A new study commissioned by public planning agencies on Nantucket and Martha’s Vineyard finds a real estate transfer fee to fund affordable housing would not hurt home sales on the Islands.
Island officials have been seeking the state’s permission to impose a fee on real estate transactions to generate money for year-round housing initiatives, including for middle-income people who cannot afford the Islands’ sky-high home prices.
The study by the UMass Donahue Institute, released Wednesday, examined what the authors say is a closely comparable market: the Peconic Bay area of Long Island, which includes the Hamptons on the South Fork, plus additional communities on the North Fork.
Lead author Kerry Spitzer said those towns, like the Islands, are struggling with the cost of year-round housing.
Since 1999, communities in the Peconic Bay area have charged a 2 percent transfer fee, or tax, to fund land preservation and water quality, the UMass report said. The study examined what happened to the real estate market after four towns imposed an additional 0.5 percent tax in 2023 to fund affordable housing and housing assistance programs.
“So what we did is, we looked over time and said, you know, ‘What were the trends before, and then how did they look afterwards?’” Spitzer said. “And we didn't really see an impact on either volume or prices when you compared it to neighboring communities [on] Long Island.”
Opposition has come from the real estate industry. While supporters of the fee say many real estate agents on Nantucket and Martha’s Vineyard support it, the Massachusetts Association of Realtors opposes giving towns the option to adopt it.
Right now, Massachusetts communities do not have the legal authority to impose the fee.
No one from the Massachusetts Association of Realtors was immediately available to comment on the report, but a spokesperson said the group’s position has not changed.
Laura Silber, Island housing planner with the Martha’s Vineyard Commission, said both islands are facing a severe crisis in year-round housing.
“On Nantucket, they've lost most of their inventory under $1.5 million, and the Vineyard's lost most of our inventory under $1 million,” she said. “There is no market-rate year-round rental housing.”
The Martha’s Vineyard Commission and the Nantucket Planning and Economic Development Commission sponsored the research.
The study found that on Martha’s Vineyard, a proposed 2 percent fee on the portion of a home sale above $1 million would generate about $9.9 million a year.
On Nantucket, where a 0.5 percent fee on the portion above $2 million has been proposed, the plan would yield about $3.3 million annually, according to the study.
Silber said the Islands need that money to fund subsidized housing.
“Staffing anything — businesses, nonprofits, municipalities — is virtually impossible unless housing, subsidized housing, can be provided, either by the municipality or by the employer,” she said.
Creating subsidized housing is not just about building, she said, but also about adapting and reusing existing structures. Housing units can be restricted for year-round occupancy, which, over time, could create a bifurcated market of year-round, subsidized homes and market-rate seasonal homes.
“That's what we have to do,” Silber said. “If we don't do it, then we lose all of our year-round inventory, because every time a home sells, it's not going to be the schoolteacher or the firefighter or the wastewater plant worker who's going to purchase it. Those are the folks who are leaving. But a modest, three-bedroom home is going to go on the market for $1.4 million on the Vineyard.”
On Nantucket, that home would cost more than $2 million — sometimes more than $3 million, she said.
The Massachusetts Association of Realtors contends that a fee, or tax, would raise the cost of buying a house even higher.
Supporters are looking for legislative approval of the fee, which they say would serve as a funding source for local initiatives newly allowed — but not funded — by the Seasonal Communities designation.
Created by state law in 2024, the Seasonal Communities designation is designed for municipalities with a high percentage of seasonal homes. A community that adopts the designation by local vote can use a suite of policy tools to support year-round housing.
The designation allows municipalities to subsidize not just affordable housing for low-income households, but also “attainable” housing for households earning up to 250 percent of area median income.
