby towns

Next Steps

  • Select Board to discuss the topic of real estate transfer fees with Belmont’s State Senator and/or State Representative to understand the likelihood of passing state legislature as a statewide bill or home rule petition, and decide further next steps accordingly

Further Reading