This Week in Boston Real Estate: Tax plan update, home equity and more

by Andrew Morrell

More details on Boston transfer tax proposal

The first of what will likely be many public hearings on a proposed increase in Boston real estate transfer taxes took place at City Hall March 19. According to Tim Logan reporting for the Boston Globe, it gave supporters and opponents of the plan a chance to learn about the details of the proposal from City Councilor Lydia Edwards, as well as press for changes.

First brought to City Council’s attention in January, the bill sponsored by city councilors Edwards and Kim Janey calls for a tax of 6 percent on home and commercial real estate sales above $2 million within the Boston area. Revenues from the tax would go toward bolstering the city’s affordable housing budget. According to research presented by Edwards, if such a tax were in place in 2018, it would have contributed an additional $420 million in revenue, a vast sum compared to the city’s current affordable housing budget of around $50 million annually. Even a levy of the 6 percent tax on only commercial and industrial real estate sales, Edwards said, would be enough to quadruple the affordable housing fund.

“I would think those are numbers and money we certainly could use in the City of Boston,’ Edwards said at the hearing. “This is another tool we should consider quite seriously. We need help, and we need resources.”

Greg Vasil, president of the Greater Boston Real Estate Board, argued against the proposal at the hearing. He noted that like other taxes, these new fees could ultimately depress home sales and encourage avoidance. It’s possible that the higher cost of housing incurred by the tax could trickle down to lower-income households, Vasil said, particularly if businesses were forced to pay more to relocate.

While no vote was scheduled on the proposal yet, even if it did pass Boston City Council, the new transfer tax would need to be approved by a vote from state legislators and signed by the governor, too. That’s because such a tax is considered a home rule petition, requiring input from state lawmakers.

Should Boston homeowners be cashing out?

Real estate columnist Jon Gorey opines on Boston.com’s real estate section that local homeowners might be in a great position to sell, if they act soon. Based on Census Bureau data, Gorey found, more than 34 percent of Boston’s homeowning residents owed no debt on their property as of 2017. With home values and thus equity having risen considerably since then, it’s a wonder why more aren’t choosing to cash out.

“Like many Boston area homeowners, I find myself at a poker table of sorts, staring at a jackpot,” Gorey writes. “This isn’t at one of the state’s new casinos, but right here in my living room. And it’s not a pile of poker chips; it’s a rising heap of home equity.”

Real estate agents and other experts who spoke to Gorey said they have been advising clients to do the same, although the financial benefits aren’t always top-of-mind. Boston’s education and culture still outrank many other cities, and the economy remains strong. Those factors alone may make the city’s high cost of living well worth it.

Real estate analysts eye strong investment returns locally

The state of the national and global economy has investors spooked, not to mention some businesses and the average consumer. But with every downturn comes opportunity, and some analysts are singling out Boston for its attractive real estate investment climate.

According to Ann Cole, a co-portfolio manager specializing in real estate for JPMorgan Asset Management, Boston and Los Angeles are two cities they consider high-growth and diversified investment opportunities. That’s especially true in the midst of what appears to be a coming global economic deceleration. Cole’s group focuses on commercial real estate assets like offices, which it projects will see more rent growth in Boston and LA than the domestic average.

“The focus should be on quality of market and quality of real estate,” Cole said according to Bloomberg News. “As you get later in the cycle, that’s not the time to be taking additional risk.”

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