Boston’s Wealthy Real Estate Players Avoid Paying their Fair Share

Boston’s City Council first passed an innovative tax on luxury real estate transfers nearly four years ago to raise revenue for affordable housing. But the Massachusetts state legislature needs to approve the municipal tax. And in the face of the real estate industry’s relentless opposition, lawmakers have refused to do so.

Meanwhile, an acute housing shortage and affordability crisis grips the city. Boston has even surged ahead of notoriously pricy San Francisco in median asking rent now at an exorbitant $3,839 a month.

Renting is the only option for the vast majority of local residents who cannot afford to buy a home. Harvard University’s Joint Center for Housing Studies estimates that a family would need $189,538 in annual income to purchase a median-priced home in the metropolitan area. But the median income of a Boston household, at $81,744, is far less than half that amount.

A report by the Massachusetts Taxpayers Foundation found that about 111,000 residents left the state between April 2020 and July 2022, with high housing costs among the top reasons for their departure.

The luxury real estate transfer fee would address this problem by levying a 2 percent tax on real estate transfers above $2 million, with revenue going towards new and affordable housing units. The longer the state legislature obstructs this reform, the greater the city’s public investment revenue losses.

Click to download our interactive map of Boston.

We analyzed property sales records for 2022, finding that Boston had 7,706 Boston real estate transactions totaling more than $10 billion. The downtown area and the neighborhoods of Dorchester, South Boston, East Boston, and Jamaica Plain accounted for approximately half of these transactions.

A two percent transfer fee on transactions valued at $2 million or more would have raised $55.3 million and would have applied to just 10 percent of units. The majority of these (61 percent) were sold by institutional investors (such as companies, trusts, law firms, religious institutions, etc.).

The city could raise even more revenue by adding another tier to the real estate tax so that properties selling for more than $4 million would face a 4 percent transfer tax. Only 3 percent of units in the city meet this threshold, with institutional investors making up two-thirds of sellers. If this two-tier model had been in place in 2022, it would’ve raised an additional $38 million, bringing total revenue to $93.3 million.

Institutional investors seeking profit opportunities — as opposed to families seeking a roof to put over their heads — make up a significant share of Boston real estate deals. Our analysis of sale records reveals that these investors made 20 percent of all purchases in the city in 2022, or 1,554 units, and accounted for a whopping 41 percent of the total transaction dollars.

The huge presence of institutional investors in the residential real estate market exacerbates the housing shortage, increases prices across the board, and erects structural barriers for working- and middle-class families who hope to own homes.

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