What to know about the Mass. Senate's version of Gov. Healey's housing bill

The Massachusetts Senate is expected to vote Thursday on a bill that would authorize more than $5 billion in borrowing to spur housing production and make numerous policy changes.

The bill — based on legislation Gov. Maura Healey filed in October — is designed to address the state's crisis of low housing inventory and unaffordable options. It would prompt the creation of 40,000 housing units, according to the Senate Housing Committee Chairwoman Lydia Edwards, chipping away at the 220,000-unit shortage Massachusetts is expected to experience by the end of the decade. However, it does not include a proposal to allow communities to tax high-value real estate transactions to pay for affordable housing.

"The point of this bill, like I said — we can't fix it all. Can't undo it all. But it can course correct," Edwards said at a press conference. She later added, "We would be naive to think we could do all of that in one bill, at one time, knowing to even build the units that we need it's going to take 20 years. The housing conversation and the solutions and the tools that we need to build are just starting again."

The bill authorizes $5.1 billion in long-term capital spending on housing, but the state is currently limited to about $400 million a year in capital spending on housing under its latest five-year capital budget. Bond authorization laws only add to the menu of spending options for executive branch officials to choose from, while operating within the constraints of an annual state bond cap.

The Senate Ways and Means bill leaves out a proposal to allow local-option real estate transfer taxes, which more than a dozen communities are seeking to tax high-dollar property sales within their borders and generate money for affordable housing. The House also did not adopt the policy, meaning it is likely dead for this session, though any senator could propose to add it through an amendment.

Local option transfer taxes have long been proposed on Beacon Hill, and the idea seemed to have legs this session — especially with a heavyweight in its corner, with the support of the governor. Healey and the Legislature are now more officially at odds over the idea, though the governor has been hesitant to publicly apply pressure to lawmakers over the policy. She has avoided directly answering when reporters have asked if she would still sign a housing bond bill that excludes the local-option transfer fee.

Sen. Edwards has also been a vocal supporter of the tax, and the housing bond bill sailed out of her committee earlier this year with the policy still included. Edwards sponsored an initiative in 2019 as a Boston city councilor to apply a 2 percent fee on real estate transactions above $2 million, which she said at the time could have raised $168 million for affordable housing in the city.

Asked by reporters why the fee wasn't included in the Senate Ways and Means bill, Edwards said there are already a lot of existing housing production tools, and more would be created under the bill.

"Before we add an additional tax, we think it's incumbent upon us to look at what we have already provided and tools in the toolkit for a lot of cities and towns, and to make sure they are sharpened to their best potential," Edwards said.

One of those "sharpening" measures in the new bill that is a $50 million incentive for Community Preservation Act communities who have spent the state CPA dollars on housing, she said.

"196 cities and towns have a form of CPA, and that is an opt-in local option kind of tax. And it has not been working as well as it should have been," she said. "And before we add an additional tax bill, we need to make sure that we're right sizing and ensuring that those are working correctly."

Asked by reporters last week if she personally supported allowing transfer taxes, Senate President Karen Spilka of Ashland said, "I'm getting a feeling from the members. That is, to me, what is the most important."

Sen. Jo Comerford of Northampton, who filed a bill this session seeking to broaden the scope of transfer fees to allow lower-income communities to use the tool, said the bill will create a commission to study the idea, with a provision to include a rural perspective.

"We'll be back to work on this again," she said.

Amherst, which is in Comerford's district, was one of the municipalities that filed home rule petitions this session seeking to implement a new tax on high-dollar transactions to pay for affordable housing.

"The Amherst town manager talked at length about the town's extensive use of CPA funds for housing, they've dedicated ARPA funds, they've formed a housing trust fund. This is a community that is pro-housing, and they're just asking us for another tool in this home rule petition. And I believe they should have that if they believe they can use it right," she said.

More than 10 other towns in her district are also considering how transfer taxes could work for their communities, Comerford said.

"We want to be able to give communities the tools they're asking for," she said.

Sen. Julian Cyr of Truro was also a vocal supporter of the fee, as communities on Cape Cod and the islands of Martha's Vineyard and Nantucket have sought to implement the policy. Housing advocates who support the proposal say it would be especially helpful in communities with a lot of tourism, such as the Cape and islands, where wealthy people buy property without living there year-round, pushing out locals. The tax on the expensive second-home sales would help fund affordable housing for local residents, they say.

"Of course, I'm disappointed that a local-option transfer fee was not included in the base bill, but I continue to see momentum on this," Cyr said. "A revenue source that would work well for some communities, many of which I represent, would help those communities solve a very real problem and also stretch limited state taxpayer dollars elsewhere in the state, where this particular tool might not make sense."

Cyr said there are policies in the bill that will help seasonal communities like the Cape and islands, and he's hopeful that lawmakers will come back to the transfer fee in a future housing bill.

"I'm encouraged to hear this isn't the only housing bill we'll do for the next decade," he said.

Cyr is a member of Spilka's leadership team, and Comerford is the assistant vice chair of the powerful Ways and Means Committee.

Real estate lobbyists have been pushing for over a year to discourage lawmakers from allowing the local-option taxes.

"To overcome the housing crisis, leaders on Beacon Hill need to prioritize policies that reduce barriers to housing creation, which will in turn help generate production of homes across all price points," Greg Vasil, CEO of the Greater Boston Real Estate Board, said in a statement on Monday. "We are thrilled that the Senate Ways and Means’ version of the Housing Bond Bill unveiled today embraces these efforts by including massive investments in affordable housing, as well as streamlined permitting of Accessory Dwelling Units (ADUs), while also rejecting flawed policies such as transfer taxes."

One policy change seems on its way to becoming law, with support from the governor, the House earlier this month and now the backing of Senate Democrats. The Senate Ways and Means Committee proposed allowing for accessory dwelling units, or ADUs, by right in single-family zoning across the state. The administration previously estimated this could create 10,000 new housing units across Massachusetts.

ADUs are smaller, independent units located on the same lot as standalone houses, and frequently provide housing for elderly family members who want to downsize and live closer to their families, for adult children, or are rented out by homeowners.

A recent University of Massachusetts Amherst/WCVB poll found that 66 percent of residents supported allowing the smaller housing units in single family zoning districts.

In addition to ADUs, the bill adopts a number of proposals Healey recommended in her own bill, including: allowing tenants to seal previous eviction records in certain cases, expanding the designation to address housing availability in "seasonal communities," and allowing a simple majority voting threshold for inclusionary zoning ordinances and bylaws at the local level.

Edwards sponsored the bill this session that would prevent an eviction from becoming a permanent mark on an individual's housing record by sealing evictions from prospective landlords, who could use old cases to deny applicants housing.

When Edwards testified on this bill in 2021, she called it the "scarlet letter E."

"The fact is, if you file a case, the moment you create an eviction record that is permanent for life," Edwards said at the time, adding that people of color, particularly Black women, are more than twice as likely to be evicted and "not given a softer landing" in the courts.

As for seasonal communities, Cyr said the bill would expand this designation and create a greater policy toolkit for communities — like those in Cape Cod and the southern Berkshires — that have 40 percent or more of their houses as secondary properties.

It would allow a path for communities to implement a year-round deed restriction program, which would create financial incentives for homeowners to reserve their properties for year-round housing. This would apply to both houses that are rented and those lived in year-round by their owners.

"This is a crucial tool for us. We need to be able to preserve units for people who actually live here," Cyr said. "Aspen, Vale and California towns around Tahoe have used this tool, and we'll soon be able to if the Senate language prevails in conference ... Police chiefs, fire chiefs and our schools have been reaching out to us to provide housing for our municipal workforce. This bill does that."

In addition, the bill would raise the ceiling on year-round residential property tax exemptions, which Cyr also said is a lifeline for year-round residents on the Cape and islands, as it shifts a greater percentage of the property tax base onto second homeowners.

The Senate Ways and Means bill would add inclusionary zoning ordinances and bylaws to the list of zoning changes municipalities can pass by a simple majority instead of a two-thirds majority vote. Inclusionary zoning refers to local policy that requires or provides incentives to developers to set aside a fraction of newly constructed housing units to be affordable.

The bill would allow simple-majority inclusionary zoning votes for up to 13 percent affordable units, after which those votes could defer back to two-thirds.

"We had heard a lot of people voiced true concern about cities and towns being able to use that new power to block housing by saying, 'Oh well, anything to be approved here has to have 80 percent of affordable housing,' and so on and so forth," Edwards said. "And so we wanted to meet both concerns and we thought that we threaded the needle by saying simple majority for up to 13 percent."

Leah Robins, government affairs director at the Metropolitan Area Planning Council, said the agency was excited to see the inclusionary zoning measure included in the Senate bill, after the House excluded it from their housing bond bill earlier this month.

"A number of other zoning provisions are at a simple majority vote, and this puts it in line with many other zoning provisions, so that you don't get to 51, or even to 64 percent, and not get to advance the measure forward," she said. "So it says, 'Let the majority rule'. What it does is enable cities and towns to say if you're going to develop, we want to be able to say a certain amount should be affordable."

Edwards also highlighted a policy that would require broker's fees to be paid by landlords — rather than tenants.

Tenants are often required to pay first month's rent, last month's rent, a security deposit and a fee for the real estate broker who showed them the apartment when they first move into a new unit. Edwards said these costs can be between $12,000 and $15,000 on average, creating a barrier to housing for tenants.

"This would be incredibly impactful," she said. "If a landlord contracts a broker, you're paying for the whole fee. You're not going to pass any of that on to your tenants."

The Senate bill also excluded the $1 billion bond authorization to expand the Massachusetts Water Resource Authority's service area to the suburbs south of Boston, a priority for House Speaker Ron Mariano.

Mariano pointed to Weymouth, where he said 6,000 homes could be built at the former South Weymouth Naval Air Station if there was accessible clean water to the area.

Comerford, whose district includes some of the towns surrounding the Quabbin Reservoir which provides the water flowing east to the greater Boston area, said the Senate believed that there hadn't been enough conversation about this topic.

She filed a bill this session that looks at recompense for the Quabbin communities for stewarding the clean water reservoir.

"It's really important to remember that this is not an idea that has had a hearing, right? No one has really said this is a workable plan. In terms of state agency heads, we haven't given any thought to this idea," she said. "If the governor should authorize this, what would it do to the chances of any other community west of Worcester getting access? So there's a lot of questions that haven't been answered yet."