There are several barriers that make it difficult to build affordable housing in Franklin County, but by far the largest is the lack of funds to renovate older buildings or develop new housing. While it costs more or less the same to build housing here as it does in the Boston area, the lower salaries that people earn here results in a gap between the cost of housing and the rents or mortgage payments that local people can afford. There are state funds to fill that gap, but they tend to go to large developments which are rare in our part of the state.
So, what to do? Community Preservation Act (CPA) programs in some communities help a bit, but their funds are divided among several important issues: open space, historical preservation and recreation, as well as housing. While they can assist in housing development, it is rare that CPA funds can entirely fill the gap between development costs and market prices.
We have a new tool to help us create truly affordable housing in Franklin County. The Local Option for Affordable Housing (LOAH) bill is presently being considered in the state Legislature. LOAH would allow each town to place a small surcharge on the sale of luxury housing. Funds from that surcharge would be put into an affordable housing trust fund and could only be used for that purpose.
How would it work? In Franklin County right now, the average house is being sold for around $250,000. For the local option luxury surcharge, any home that sold for more than $250,000 would be assessed a surcharge on the amount of that sale that is over $250,000. So, for instance, if I were to buy a house for $300,000 and my town decided to assess a 1% surcharge, the surcharge would be on the $50,000 over the county average. At 1%, that would add $500 to the sale and could be included in the mortgage. As a result of that one sale, the affordable housing trust would get $500. In Franklin County last year, even with the pandemic, more than 2,000 properties changed hands. If 50% of them were sold for $300,000, and every town had a 1% surcharge for affordable housing, $500,000 would have been raised.
The surcharge is a one-time fee, not an ongoing tax. It only impacts those who are buying and selling new property. Each town can choose whether they want to have such a surcharge and if they choose to do so, it can range from .5% to 2%.
The funds from this charge could be used in creative ways as defined by individual town ordinances. For instance, if the big issue in your community is how to provide a proper sewage system for new housing, that could be included as one use for these funds. If your community requires additional public transportation to make affordable housing feasible, it might be possible to designate that some of these funds could be used to develop a contract with the FRTA for the new affordable housing in your community. And of course, these funds could be used to cover the financial gap between construction costs and rent or mortgages.
There is an increasing need for affordable housing in Franklin County. In Greenfield alone, the Franklin Regional Council of Governments states that 57% of Greenfield’s residents could be eligible for affordable housing if it were available. The Donahue Institute at the University of Massachusetts estimates that Franklin County needs about 2,300 new housing units by 2025 to meet our housing needs. The Local Option for Affordable Housing luxury housing surcharge is one way to help us get there.
If you are interested in learning more online, go to www.realestatetransferfee.org/. If you are ready to take action to support this legislation (S 868/ H 1377), please write to your state senator and state representative. To find your state legislator, go to https://malegislature.gov/search/findmylegislator.
Susan Worgaftik is a member of Housing Greenfield, which seeks to find and advocate for creative, affordable solutions to meet the housing needs of people of different incomes, abilities and stages of life.