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A new real estate transfer fee may soon be imposed on property transactions within the City of Somerville.
By Jim Clark
The Legislative Matters Committee of the Somerville Board of Aldermen continues to amend and discuss details of its intended home rule petition to impose a real estate transfer fee on property sales in the city.
According to Alderman At-Large Mary Jo Rossetti, many have been following the process, but others are not fully aware of the proposed legislation and what it will mean to current and future property owners.
“In our efforts to assist our families and all constituents who are being ‘priced out’ of Somerville, this ordinance would impose a fee when a home or apartment building were sold,” Rossetti said. “Briefly, we are talking about potentially exempting all owner-occupied 1, 2, and 3 family homes. Also exempting any family trust transfers. Other proposed exemptions continue to be discussed. Some discussion has been looking to hold this transfer cost to developers who are flipping homes quicker than we can blink. However, as I stated above, the BOA continues to hold discussion on this draft document.”
Rossetti pointed out that the monies collected would perhaps go only to an Affordable Housing Trust Fund.
“If, after a Somerville Public Hearing on this matter, the Board of Aldermen choose to move forward on this, it must first be approved by State Legislature, a Home Rule Petition,” said Rossetti. “This has not been done in Massachusetts as of yet. Other districts have attempted it in the past. Much more discussion will be held here in Somerville, then a public hearing will occur.”
Rossetti is reminding the public that the ongoing meetings are both live steamed and/or viewable at any time via the video link on the city’s web page: http://somervillecityma.iqm2.com/Citizens/Default.aspx.
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And hopefully it won’t be done. The wishes of the people should come first. We do not want it.
We need to take a stand on the addition of all of these home rule fees. Somerville now has a $40 parking permit fee, water bill fees and is looking for even more fees. This is another attempted way to bypass taxpayer protections that reside within Proposition 2 1/2. Somerville needs to live within its budget much the same way as its taxpayers need to live within their budgets.
2/8/2018 – Somerville News
To say a transfer fee will only impact the buyer is very naive. It will most likely reduce the price that the seller receives..
The bigger issue is that government’s insatiable appetite for more taxpayer money continues unchecked. As all taxes are based upon a percentage of a transaction (e.g. sales, income, etc.) there is already a built-in adjustment to cover inflation for the government, even if the taxpayers don’t receive the same built in guarantee that the government receives.
What is next? A car transfer fee? After all, if you can afford to buy a car then you can afford to pay the “small fee” to help feed the never-ending feeding trough.
The exemptions make this a bit more palatable.
The city is finding more and more ways to squeeze money out of residents, and this is just one more. If they want to make owner-occupied single-family homes exempt from property taxes altogether, then having a transfer fee would be fine by me.
If you are over 65 and want to defer property taxes until your home is sold you can do that, but then imagine how much you will actually get for your home if they take back the taxes owed for that length of time plus a transfer fee. You’ll be lucky to have any money left.
Considering how many people live in this city now, you’d think there would be plenty of money in taxes and fees already.
Lets no allow this to pass the constant attack on property owners to solve a problem that could have been stopped when the condo boom started. Property owners pay their taxes every year and it has not stopped increasing.
We work more hard to do so while others just work to solve problems that are part of at everyone elses expense.
Pass the word so everyone will contact the City and stop this before it occurs. There is nothing to say that at anytime after it was approved that they would not change the language to also include smaller properties next.
PM
They are only “talking about“ potential exemptions. No decisions have been made, and some people don’t want there to be any exemptions in order to maximize tax revenue. Not a done deal either way. Better keep an eye on them.
I’ll “take issue” with each respondent, but before those issues, there should be some common knowledge about a transfer fee. First, it has a long history (from the 1980’s) in Martha’s Vineyard and Nantucket, where the funds go to preserve open space, which, as a resort and vacation and retirement space, is their regional “industry.” And such fees have a longer history in Europe and the West Coast, where they often range considerably higher than the 1% proposed in Somerville. In all of those locations the fees are paid by BUYERS ONLY, and long term residents pay nothing. It is, in virtually all other sites, a sales tax on an inflationary price, designed to harness those prices to generate more affordable options in both job and housing preservation and growth.
Further, in order to get the fee through the Legislature and a Republican Governor, it must a means to produce measurable restraint on gentrification and to deliver more affordability to key, vulnerable populations. Only then would the Legislature let Somerville test those measures before other cities – like Cambridge, Boston, and gentrifying suburbs – might consider them. Somerville alone would never get approval, because the Speaker and the Governor think “tax” is a dirty word rather than feasible investment.
Beyond that perspective – verified by plenty of research and documentation here and abroad – there are many other mistakes among the arguments raised here:
“The wishes of the people” are to stay in Somerville. Those people who already own will have nothing to do with this fee until they sell, and then they’ll sell to a buyer for whom a 1% transfer fee is very small for very many benefits.
To think a transfer fee will “reduce the price” a seller may get is like imagining a sales tax on a Mercedes Benz, which is much more than 1%, would harm Mercedes. Wrong, particularly in Somerville where we don’t sell cheap to anyone.
And, to think that this goes to the “general fund” and makes government fatter ignores the target proposed for a “community investment trust” to guarantee affordable mortgages and help startup new jobs. It is the GOAL that determines the VALUE of the fee, not the government. And it is to the government’s benefit – and all of our benefit – to stabilize our population and insure security for long term residents.
That “investment trust” option, incidentally, would mostly guarantee and generate ten times its value in mortgages, while those mortgages would target “affordable” mortgage payments and thereby have very, very little risk of default. After a few years the fee could expire, and the fund it created would be large enough to secure the whole city.
Exemptions do NOT make it more palatable, only more complicated. Since only buyers will pay, transfers among family members would not pay anyway. More elaborate rules invite manipulated transfers to corrupt a system. But, I forgot, no Citizen Somerville (or is it Somerville Citizen?) imagines anything corrupt!
As the first person in eight years to get that property tax deferral at age 70, I can agree with it’s benefit. Since my house appreciates at about $60,000/year the $6,000 deferral won’t hurt anyone. Yet, as a reverse mortgage holder, I just encountered Trump’s “innovation” that makes that deferral no longer available since taxes can’t take a secondary loan position under his administration.
And, Paul, this is ONLY a SALES TAX, and not a property tax, so, stay where you are and you’re totally exempt.
This isn’t rocket science. Read some stuff from the Lincoln Land Institute, or from the research in Europe and Washington State, and you’ll see that virtually all these cautions deeply mis-understand the strategy and tactic of a fee to create secure jobs and home ownership for long term residents and their families.
Joe – You can say buyers will pay all you want and that it won’t impact what the seller receives for their home, but I will disagree. Most buyers think about how much home they can afford not by the sticker price, but rather the price they pay each month after the sale. This is made up of their mortgage, property tax and insurance. The 1% surcharge will be factored into this equation. Now do I think 7k on a 700k purchase will make a big difference to a buyer… no, but i think it is disingenuous to say that it will not be part of the price negotiation.
While you feel that exemptions do not make it more palatable I would rather see this fee be targeted at non-owner occupied properties and property flippers. E.g if your property has not been owner occupied for a minimum of 5 years the fee kicks in.
In any case having a broad debate on the topic and voting on it is a good thing and I appreciate you bringing your perspective to the table.
1. Just because it’s being done elsewhere doesn’t make it good or right.
2. I don’t trust our local or state governments to follow through on a dedicated place for the ‘fee’, really yet another tax.
3. Please stop saying that this will affect only buyers. A mercedi doesn’t cost over a milliion dollars. If you think buyers, even wealthy ones, aren’t looking at the bottom line you’re wrong.
4. If the tax is paid by buyers it will further price out people who are trying to buy here who can’t afford the ‘crumbs’ that this tax would cost them.
5. Somerville would only become even more of a rich vs. poor town. It would terribly damage what diversity we still have.
6. You say don’t worry, it won’t affect you until you sell. Well, guess what, the taxes, fees, and policies of this administration are pricing many people out of the city. They are being forced to sell because they can’t keep up with the taxes disguised as fees.
7. This is socialism/social engineering at it’s worst, and neither works.
Socialist money grab! Nothing less!
Here come the Bernie Sanders crew!
Joe,
Deferring your taxes is great but most of us care for our property and keep it in good condition costing us more in increases.
To say its no big deal you are wrong, property owners should not have to pay the costs to house everyone else. Increase the amount of affordable units within the new developments and be sure the middle class residents can acquire a unit not just the lower income group.
Police, Fireman, Teachers, City Workers all have to live outside the city as a result of poor management. You cannot continue charging it off to those that can barely afford paying all that is already being charged to property owners.
We pay thousands a year and adding any more at the end of a sale just screws the little guy again.
PM
Now we see what their revolution is really all about. They want what you have and they are going to take it.
Responding to some of “Dear Joe”‘s points.
2. If the ordinance for the transfer fee is properly written (and it has to be approved by the state legislature and signed by the governor), then it will be restricted to its purpose to help people afford mortgages in Somerville. Advocate for that to the Aldermen.
3. and 4. contradict each other “Dear Joe”. Either a) the 1% fee will modify the market price so that it is unchanged, and therefore it won’t increase the cost for people buying into Somerville or b) the 1% fee will not impact the selling price, and therefore it won’t hurt the older seller trying to get some money and retire. Either way, a lower income person trying to buy into Somerville won’t be able to afford it whether the 1% fee affects prices or not. They will need the limited equity no down-payment mortgage option that this fee will allow for. It seems you have completed ignored what Joe explained above.
5. As I just stated, this fee would back mortgages for those who are too poor to ever acquire enough money for a large downpayment to buy into Somerville.
6. This one doesn’t even make sense. The taxes and fees are pretty insignificant compared to the crazy property prices here for anyone to buy into Somerville. If you are elderly, you can get property tax deferral if you own, as Joe explains. Please give me statistics on the number of people who have been “forced” to sell and leave Somerville purely due to Somerville fees and property taxes.
7. Ad hominem that isn’t worse addressing.
The good news is that this will never pass the legislature, because the representatives and senators in other districts actually care about middle class people, and they don’t want to set a precedent. Meanwhile, in Somerville, Aldermen Davis and Ewen Camden object to even informing property owners about a public hearing on a tax that directly affects them. Talk about elitist jerks. They love to dip into other people’s wallets while keeping people in the dark. We’ve been taken over by Bernie Bros who want to mansplain how to spend our household budgets.
Why do we even need this legislation? I’d love to live in Weston but can’t afford it. Rather than asking the people of Weston to subsidize my lifestyle, I moved into a community I could afford. My kids would have loved to buy a home in the community they grew up but could not afford it. Rather than whining about it or asking for a government handout, they bought homes in communities they can afford. Why can’t our government grasp the simple fact that we should all live within our means?
TheoNa: when all the Cambridge people moved here in the 80s and 90s, locals faced that exact choice and had to move to towns they could afford. My brother and cousins all moved to Stoneham and Wakefield because that’s where they could afford to buy. Now we have millennials who’ve rented here for just a few years demanding handouts from everyone else. The Entitled Generation doesn’t want to make sacrifices and work to get ahead.
TheoNa: I agree to a degree. But the issue is that this isn’t just happening in Somerville. It’s happening all over Boston metro. So the problem becomes that people that we need in our society cannot live in reasonable commuting distance. I’ve seen it first hand at my child’s preschool (preschool, not daycare). All the teachers are having a harder and harder time making ends meet. The school keeps raising their salary to try to help, but parents are unable to keep up with rising tuition at the same rate that cost of living is increasing in the area. So teachers (very good teachers) have started leaving the area for cheaper areas and no longer teach at the school. It’s become harder to get qualified teachers at the salaries the school can afford to pay them.
During campaign season, this transfer tax was often characterized as targeting condo/house flippers and property speculators, but what is being contemplated is far beyond that.
Somerville’s residents didn’t create the region’s housing crisis–arguably Somerville has done more, and is doing more, than any other city in the metro area to address housing affordability, so I’m concerned that our elected representatives are asking middle class buyers and sellers of homes to pay more. Perhaps $10k is no big deal to some, but for many families and seniors, this pays for all sorts of needs: child care, college funds for children and grandchildren, medical expenses, home repairs, and more.
I will urge the Aldermen to think twice before taking more money out of the pockets of Somerville residents. Trying to solve the region’s housing affordability crisis on the backs of everyday Somerville homeowners is not the solution.
Rob, I agree with what you said about the positioning of the transfer tax. The only thing is, today, rarely do you see a home for sale for under 750k… I think we have gone beyond the reach of the middle class.
People should be aware in addition to the city trying to ram this down our throats. This was stated in the March 22, 2018 newsletter from Our Revolution Somerville:
Opponents of the home rule petition will attend the April 4 public hearing, hoping to sabotage it with scare tactics and misinformation. We need supporters to speak at the hearing, telling the Board that the people of Somerville need the increased funding for affordable housing that the the real estate transfer fee will generate. We also ask that ORS members speak against the proposed exemption for property owners who have occupied their buildings for 20+ years, as this would reduce revenue significantly. A resident who has lived in a home for 20+ years will have seen the property appreciate tremendously in value, and a 1% fee on that windfall only in the event the owner sells is a reasonable fee for a good cause. The buyer will pay, not the owner.
Nervous about public speaking? Not to worry—all you have to do is state your name, street address, and support for the petition. Wednesday April 4th at 6pm at City Hall.
When a developer builds in this city it is negotiated that some affordable housing be made available for the project to proceed. Over gentrification caused prices to spike in the first place forcing life long residents to leave the city because they were no longer able to afford to live here. How many more fees can the middle class endure? NO MORE FEES!