1% tax sought on island home sales
Levies on costliest properties would go to affordable housing
Nantucket and the towns on Martha's Vineyard want to impose a 1 percent tax on high-dollar home sales to fund affordable housing development, basically transferring money from wealthy second-home buyers to struggling year-round residents.
The tax, which must be authorized by the state Legislature and then approved by voters on the islands, would create an annual pot of several million dollars to subsidize home construction, allowing the homes to be sold or rented at below-market prices.
Supporters say demand for second homes has made it virtually impossible for year-round residents to find apartments or become homeowners.
"The cost of housing on the islands is in outer space, and it's tearing at the fabric of these communities," said state Senator Robert O'Leary, a Barnstable Democrat, who represents both islands and sponsored the authorizing legislation at the request of the local governments.
O'Leary's bill passed the Senate on Wednesday, 23 to 10, and now awaits action by the House. A similar bill was rejected by the House after passing the Senate two years ago, but O'Leary said he believes growing awareness of the problem has improved the bill's chances.
The opposition comes primarily from the Massachusetts Association of Realtors, which opposes any form of tax on real estate sales. The trade group says such selective taxes inherently are unfair.
"They're singling out a small portion of the population and requiring them to pay for this initiative," said Stephen Ryan, government affairs director for the trade group.
There is also some question about whether the islands need the money. The state already offers a number of ways to subsidize affordable housing development. Furthermore, the island towns already collect a 2 percent tax on each real estate sale, excluding the first $100,000, to buy land for conservation. Peter Fyler, a Vineyard real estate agent, has suggested using some of that land and money for affordable housing.
The island towns are the only Massachusetts communities authorized to tax real estate sales. Supporters say extending that mechanism makes sense because of the islands' peculiar economic reality.
Nantucket and the towns on Martha's Vineyard rank among the state's most expensive housing markets, but they are even more distinguished by their isolation - people who work on the islands cannot easily commute from a nearby town. As a result, as the rich got richer in recent years, and prices on both islands spiked dramatically, local workers increasingly struggled to find housing.
Support for the tax on the islands appears widespread. Each of the six towns on Martha's Vineyard already has passed a nonbinding resolution in support, as have the Nantucket selectmen.
It helps that the tax would apply almost exclusively to buyers of second homes - people who generally are registered to vote somewhere else. The proposed tax would not apply to the first $750,000 of a sale on Martha's Vineyard, and the first $2 million of a sale on Nantucket. After that, each price increment of $100,000 would be taxed $1,000.
The thresholds may seem high to mainlanders.
However, since the beginning of 2006, half of the 561 single-family homes sold on the Vineyard sold for more than $750,000, according to data provided by Warren Group, a Massachusetts real estate data firm. The higher threshold on Nantucket would catch a smaller share of sales. During the same period, about 40 percent of the 351 single-family homes sold on Nantucket sold for more than $2 million.
Proponents estimate the tax would raise between $2 million and $3 million each year on the Vineyard, and perhaps twice that much on Nantucket. On the Vineyard, the money could help to fund construction of about 20 subsidized homes each year, according to Bob Wheeler, copresident of the Island Affordable Housing Fund, a private nonprofit that uses contributions to subsidize housing.
Wheeler said his group has a waiting list of 320 families seeking homes.
He dismissed concerns that the islands are unfairly taxing their summer residents.
"It is these people who own the large homes here on the Vineyard that stand to benefit the most," Wheeler said. "Because if we don't solve this affordable housing problem, we lose our infrastructure - all of the people that all of the people who own the big houses rely on."
Binyamin Appelbaum can be reached at bappelbaum@globe.com. 