{"id":172010,"date":"2024-05-20T12:34:05","date_gmt":"2024-05-20T18:34:05","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=172010"},"modified":"2024-05-20T12:41:31","modified_gmt":"2024-05-20T18:41:31","slug":"massachusetts-weigh-new-real-estate-transfer-tax","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/massachusetts-weigh-new-real-estate-transfer-tax","title":{"rendered":"How Much Could a New Real Estate Tax Hurt Investors In Massachusetts\u2014And Will It Even Work?"},"content":{"rendered":"\n

Massachusetts is the latest state considering a transfer tax <\/span>in a bid<\/span> to increase funding for <\/span>affordable housing<\/span><\/a>, but the<\/span> controversial fee doesn\u2019t bode well for the Bay State\u2019s already pricey real estate sector.<\/span><\/p>\n\n\n\n

State officials argue that the proposed transfer tax could inject billions into state-funded affordable housing projects, potentially alleviating the housing crisis. <\/span>However, real estate experts caution that such a tax could dampen home sales and add to the challenges <\/span>faced by<\/span> <\/span>commercial real estate<\/span><\/a> developers, who are already struggling with high office vacancy rates.<\/span> <\/span><\/p>\n\n\n\n

What\u2019s in the Bill? <\/span><\/h2>\n\n\n\n

The transfer tax is part of Governor Maura Healey\u2019s $4 billion <\/span>housing bond bill<\/span><\/a>. Introduced in the fall, the bill has gained traction and the <\/span>support<\/span><\/a> of dozens of municipal leaders. If passed, cities <\/span>would be able to<\/span> impose a 0.5% to 2% fee on property sales that exceed $1 million.<\/span><\/p>\n\n\n\n

Supporters of the provision, including Boston Mayor Michelle Wu, say the tax would help address a shortage of affordable housing in the state. According to Massachusetts Secretary of Housing Edward Augustus, the state needs 200,000 more homes to keep up with the growth in population.<\/span><\/p>\n\n\n\n

\u201cThis policy is a win for local governments, but most importantly, it is a win for renters and homeowners who have otherwise <\/span>been priced out<\/span>,\u201d Augustus <\/span>said in a statement<\/span><\/a>.<\/span><\/p>\n\n\n\n

State officials project that a 2% transfer fee tax would have generated<\/span> $784 million<\/span><\/a> in fiscal year 2022, with over half from commercial real estate sales.<\/span><\/p>\n\n\n\n

Why the Real Estate Industry Is Against a Transfer Tax <\/span><\/h2>\n\n\n\n

Critics are skeptical that the transfer tax would be <\/span>useful<\/span> and <\/span>feel it<\/span> would <\/span>actually<\/span> hurt the housing market.<\/span> Office vacancy rates in Boston reached <\/span>23% in the first quarter of 2024<\/span><\/a>\u2014levels not seen since 2010. The residential housing market is also under pressure as high interest rates have kept homeowners from selling.<\/span> <\/span><\/p>\n\n\n\n

Massachusetts communities could <\/span>actually<\/span> lose money if the changes <\/span>are implemented<\/span>,<\/span> according to a <\/span>report<\/span><\/a> from the Greater Boston Real Estate Board (GBREB) and Tufts University.<\/span> <\/span>The report found that if a 2% transfer tax were in place in 2023, <\/span>for every dollar in taxes collected,<\/span> communities could lose up to $0.60.<\/span> <\/span><\/p>\n\n\n\n

While the GBREB\/Tufts report highlighted the need for new housing, including affordable housing, it claims a transfer tax isn\u2019t a viable solution, as it would inhibit property sales. Rather than helping ease affordable housing, a transfer tax would <\/span>actually<\/span> put pressure on some of the most distressed real estate markets, likely causing higher rents as a result, the report found.<\/span><\/p>\n\n\n\n

\u201cMassachusetts needs meaningful solutions to the housing crisis <\/span>and<\/span> this research should tell the governor, legislators, and local leaders that new taxes won’t work,\u201d Mike Edward, chair of the Greater Boston Real Estate Board and president of Perry CRE, <\/span>said in a statement<\/span><\/a>. \u201cThe Commonwealth must avoid passing misguided policies like transfer taxes and instead focus on workable solutions that promote new housing, reduce red tape, and ensure the entire Commonwealth participates in a stronger housing future.\u201d<\/span><\/p>\n\n\n\n

Meanwhile, a <\/span>separate report<\/span><\/a> on a proposed transfer tax in Boston found that such a tax would reduce the volume of sales and lower prices <\/span>equal to the level of the tax<\/span>.<\/span> <\/span><\/p>\n\n\n\n

What the Bill Could Mean for Real Estate Investors<\/span><\/h2>\n\n\n\n

Massachusetts isn\u2019t the only state that has introduced a transfer tax to address the affordable housing crisis. Last year, Los Angeles\u2019 so-called \u201cmansion tax\u201d went into effect, charging a 4% tax on properties above $5 million and 5.5% on sales above $10 million. <\/span><\/p>\n\n\n\n

While the initiative has raised roughly $215 million, <\/span>it\u2019s<\/span> also <\/span>hampered the luxury real estate market in LA<\/span><\/a>. <\/span>It\u2019s also<\/span> raised less than initially projected, which critics say is proof that such a tax doesn\u2019t really work.<\/span><\/p>\n\n\n\n

With the<\/span> housing market in Massachusetts already under a lot of pressure from the high cost of living and increased immigration into the state, the transfer tax could make it worse.<\/span> Those looking to sell luxury homes priced over $1 million <\/span>are likely to<\/span> look for alternative ways of selling or not selling at all. Meanwhile, commercial real estate is <\/span>likely<\/span> to be hit the worst <\/span>during a time<\/span> when it\u2019s already under extreme pressure, creating a worrying real estate market in the state. <\/span><\/p>\n\n\n\n

In other words, for real estate investors in the Massachusetts market, now might be the time to look elsewhere for opportunities in the commercial and luxury real estate space.<\/span><\/p>\n\n\n\n \n

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Massachusetts is the latest state considering a transfer tax in a bid to increase funding for affordable housing, but the controversial fee doesn\u2019t bode well for the Bay State\u2019s already pricey real estate sector. […]<\/p>\n","protected":false},"author":613681,"featured_media":172013,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7384],"tags":[],"class_list":["post-172010","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-politics-policy"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/172010","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/613681"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=172010"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/172010\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/172013"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=172010"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=172010"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=172010"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}