The city, the state, and the funding of affordable housing
The relationship between state and city lawmakers is often the state telling the city what they can or cannot do. As a City Councilor, I don’t have absolute power. Medford City Council can only pass ordinances specified under Massachusetts General Law. Otherwise, we'd get sued. The state legislature can give cities the option to pass a tax or an ordinance, and the City Council may or may not choose to do so.
Often, municipalities want to do things that the state doesn’t explicitly allow. In this case, they file a home rule petition. Medford’s linkage fees, in which Medford charges developers a certain amount to contribute to roads, sewers, and so on, required a home rule petition in 1989. These linkage fees were later implemented in Medford’s municipal codes (Chapter 94-10). Two recent City Council meetings have seen the discussion of a few home rule petitions related to affordable housing.
Medford puts very little money towards affordable housing. We only passed an affordable housing trust (as allowed under state law) last year. Somerville passed theirs in 1989. The trust, in itself, does not produce any money. It just stores money. It’s the City Council’s job to find revenue streams for the trust. What are some possible sources?
Community preservation committee
The most obvious is the community preservation committee, which we’ve had for five years. It gets around $2-3 million a year in local taxes matched by the state. Around a third of this is typically put towards affordable housing developments. The redevelopment of Walkling Court, which I’ve previously written about and which just received final approval at our February 20th meeting, is receiving $2.4 million from the CPC over a three-year period. This really isn’t a lot — it’s just around 2% of the estimated cost of the project. The other 98% is coming from state and federal grants. In contrast, because Somerville has been funding their affordable housing trust for years, they were able to fork out a lot more money to buy land for their community land trust. Medford has a lot of catching up to do.
The CPC can put some money into our new affordable housing trust, once it’s fully implemented. It’s actually a great partner to the CPC, because CPC money has to be spent every year on an annual funding cycle, and credible affordable housing developments usually only come along once every several years. Because, under state law, the CPC has to spend a minimum of 10% on affordable housing, it can just put money into the affordable housing trust every year to meet that requirement. But this, in itself, is hardly enough to fund any substantial affordable housing development.
Where else can affordable housing funds come from? Linkage fees, as mentioned above, are one option I’ve been looking into. The special act that allowed for Medford’s linkage system in 1989 says the following:
The linkage ordinance shall be used solely for the purposes of defraying the costs of capital improvements provided by the city caused by and necessary to support future development such as, but not limited to the following: capital improvements to school facilities, public facilities, roads, sewers, water supply lines, affordable housing, child care facilities, job training facilities, public safety service and facilities, and parks, playgrounds and other recreational facilities.
So, technically, the act allowed for money from developers to go towards affordable housing, but the City Council at the time didn’t write this into local ordinance when implementing it. Once the home rule petition was approved, they created four trusts: parks and recreation, water and sewers, roads and traffic, and police and fire. But the affordable housing trust was only passed 33 years later, and, in 2024, we’re still in the process of implementing it.
Would this mean diverting money from those other trusts? I don’t think so. The special act also requires that linkage fees in Medford be updated every three years by the Community Development Board. Those fees just haven’t been updated since 1990. The amount brought in has since been massively devalued by inflation. This isn’t completely the CDB’s fault — they need a study to recommend how much the fees ought to be updated, and consultants who conduct those are hard to come by. Once linkage fee prices are actually changed, that provides more than enough money to add a fifth bucket for affordable housing.
Housing Home Rule Petitions
On the current City Council’s governing agenda, there are three home rule petitions: one for rent stabilization, one for tenant right of first refusal, and one for the real-estate transfer fee. Two of these were proposed via resolution two years ago, and the third, the real-estate transfer fee, was proposed by myself and Councilor Collins at the February 20th meeting, which was tabled until March 12th.
The short version of each of these home rule petitions is: rent stabilization would prevent landlords from raising rent by more than a certain percent annually (5% is the typical number); tenant right of first refusal would give current tenants the right to buy the property if their landlord wishes to sell at all, with six months to find the funding; and the real-estate transfer fee would charge a fee (2% is what most communities ask), equally split between the buyer and seller, every time houses are bought and sold. That fee would be put into the affordable housing trust. Most home rule petitions specify a number of exclusions, too — it does not apply to transfers between family members (in which cash is often not exchanged), vulnerable seniors, or houses below a certain value — $1,000,000 is often the amount proposed, though this dollar amount doesn’t have to be specified in the home rule petition itself. (In drafting Medford’s, I’m basing it heavily on Somerville’s.) Whether or not it’s progressive is another policy question — some versions of the fee specify a threshold above which it would progressively apply — thus, the first $1,000,000 (if that were the threshold) would be untaxed, and a 2% fee on a $1.2 million home would be taxed two percent of $200,000, or $4,000. In this way, it only substantially affects sales on very high-end properties. (The choice of threshold and whether or to only tax the sale price above the threshold substantially affects projected annual revenues — about $2.5 million versus $375,000 for Medford — though most versions of the transfer fee discussed at the state level are progressive.)
I will talk mostly about the transfer fee, since I sponsored it. First, if the home rule petition passes the City Council, it does not mean that we have a transfer fee. That needs to be signed by the mayor and approved by the state first. If that happens, then we have the option to make our own. 18 other communities have filed similar home rule petitions for real estate transfer fees. None have yet been approved.
The political reality is that this is a state-level debate, and, in my view, the main purpose of passing this in Medford is to give our state delegation the tools to show the leadership at Beacon Hill that local communities need to fund affordable housing. Governor Healey’s Affordable Homes Act, which is still being hammered out, may itself contain a local option for a real-estate transfer fee, and if it did, that would make the home rule petitions moot. Even so, having so many communities ask for it may influence that policy decision. (Based on the state’s analysis, I think any transfer fee local option that is approved statewide will be less than 2%, and the percentage will be progressive and only apply above a certain threshold, but 2% is pretty standard on all of the home rule petitions that have been filed thus far.)
I also think that there is an order of precedence that the state will approve things in. We may get a transfer fee, in some form. But, if the state decides to not approve the transfer fee, there’s pretty much zero chance that they will approve rent stabilization. Getting a transfer fee, in some form, and not getting rent stabilization, is a very possible outcome. Even so, I support incremental wins and the slow progress of policy ideas — the toothless Civil Rights Act of 1957 needed to be passed before Congress could pass more substantial civil rights legislation in 1964 and 1965. Medford’s in the same bucket as Greater Boston and much of America when it comes to the complete unaffordability of housing, and we need to do everything we can to address that.
