- Cape Cod is proposing a 2% tax on luxury home sales over $2 million to combat its affordable housing crisis.
- A local real estate agent says sellers are already panicking.
- Cape Cod isn't the only area to introduce legislation to tax wealthier residents' properties.
Cape Cod may be a hotspot for wealthy vacationers, but year-round residents are being squeezed out. Now, the Barnstable County Assembly of Delegates wants to fix the area's affordable housing crisis via a new tax on the rich.
The assembly is considering a 2% real estate transfer fee on luxury home sales exceeding $2 million. The idea is that the tax would create revenue — an estimated $56 million per year — that could go towards affordable, year-round housing in an effort to correct the area's affordable housing crisis.
"Cape Cod is in the midst of a housing crisis that threatens the fabric of our communities," Barnstable County Assembly of Delegates Deputy Speaker Daniel Gessen said in a statement. "This legislative timeline is the scaffolding for the assembly to begin confronting the depth of this crisis and moving toward solutions that match the scale of the challenge."
Barnstable County, where Cape Cod is located, is generally a well-off region. But statistics show a significant wealth gap. The median household income is $89,893, according to the US Census, only slightly higher than the national median of $77,719.
However, the median home sale price in Barnstable County was $730,000 in July, well above the $442,992 national median, according to Redfin. And in enclaves like Chatham, Massachusetts, a town on the southeastern tip of Cape Cod, the median home sale price was $1,142,000.
"A family today must earn more than double the average income just to afford the price of an average home. That's not just unsustainable. That is a crisis," Gessen said in a statement.
The tax, which so far as a strong well of support from business leaders, county officials, housing advocates, and the Cape Cod Chamber of Commerce, is seen as a way to revive the county's dwindling middle class.
"Nearly 30% of the region's workforce now commutes to the Cape each day," Cape Cod Chamber of Commerce CEO Paul Niedzwiecki told Realtor.com. "We are going to turn into something very different if we don't make aggressive and transformative moves to protect the middle class."
Amid news of the potential tax, Cape Cod real estate agent and full-time resident Alfred Schofield has already been fielding calls of panic from his wealthier clients.
"I've been getting some calls from anxious sellers," Schofield told Business Insider. "I think there's a little bit of general trepidation from the affluent marketplace about the potential impacts, and more and more people contemplating a potential sale before the end of the year."
Schofield said that while some sellers are trying to jump the gun and close deals before any changes go into effect, others are digging their heels in and holding on to properties longer, waiting for the dust to settle.
He also thinks that sellers will try their best to pass those extra costs on to the buyer.
"There certainly will be people who try to bake those costs into the retail price of their home," he said.
"I'm not exactly positive of what the market impact would be, but I could certainly see a scenario where home prices rise as a result of the tax," he added.
In Rhode Island, lawmakers have already started charging wealthy vacationers with "The Taylor Swift Tax," which taxes second homes $2.50 for every $500 in assessed value over $1 million. The pop star bought a home in Rhode Island for $17.75 million, and Westerly, Rhode Island, property records show it's currently assessed at about $28.3 million.
The Barnstable County proposal doesn't single out second-home owners specifically, but there are quite a few of them there. According to a 2022 housing needs assessment by JM Goldson LLC, a Boston-based community preservation and planning firm, at least 33% of homes in Barnstable are second homes.
While the new proposed law wants to prioritize creating affordable housing for the working residents and families who may no longer be able to afford to live there, Schofield said that Cape Cod's economy relies on visitors stopping by for a short stay. He said he hopes the potential tax doesn't deter people from moving to the area altogether.
"As someone who's lived here year-round my whole life, I certainly hope it doesn't dissuade people from living here year-round," Schofield said. "I think part of what makes the Cape fabric so special is that it's a mix of seasonal residents as well as those year-round residents."
