How real estate transfer taxes got derailed in the Legislature

They were here to ask the Legislature for help, specifically by passing a new fee on high-dollar real estate sales that advocates say would bring Boston and other Massachusetts communities tens of millions of dollars in new housing funding, a gusher of cash that could help build lots more buildings like the one St. Katherine Drexel is planning. Some in the room had pushed the idea for years and felt — based on positive signals coming from Beacon Hill leaders and increasing pressure to address the state’s raging housing crisis — that they were finally close to the finish line. Until the last few weeks.

In addition to faith leaders and tenant advocates, some business groups as well as a wide range of cities and towns — including Boston, Somerville, Nantucket, and Concord — support the new transfer fee, or tax, as opponents call it. Late last year, Governor Maura Healey included a version in her housing bond bill, her administration’s first big swing at tackling the housing shortage. And in March, House Speaker Ron Mariano told the Greater Boston Chamber of Commerce he would consider moving the idea forward.

It looked like the policy’s supporters had finally gained momentum.

Then the real estate industry stepped in, ramping up lobbying against the measure, sending mailers, funding studies, and trying to snuff out pockets of local support. One group vowed to spend whatever it takes to defeat the proposal, worried it would dampen both the housing market and the struggling commercial real estate sector. And when the House unveiled its version of the housing bond bill on June 3, the transfer tax was nowhere to be found — raising doubt it will make it through the Legislature this year.

“What happened was what we knew was going to happen,” said Mark Martinez, who leads a coalition supporting the fee. “The real estate industry has come out in full force against the transfer fee and they are spreading misinformation. Simply put, they have a lot more money than we do. It’s challenging to battle that.”

It’s also an example of how hard it can be to advance housing policies on Beacon Hill, especially when they have powerful opponents.

Several other states have similar taxes; some tax the seller, others the buyer.

Healey’s proposal would give municipalities in Massachusetts the option to impose a fee that could range anywhere between 0.5 percent and 2 percent on all residential or commercial real estate sales over $1 million, or above the median home sale price in counties where that figure exceeds $1 million. Municipalities could choose the rate of the tax, which would be charged to the seller and only apply to the portion of the sale that exceeds $1 million. Studies have found that it could generate millions of new dollars for affordable housing in a given year. (In Boston, Mayor Michelle Wu’s administration has said that a 2 percent transfer tax on residential and commercial property sales would have raised nearly $100 million in 2021 alone.)

A 1 percent transfer fee in Somerville, for instance, would mean a homeowner who sells their house for $1.4 million would pay $4,000, while if Boston enacted a 2 percent fee, the real estate firm that sold the 21-story office tower at 101 Arch St. for $78 million in March would have paid $1.5 million.

Officials in at least 27 municipalities have signaled support for the policy, as have regional business groups, including the Cape Cod Chamber of Commerce and even the state’s largest employer, Mass General Brigham, giving supporters a uniquely broad coalition as far as housing policy goes. Thousands have attended rallies in support. And with Mariano’s speech in March, the idea looked like it had a chance.

Then real estate groups flexed their muscle. In mid-April, the Greater Boston Real Estate Board announced a marketing campaign against the transfer tax, with its chief executive, Greg Vasil, saying the group will spend “whatever it takes” to defeat the proposal.

“This isn’t a policy idea that’s going to go away,” Vasil said. “We just want to remind people that this isn’t a good solution.”

To the public, that took the form of mailers, mass texts, and websites that framed the proposal as a “new tax” that “will be a drag on your wallet and our economy.” The real estate group, in at least one instance, targeted an individual municipality that was considering a vote in support.

In Medford, after the City Council planned a discussion about supporting…