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Boston City Councilor Explores Luxury Housing Tax

Can Boston Tax Its Way To More Affordable Housing?

Housing Rights March
Advocates with City Life/Vida Urbana hold up one of many signs displayed during an October march through Dorchester.
Saraya Wintersmith/WGBH News
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Boston City Councilor Explores Luxury Housing Tax

A tax on high-end condos is one idea that Boston City Councilor Kim Janey is considering as a potential solution to a shortage of affordable housing in the city.

Janey, who represents parts of Roxbury and Dorchester, spoke after a hearing she sponsored last month on gentrification and displacement in Roxbury before more than 200 people packed into a room at the Bruce C. Bolling Municipal Building. The event lasted more than four hours, as advocates and current and displaced residents shared their experiences and offered recommendations.

When asked which proposals stuck out, Janey mentioned exploring a luxury tax, an anti-speculation tax and other new levies.

“I’d like us to be thinking about how we go after these luxury condos,” Janey said in an interview with WGBH News. "If you wanted to sell your property within the first year, which a lot of flippers and speculators do, you would then be paying a higher tax when you let go of that property, versus if you held on to it."

Nearly 20 percent of Boston’s housing stock is income-restricted, according to a recent report from the city's Department of Neighborhood Development. Mayor Marty Walsh has set a city-wide goal to build nearly 16,000 more units of income-restricted housing by 2030. Still, Boston has been seeing longtime residents flee faster than units are becoming available.

Imposing luxury taxes to help stem this displacement — a policy direction that has surfaced elsewhere — elicits strong opinions on both sides. Supporters say such a tax could break the cycle of displacement. Critics say the new taxes might not have the desired impact.

The proposals for new taxes, which received public praise from concerned residents at the hearing, came from the left-leaning Institute for Policy Studies. Chuck Collins, director of the program on inequality and the common good at the DC-based think tank, wants the city to tamp down speculative activity.

"It's having, overall, a hugely disruptive effect on our local housing market," he said.

Collins argued that Boston's luxury housing market is evolving into a safe deposit box for global wealth. He said that while the construction jobs and property taxes that come with high-end units have positive effects, he does not think those effects are not positive enough to offset their damage.

"These are $3 million condos and up, so many of them are out-pricing local affluent markets and pushing affluent buyers into other neighborhoods and leading to a cycle of displacement," he said.

To remedy this cycle, Collins and the Institute for Policy Studies have called on the city to consider new taxes: an anti-speculation tax when homes resell within a year, a vacancy tax to discourage unused units and a luxury tax when units sells for more than $2.5 million dollars. Money raised from each of the taxes, he said, would go into the city's coffers to build affordable housing.

"I think the city should capture some of that value so that the people who live in Boston can afford to stay here," Collins said, pointing to states like New York where the so-called mansion tax on homes of $1 million or more generated more than $400 million last year. Voters in Evanston, Ill. elected to impose a similar tax this past November, and Hawaii and New Jersey each charge higher taxes on pricier home sales.

But tax analysts like Joan Youngman, a senior fellow at the Lincoln Institute of Land Policy in Cambridge, warn the measures are neither a cure-all nor a guaranteed solution to the city’s housing shortage.

"Taxes are generally best designed to raise revenue and not to influence markets. It's very difficult to predict how any specific tax will influence markets," she said. “When we’re talking about housing markets, or real property markets, we know how hard it is to predict what’s going to happen, even under normal circumstances.”

Youngman said that aside from there being no guarantees about how the market might respond to a new tax, add-ons would complicate a system that, ideally, should be simple and easy for officials to administer.

"When you have a specific penalty like that, you are going to have all sorts of situations calling for hardship exemptions and relief from the tax, so you have to be very careful not to introduce complexities," she said.

Janey isn’t just looking at new taxes. She said all options are on the table.

“We need to be looking at each and every option,” she said after the Roxbury hearing. “I took lots of notes and I’m looking forward to reviewing the comments again so what we can make sure we’re lifting up all of the solutions to see what can have some real traction.”

Janey said she’s hoping to have a report and recommendations for her council colleagues to consider soon.

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