Massachusetts S 1971: An Act creating a graduated deed excise tax for affordable housing

Summary

Legislative Analysis: Senate No. 1971 An Act Creating a Graduated Deed Excise Tax for Affordable Housing Massachusetts 194th General Court | Filed: January 15, 2025 | Sponsor: Sen. Lydia Edwards (D-Third Suffolk) --- 1. Primary Purpose and Policy Objectives The bill restructures Massachusetts's existing deed excise tax (G.L. c. 64D, §1) from a flat-rate instrument to a progressive, graduated rate structure tied to property sale price. The overarching policy objective is to generate additional revenue earmarked specifically for affordable housing initiatives, leveraging higher-value real estate transactions to fund housing crisis remediation. The bill operates in conjunction with the Affordable Housing Act (Chapter 150 of the Acts of 2024), Massachusetts's recently enacted omnibus housing legislation. --- 2. Key Provisions and Mechanisms A. Rate Structure Amendment (Section 1) The bill amends G.L. c. 64D, §1 by establishing a tiered multiplier system applied against the existing baseline deed excise rate (currently $4.56 per $1,000 of consideration statewide, comprising a base rate of $2.28 per $500): | Sale Price Threshold | Rate Multiplier | Effective Multiplier on Base | |---|---|---| | Up to $250,000 | 1.0x ("existing rate") | No change | | $250,001 – $499,999 | 1.1x existing rate | ~10% increase | | $500,000 – $999,999 | 1.6x existing rate | ~60% increase | | $1,000,000 – $1,999,999 | 1.8x existing rate | ~80% increase | | $2,000,000 and above | 2.0x existing rate | 100% increase (rate doubles) | > Drafting Note: The bill uses "exceeding" language, which technically excludes the threshold figures themselves (e.g., a sale at exactly $250,000 or $500,000 falls outside any bracket). This creates potential ambiguity at threshold values that may require technical correction. B. Revenue Dedication and Administration (Section 2) - Directs the Executive Office of Housing and Livable Communities (EOHLC) to administer and allocate resulting tax revenues. - Mandates an equal 50/50 division of deed excise revenues between: 1. General housing crisis initiatives (broadly defined); and 2. Affordable Housing Act (Ch. 150, Acts of 2024) specific initiatives. - Inserts the dedication provision following the existing governmental exemption clause (transactions where the United States, Commonwealth, or their agencies are a party remain exempt). --- 3. Fiscal Impact Precise fiscal scoring is not included in the bill, but the following observations apply: - Revenue-positive: The Commonwealth collected approximately $280–$320 million annually in deed excise revenues in recent years (pre-rate change). The graduated surcharges on mid-to-high value transactions would generate material additional revenue, with magnitude highly sensitive to real estate market conditions. - High-value transaction concentration: Massachusetts's real estate market—particularly in Greater Boston (Suffolk, Middlesex, Norfolk counties)—features a substantial volume of transactions in the $500,000–$2,000,000+ range, suggesting the upper brackets would generate disproportionately significant revenue. - Market sensitivity: Revenue projections would be subject to interest rate fluctuations and housing market volume, creating inherent volatility in the dedicated funding stream. - A formal fiscal note from the Department of Revenue would be required prior to floor consideration. --- 4. Affected Stakeholders | Stakeholder Group | Impact | |---|---| | Residential homebuyers/sellers (mid-to-high price tier) | Increased transaction costs; greatest burden on $500K+ sales | | Commercial real estate transactors | Significant cost increase; $2M+ bracket doubles the excise obligation | | Real estate industry (brokers, developers, lenders) | Potential dampening effect on transaction volume at higher price points | | EOHLC | New administrative and allocation responsibilities | | Affordable housing developers/recipients | Primary beneficiaries of increased dedicated funding | | Low-income renters/prospective buyers | Indirect beneficiaries through expanded affordable housing supply | | Municipalities | No direct revenue sharing mechanism specified; dependent on EOHLC program disbursements | | Government entities | Unaffected; existing exemption preserved | --- 5. Notable Amendments, Issues, and Controversies Structural/Drafting Concerns - Threshold ambiguity: Use of "exceeding" without "not exceeding" creates technical gaps at exact threshold values ($250,000, $500,000, etc.); standard graduated tax drafting typically employs "at least X but less than Y" or "over X up to Y" constructs. - Bracket specificity: The bill does not address whether the graduated rate applies to the entire consideration or only the amount exceeding each threshold (i.e., cliff vs. marginal structure). Based on current G.L. c. 64D mechanics, this appears to be a cliff-rate structure (entire sale subject to applicable bracket rate), which could create notch effects at thresholds. Policy Considerations - Nexus to housing affordability: The bill imposes the highest burdens on expensive transactions but does not explicitly exempt or protect first-time homebuyers, owner-occupants, or affordable housing project transfers, which may create unintended consequences for some mission-driven transactions. - Relationship to Ch. 150 (2024): By cross-referencing the Affordable Housing Act, the bill ties revenue dedication to an existing statutory framework, which provides programmatic clarity but also creates dependency on that Act's continued implementation and structure. - EOHLC discretion: The "equal division" mandate provides limited programmatic specificity for the first allocation category ("initiatives to address the housing crisis"), potentially granting broad executive discretion over half the dedicated funds. - Referred to: Joint Committee on Revenue (as indicated by committee designation). --- Analysis current as of bill filing date. No committee action, amendments, or fiscal note on record at time of analysis.

Bill Text

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SENATE DOCKET, NO. 1229        FILED ON: 1/15/2025 
SENATE  .  .  .  .  .  .  .  .  .  .  .  .  .  .  No. 1971 
 
The Commonwealth of Massachusetts 
_________________ 
PRESENTED BY: 
Lydia Edwards 
_________________ 
To the Honorable Senate and House of Representatives of the Commonwealth of Massachusetts in General 
 Court assembled: 
 The undersigned legislators and/or citizens respectfully petition for the adoption of the accompanying bill: 
An Act creating a graduated deed excise tax for affordable housing. 
_______________ 
PETITION OF: 
 
NAME: DISTRICT/ADDRESS: 
Lydia Edwards Third Suffolk 

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SENATE DOCKET, NO. 1229        FILED ON: 1/15/2025 
SENATE  .  .  .  .  .  .  .  .  .  .  .  .  .  .  No. 1971 
By Ms. Edwards, a petition (accompanied by bill, Senate, No. 1971) of Lydia Edwards for 
legislation to create a graduated deed excise tax for affordable housing.  Revenue. 
 
The Commonwealth of Massachusetts 
 
_______________
 
In the One Hundred and Ninety-Fourth General Court 
(2025-2026) 
_______________
 
 
An Act creating a graduated deed excise tax for affordable housing. 
 
 Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority 
of the same, as follows: 
 
1 SECTION 1. Section 1 of chapter 64D of the General Laws, as appearing in the 2022 
2Official Edition, is hereby amended by adding the following after the words “after two dollars” 
3as it appears the second time and before the word “provided”:- 
4 “hereafter referred to as the existing rate”.  
5 And in said section, after the words “two dollars” and  before the word 
6“Notwithstanding” the following words:- 
7 however, for sales exceeding $250,000 but less than $500,000, 1.1 multiplied by the 
8existing rate; for sales exceeding $500,000 but less than $1,000,000, 1.6 multiplied by the 
9existing rate, for sales exceeding $1,000,000 but less than $2,000,000 1.8 multiplied by the 
10existing rate; for sales exceeding $2,000,000 the existing rate multiplied by 2. 
11 SECTION 2. Said section 1 of chapter 64D is hereby further amended by inserting after 
12the words "or the United States or any of their agencies are a party." the following words:-  

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13 "The Executive Office of Housing and Livable Communities shall equally divide such 
14tax revenue  to initiatives to address the housing crisis and to fund the Affordable Housing Act 
15initiatives as established in chapter 150 of the Acts of 2024."