Chatham Joins Coalition To Support 'Mansion Tax'

By: Tim Wood

The Chatham 365 Advocacy Group sponsored these signs to draw attention to the housing crisis. FILE PHOTO

CHATHAM – Recognizing that there may be influence in numbers, the select board has joined a coalition of municipalities, organizations and individuals supporting legislation allowing communities to levy real estate transfer fees to raise money for affordable housing.

“It would be better to be part of this than not,” said Select Board Chair Peter Cocolis.

Voters earlier this year backed home-rule legislation to authorize the so-called “mansion tax” that would allow the town to impose a surcharge of one-half of 1 percent on real estate sales of $2 million or more. On Monday the legislature's joint committee on revenue held a hearing on the legislation as well as a number of other similar bills filed by other Massachusetts communities. Cocolis, fellow select board member Jeffrey Dykens, Town Manager Jill Goldsmith and finance committee chair Stephen Daniel provided testimony in the hearing.

The Transfer Fee Coalition Initiative unites more than 60 individuals, groups and towns that support a fee on real estate sales to help raise money to address the housing crisis that has gripped Chatham, Cape Cod and much of the state. In the past year, the median home sale price in Chatham has climbed to more than $1 million and hit $508,000 state-wide, a 21.1 percent increase from the previous year, according to information provided about the coalition. Prices are expected to continue to rise as much as 10 percent next year. High-end sales and speculation has driven up costs and displaced many local residents.

Chatham has seen the housing crisis close up. Even before the pandemic, which super-charged the real estate market, there was evidence that young people and families were being squeezed out of both rentals and ownership. In the past 18 months many people have lost rentals as homes are sold to take advantage of high real estate prices, and those escalating prices have made it difficult for working people and families to afford to buy a home, contributing to the worker shortage and dwindling school enrollment. The Cape and Islands Association of Realtors reported this week that the year-to-date median single-family home sales price in Chatham is $1,230,000.

“The town is in danger of becoming an enclave of wealthy part-time owners and real estate speculators who are driving the price of real estate out of sight,” Select Board member Jeffrey Dykens wrote in written testimony to the joint committee on revenue. “If the town of Chatham does not pursue relief with creative and aggressive measures to counter these powerful market forces it stands the very real risk of forever losing its rich, local history and the very citizens that make it up.”

“We're looking at a crisis of housing,” said Select Board member Shareen Davis said last week. “We do not have a silver bullet. It's going to take creation of many funding opportunities” to increase the stock of affordable housing. Chatham is pursuing other efforts to increase affordable housing, including purchasing property and legislation to allow community preservation funds to be used for so-called “attainable housing,” available to residents who earn up to 200 percent of the median area income, and another bill that would allow the town to establish an attainable housing trust fund. The legislature's joint committee on housing will hold a hearing on the two bills on Oct. 26.

Several local towns, including Provincetown, Truro and Nantucket, have filed home-rule legislation to establish real estate transfer fees for affordable housing; several other towns in the state have also done so, including Boston, Concord and Somerville. Others are in the process of filing legislation. There are also two state-wide local option bills – one sponsored by Falmouth Representative Dylan Fernandez – that would allow any community to opt in to a real estate transfer tax ranging from one-half of 1 percent to 2 percent; the bills set different thresholds for triggering the tax, from the state or county median home sale price to sales over $1 million.

In Fernandez's bill, two-tenths of a percent would go to the state's department of housing and community development for state-wide affordable housing solutions. The other local option bill filed by Representative Mike Connolly of Cambridge and Senator Joanne Comerford, who represents Hampshire, Franklin and Worcester, would authorize towns to also charge up to 6 percent for speculative sales, defined as properties sold within one year at a price three times the state median sales price.

It's notoriously difficult to get legislation passed to allow local communities to levy new taxes. State Representative Sarah Peake, D-Provincetown, said she's been filing home-rule legislation to allow Provincetown to levy a real estate transfer tax for close to a decade. Other towns within her district have also filed similar legislation over the years, none of which have made it into law. Given the number of bills being filed, a possible outcome is that all of these individual legislative initiatives will get combined into a single local-option bill, she said.

“Bringing a tax vote to the floor is a difficult thing,” Peake said.

But it's not impossible. For years Peake filed locally sponsored legislation to add short-term home rentals to the state room tax, and it finally passed in 2018.

“The lesson in this is never give up,” Peake said.

That short-term rental tax revenue could also prove to be an impediment to passage of a real estate sales transfer fee. Peake said that she and Senator Julian Cyr, D-Truro, have told Cape officials that the additional revenue brought in by short-term rentals provides an opportunity to fund affordable housing now rather than pin hopes on a transfer tax passing.

“That is money they have today, will have tomorrow and years into the future,” she said, “as opposed to waiting a year, five years, 10 years for something like this to be enacted. They shouldn't miss the boat.”

On Monday, Harwich special town meeting voters agreed to set aside 25 percent of short-term rental revenue for affordable housing and the same percentage for wastewater projects. Chatham has not earmarked its short-term rental revenue, according to Finance Director Alix Heilala; the money currently goes into free cash.

The short-term rental tax in Chatham has raised a significant amount of money. In fiscal 2021, the first year it was separate out from the total room tax, short-term rentals brought in $1,339,321, according to Heilala, more than the rooms tax on hotels and motels, which amounted to $1,255,910.

Chatham's legislation, H4060, would set aside proceeds from a real estate transfer tax for both affordable and attainable housing. It requires that the buyer pay the tax, and exempts a number of transfers, including sales among family members. The surcharge would end after 10 years.

In his testimony, Dykens said the popularity of the town has become both a “blessing and a curse.” Due to the increase in property values, exacerbated by the pandemic, finding housing has gone from “a very difficult stretch” to “out of reach for the vast majority of our local citizens.”

“As a result, our teachers, firemen, policemen, fishermen, carpenters, and white collar professionals alike have been priced out of the Chatham housing market. The very social fabric of our year-round community suffers as a result,” Dykens wrote.

In his testimony, finance committee chair Stephen Daniel said between April 2020 and April 2021, the average sale price of a single-family home in town went from $557,500 to $1.78 million, a 219 percent increase. The transfer tax will generate funds for affordable housing at a time when the town's budget is under stress due to water contamination from PFAS, climate change, dredging and other expenditures. The transfer tax would provide a “designated source of revenue for our community housing efforts to ensure progress on this vitally important goal of our community.”

Daniel said the finance committee rejects the claim that a real estate transfer tax will adversely effect sales activity or property values. “Nantucket has had a transfer tax (for the benefit of its land bank) for a number of years,” he wrote. “In two of the three years preceding the pandemic, property transfers on the island exceeded $1 billion, hardly suggesting an adversely impacted market.”

While a majority of the select board said joining the coalition would be benefit the effort to pass the legislation, the move was opposed by board member Dean Nicastro. He opposed the transfer tax and said the local option bills could impact properties selling for less than Chatham's $2 million threshold.

“I think there's a potential concern for not just the high-end property owners in this town,” he said.

Following Monday's hearing, the joint committee on taxation will confer and decide whether to move the bill forward, Peake said.