Background

In January 2019, Governor Baker filed legislation, An Act Providing for Climate Change Adaptation Infrastructure Investments in the Commonwealth (S.10). The proposal would increase the Deeds Excise Tax from $4.56 per $1,000 to $6.84 per $1,000 and use approximately $150 million in new funding to sustain and implement the Municipal Vulnerability Preparedness (MVP) program and the MA Climate Clearinghouse.

In response to the Governor’s proposal, housing and climate advocacy organizations came together to advocate for major new state investments to protect our families, neighbors and communities from the urgent and immediate affordable housing crisis and the urgent existential threat of climate change. The HERO Bill was initially filed in the 2021-22 legislative session by Representative Elugardo (H.2890) and Senator Eldridge (S.1853).

The bill was filed this session by Sen. Eldridge & Rep. Montaño (S1799 & H2894) in order to continue to move this critical legislation forward and secure a sustainable source of revenue to address the affordable housing and climate crises.

The current legislation would double the current Deeds Excise Fee, which is due upon the sale of real property in Massachusetts from $4.56 per $1,000 to $9.12 per $1,000, in order to bring in an additional $300 million in revenue annually. The bill would divide this funding equally (50/50) between climate change and affordable housing.

Double the Current Deeds Excise Fee

We believe the Deeds Excise Fee is the right tool to generate revenue for both climate response and housing action. Massachusetts has one of the lowest deeds excise rates in the region. The HERO Act brings the Massachusetts excise fee into alignment with surrounding states.

The deeds excise fee has remained at the same level for decades. Based on data apparent in the Governor’s proposal, as well as data provided by the Suffolk County Registry of Deeds, doubling the fee would raise approximately $300 million per year in new revenue. Even if we double the current tax, Massachusetts would still have a lower fee than most neighboring states.

State
Rate per $1,000

New Hampshire
$15

New York
$12.50

Vermont
$12.50

Connecticut
$10.52

Massachusetts Proposal
$9.12 (double)

Rhode Island
$4.60

Why is the Deeds Excise Fee the right tool?

The deeds excise is a fee paid on income generated during a real estate sale. It is both an appropriate and equitable source of revenue to support housing and climate investments. The investments funded by this legislation are needed to protect real estate values and the entire real estate industry from the ravages of unmitigated climate change. And to the degree that rising property values make it harder for working families and seniors to secure housing, this mechanism provides an opportunity to mitigate that harm by creating more affordable housing.

Affordable: Most homeowners only pay it once or twice in a lifetime and can amortize the cost over the life of a mortgage.
Equitable: The largest cost is imposed on those buying and/or selling the most expensive properties and investors who buy and/or sell properties frequently, including large scale office, commercial and luxury residential developments.

Proposed Allocation of New Revenue: 50% for Climate and 50% for Housing

Climate Resilience: $150 million/year

We propose that the Climate revenues should go to the Global Warming Solutions Trust Fund, which has the ability to fund both climate mitigation and climate adaptation measures.

The legislation proposes to allocate 50% of the new funding to climate investments by depositing half the new revenue into the Global Warming Solutions Trust Fund. This would allow the Executive Office of Energy and Environmental Affairs (EEA) to allocate dollars across a wide range of climate related investments from those addressing resiliency and adaptation, to those seeking to reduce carbon emissions through energy efficiency and clean energy.

We believe that the legislation provides appropriate flexibility to respond to changing needs over the next 30 years. EEA could choose to transfer some of this money to the Massachusetts Clean Energy Center or other intermediaries responsible for implementing clean energy programs or initiatives. In spending these funds, EEA should adhere to the state’s Climate Action Plan and align investments with other funding streams such as utility funded energy efficiency programs.

Affordable Housing: $150 million/year

We propose that the $150 million portion of new deeds excise revenue set aside for housing be allocated 60/40, with 60% dedicated to the existing Affordable Housing Trust Fund, and 40% to the Housing Preservation and Stabilization Fund (HPSF).

Aiding working-class homeowners and renters through the Affordable Housing Trust Fund ($90 million/year). The Affordable Housing Trust Fund can be used to create and preserve rental housing, develop ownership housing for people traditionally excluded from those opportunities, provide permanent or transitional housing for homeless families and individuals, and rehabilitate public housing. An annual infusion of $90 million could create or preserve additional housing for 18,000 households over 10 years.
Aiding low income renters and the homeless through the Housing Preservation and Stabilization Fund ($60 million/year). This Fund can support extremely low-income households and augment funding for the Mass. Rental Voucher Program (MRVP) for low income renters. MRVP (both vouchers and “project-based” assistance) was funded at $110 million in the FY 2020 budget. A $60 M increase would assist between 3,500 and 6,500 additional families per year, up to 80% of Area Median Income ($63,500 for a 1 person household, $81,600 for 3 persons), though 75% would be targeted to Extremely Low Income households below 30% of AMI ($23,800 for 1 person, $30,600 for 3). Using some MRVP as project-based rental assistance would be less costly per unit and serve more families.
For up to one year after the end of the COVID-19 Health Emergency, the legislation would allow the state to allocate a portion of the funds to emergency relief for tenants and homeowners at risk due to the economic impact of COVID-19.

To ensure that new funds represent an overall increase in program funding, and not merely replace existing appropriations, we recommend inclusion of “maintenance of effort” language in the final legislation.

Local Option Legislation

HERO supports incorporating provisions that allow municipalities to pass local real estate transfer fees as a complementary, no+t supplementary measure. This additional tool to raise revenue empowers communities to meet local needs for affordable housing. To learn more about the Real Estate Transfer fee, visit www.realestatetransferfee.org.

Potential Impacts of the HERO Funding

The HERO Coalition believes such investments should be designed to advance racial and geographic equity by focusing on people and places most significantly impacted by the housing crisis and the dangers of climate change. Some of the ways that HERO funding could be used, include:

Implementing resiliency plans as part of the state’s Municipal Vulnerability Preparedness Program.
Accelerating adoption of clean energy technologies, especially in lower income communities and environmental justice communities.
Electrifying and decarbonizing privately owned residential housing.

Decarbonizing the state’s affordable housing inventory to ensure long-term affordability, comfort, and safety for tenants.
Building new, climate-smart, affordable housing for both renters and first-time homebuyers – potentially adding 18,000 new homes by 2030.
Providing rental assistance through the Massachusetts Rental Voucher Program to help working families and seniors make ends meet.
Supporting innovative community projects that build resiliency, ranging from neighborhood- specific strategies such as increasing tree canopies in areas subject to intense heat, to linking to municipal initiatives, such as Climate Ready Boston.
Launching workforce and small business development programs that help communities of color and other underserved populations access the economic opportunities associated with these investments and the transformation of our economy.

(S.1799/H.2894)An Act Providing for Climate Change Adaptation Infrastructure and Affordable Housing Investments in the Commonwealth