Boston Mayor Wu Wants Tax on Pricey Real Estate to Fund Low-Cost Homes

(Bloomberg) -- Boston's new progressive mayor, swept in on a wave of resentment over soaring housing costs, pushed forward a plan Friday to pay for low-cost homes by taxing high-dollar real-estate sales.

Mayor Michelle Wu signed the City Council's formal request asking state lawmakers for permission to impose a transfer tax of as much as 2% on property sales of $2 million or more, including high-end condos, office buildings, retail and multifamily rentals. Sellers would bear the cost, which would apply only to the amount above $2 million.

“This is another run that we're making at the legislation at a moment that's more important than ever,” Wu said at the Foley Senior Residences, an affordable community in the Mattapan neighborhood. “This fee will generate tens of millions of dollars each year, creating housing safety and stability and allowing people to stay in neighborhoods to put down roots and help them grow.”

The tax is similar to ones proposed by the last two mayors that faced strong opposition from the real-estate lobby. Republican Governor Charlie Baker, who would also need to sign off, said Thursday that “as a rule, I don't support these sorts of things.”

Based on 2021 sales in Boston, a 2% fee would have raised an estimated $99.7 million, according to the mayor's office. The proposal also includes expanding property-tax exemptions for seniors. But the state is sitting on a budget surplus with swelling tax receipts and billions in unspent federal Covid relief money.

“I especially wonder why we're doing this at a point in time when we have billions of dollars available to us to spend on housing,” Baker said Thursday on WGBH, a Boston public radio station.

While people think the tax would just hit the rich, it also would make rentals more expensive by increasing costs for buyers of multifamily buildings, said Greg Vasil, chief executive officer of the Greater Boston Real Estate Board, a local trade association.

Vasil suggested the city focus instead on changing zoning to make it easier for developers to build more dense affordable-housing projects.

“It puts an additional cost on an already expensive market,” Vasil said.

Wu's housing agenda also includes rent control, which would also require state approval.