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In search of living space

Nantucket pushes tax on trophy homes to ease housing crunch

On an island where housing costs have outdistanced the reach of the working class, Nantucket officials are pleading with Massachusetts lawmakers to let them levy a first-in-the-state tax on trophy homes and use the revenue to build moderate-price residences.

At stake, the officials say, is nothing less than maintaining a community where teachers and police officers, bakers and landscapers can afford to live among the McMansions, the oversized houses that are sprouting like mushrooms across the island.

"There's been an infusion of second homes, not just by the rich, but by the superrich," said John Pagini, director of the Nantucket Planning and Economic Development Commission. "There is no housing right now on Nantucket for anybody of low or moderate income the way it is traditionally defined."

Under the plan, approved at Town Meeting and now seeking state approval, Nantucket would assess an $8 surcharge on every square foot of new construction greater than 2,500 square feet. Revenue from the one-time charge, estimated at about $500,000 a year, would be channeled to a trust fund that would be created for affordable housing.

"There's a nexus between that second home on the market and the creation of an affordable-housing need," Pagini said. "Those that create that need should help pay for it."

Pagini and other Nantucket officials, who trekked to Beacon Hill recently to lobby for the tax, faced hard questions from the Legislature's Joint Taxation Committee. State Representative Paul C. Casey, the panel's cochairman and a Democrat from Winchester, said the proposal will undergo intense scrutiny.

When asked about a constitutional roadblock to the tax, Casey said, "Boy, there could be, because you're discriminating against different augmentations of homes."

Another concern, he said, is fairness. "You're seeing this on a much more prevalent basis, where locals are transferring costs on to the newer, incoming class of individuals," Casey said. "You really have outsider versus insider, almost like tension. And this tension is prevalent where there is new money coming into communities."

However, Casey added that he was struck by the concerns he heard from ordinary Nantucketers. "Whether this passes or not, there is a severe housing shortage," Casey said. "Middle-class people were saying, `We're getting priced out.' "

Pagini offered a raft of statistics to support that contention. On an island where the median household income is $73,000, he said, the median cost of all residential property sold is $700,000. Only 100 units are designated as "affordable housing" on Nantucket, Pagini said, out of 4,000 year-round residences and 10,000 units overall.

The difference between median income and the cost of housing is so great, Pagini said, that Nantucket nearly doubled the minimum family income mandated by the federal government to be eligible for affordable housing. Instead of keeping that threshold at 80 percent of median income, Nantucket set its "affordability" bar at roughly 150 percent of median household income on the island, or $113,000.

Nantucket is the fifth least-affordable rental market in the nation, Pagini said.

David Goodman, a tile worker and local newspaper columnist, said he supports the levy, partially because the trophy homes he calls "plywood palaces" exact such a toll in infrastructure needs such as roadwork and utilities. "Anyone who builds these gargantuan houses, they should pay," Goodman said. "It's like a luxury tax."

The housing crunch also sets in motion what residents call "the Nantucket shuffle." In this yearly merry-go-round, renters are forced to move as mammoth markups drive them into inferior housing for the summer. A unit that rents for $2,500 a month during the winter, islanders said, often is leased for $2,000 to $5,000 a week during tourist season.

Jane Miller, a Nantucket broker for Denby Real Estate, said the need for moderate-price housing is crucial. "If we want to remain a viable, vibrant community that attracts people that will help us grow and be a stronger community, we need to do something," Miller said. "I don't think anybody knows whether this is the answer, but this is an attempt. . . . We want to have the person who cuts our grass live here."

Joseph Kriesberg, president of the Massachusetts Association of Community Development Corporations, said the tax is worth studying. "I do think that, given the desperate need for housing on the island, it's appropriate to look at measures like this to generate resources for housing," he said. "Trophy homes are taking up valuable land and resources to build modest housing for working people."

The tax is the latest in a series of Nantucket initiatives to raise revenue for housing and land preservation. In the 1980s, Nantucket was in the vanguard of Massachusetts communities that adopted a 2 percent tax on land transfers, with the revenue used to buy and protect open space. Two years ago, the island approved an additional 3 percent tax on transfers, which is dedicated to open-space acquisition, historic preservation, and affordable housing.

The state Senate voted this year to authorize Nantucket to impose a sales tax 1 percent above the state sales levy and to use the additional proceeds for housing needs. However, agreement could not be reached with House negotiators. Now comes the proposed tax on McMansions, which Pagini said is not intended to be a panacea. Instead, he said, the levy would give islanders "another tool in the toolbox to make affordable housing happen."

Pagini offered a personal example. In 1998, he built a modular Cape-style house on a midisland lot without an ocean view. The cost: $119,000 for the half-acre parcel and $206,000 for the house. "Today, the very same house is probably worth $700,000," Pagini said. "That's very bad news for anyone else who wants to have reasonably affordable housing on the island."

A remedy needs to come soon to staunch the flow of house-rich but cash-strapped islanders to the mainland, he said, and to attract professionals who often cannot afford to move to Nantucket.

"We've had difficulty filling key positions in the community," Pagini said. "At one time, several summers ago, we had 30 teacher vacancies." As a result, the island's schools decided to build housing for their staff.

"We're compared to Aspen a lot, but they can move to the next town down the valley," said Miller, the real estate broker. "Frankly, we're talking about attracting attorneys, town employees, and doctors, who have perfectly lovely homes elsewhere that they might be able to sell for $300,000 and $400,000. Then they come here and see what they can get, and it's really a quality-of-life decision for them."

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