Cape Cod Considers 2% Fee on Luxury Home Sales—Raising $56 Million for ‘Missing Middle’ Housing

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Lawmakers on Massachusetts’ Cape Cod are considering an increasingly popular solution to solve the area’s housing crunch: a tax on the rich. The newly proposed real estate transfer fee would tack on a 2% surcharge on luxury home sales over $2 million.

The proposal, which is currently before the Barnstable County Assembly of Delegates, could generate up to $56 million a year for affordable and year-round housing—a revenue stream local leaders say is desperately needed as prices spiral beyond reach.

The proposal comes amid a string of similar levies on the East Coast, where Rhode Island and New Jersey have imposed a “mansion” or “Taylor Swift tax” on sales of luxury homes to offset funding shortfalls and boost affordable housing.

The housing working group of Barnstable—a county that encompasses all of Cape Cod—has unanimously backed the idea. Rob Brennan, chief legal officer at the nonprofit organization Housing Assistance, went so far as to say: “This is no longer a cyclical shortage—it’s an existential crisis. … Without a permanent, predictable source of funding, we cannot support housing that working Cape Codders can actually afford.”

For local families, the takeaway is clear: If the fee passes, it won’t raise your tax bills, but it could shape whether your children, coworkers, and neighbors can keep calling the Cape home.

Why this fee, why now

The push for change stems from Barnstable County’s April declaration of a housing crisis, a move that formally recognizes Cape Cod’s affordability isn’t just a problem but a full-blown emergency.

Barnstable County Assembly of Delegates Deputy Speaker Dan Gessen of Falmouth, who introduced the resolution, framed it starkly in a press release: “This place we call home—the one so many of us were lucky to be born into or found and fell in love with—is slipping through our fingers. … 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.”

The pandemic only sharpened that reality. “Home prices for people that live on Cape Cod skyrocketed by more than 43%,” Gessen recently told CapeCod.com.

“If you didn’t inherit a house, or if you are not independently wealthy, [living here] is nearly impossible, and so we’re losing the very fabric of our communities,” he continued.

The message is clear: The Cape is at a breaking point.

As Gessen concluded in the press release for the crisis declaration, “This resolution does not solve the crisis on its own, but it does one thing that those in power often struggle to do: admit that we have a problem, and commit to identifying real, actionable solutions.”

How the 2% transfer fee would work

The transfer fee is the first of those real, actionable solutions suggested by local lawmakers. It’s designed to target only the top end of the Cape Cod housing market and would apply exclusively to sales over $2 million.

The model comes from the Cape Cod and Islands Water Protection Fund, which has raised hundreds of millions of dollars for wastewater projects through a small surcharge on short-term rentals. In the case of the transfer tax, the same approach would fund year-round and workforce housing.

Each town would decide whether to participate with a simple town meeting vote. If a town opts in, the county would collect the fee and send the revenue straight into that town’s affordable housing trust.

As Gessen put it: “A luxury real estate transfer fee … is just a common sense way to capture some of that wealth that is honestly squeezing folks out of our communities.”

Who supports it

The proposal has drawn a wide swath of support, spanning business leaders, housing advocates, and county officials, in an unusually broad coalition for a tax proposal.

Housing groups argue the money would finally give towns the resources to move plans off paper: securing deed restrictions to preserve year-round homes, building housing for municipal workers like firefighters and teachers, and offering assistance to first-time buyers who are otherwise locked out of the market.

Supporters also point to lessons from the state’s millionaires tax, which adds a 4% levy on taxable income over $1 million.

“The biggest fear … is if you start taxing wealthy individuals, they’re going to leave. But the reality is, there are more millionaires now in Massachusetts than there were when that tax was introduced,” Gessen explains.

The Cape Cod Chamber of Commerce is on board too, warning that the region’s economy is already buckling under the weight of the housing crisis. CEO Paul Niedzwiecki said: “Nearly 30% of the region’s workforce now commutes to the Cape each day. We are going to turn into something very different if we don’t make aggressive and transformative moves to protect the middle class.”

What critics say

Not everyone is likely to embrace the proposal. Skeptics argue that a new 2% fee on the sales of multimillion-dollar properties could discourage high-end buyers or dampen the luxury real estate market that has helped fuel the Cape’s economy.

There are also worries about uneven adoption. Because towns can decide individually whether to opt in, some fear communities may compete with one another—pitting municipalities that pass the fee against those that don’t, potentially shifting sales activity across town lines.

Pushback from the real estate industry is expected as the hearings move forward, with brokers and developers likely to argue that any additional costs could slow investment or complicate transactions.

A national pattern

The Cape isn’t alone in targeting luxury real estate to pay for more housing. From Rhode Island to Montana, lawmakers are increasingly looking at second homes and multimillion-dollar properties as a funding source for affordability.

Rhode Island’s “Taylor Swift Tax” kicks in next summer, slapping a surcharge on non-primary residences worth over $1 million. For Swift’s Watch Hill mansion, that means an extra $136,000 a year in property taxes.

Montana has taken a different approach. A statewide overhaul shifts the tax burden away from primary homes and onto second homes and short-term rentals with a 1.9% flat rate. Lawmakers there hope it not only boosts revenue but also encourages absentee owners to sell, injecting scarce inventory back into the market.

Connecticut and Washington have joined the trend with policies targeting property transfers and high-income investors. And across the board, the justification is the same: Luxury markets are thriving while ordinary families are being squeezed.

Cape Cod’s proposal slots neatly into that national story. “There’s no way out of this crisis without bold, systemic solutions,” Brennan said. “The $2,000,000 home becoming $2,040,000 doesn’t stop second-home buyers.”

What’s next

The proposal now heads into the public arena. Barnstable County will hold hearings on Aug. 20 and Sept. 3 at the Mary Pat Flynn Conference Center in Barnstable. Residents can also log in via Teams to testify remotely.

“If you see [the housing crisis] in your everyday life, if you’re feeling the impact of it, I would encourage people to come out and speak out for these common sense solutions,” Gessen says.

After the hearings, the Assembly of Delegates will decide whether to advance the transfer fee into formal legislation—a step that could reshape how Cape Cod funds its housing future.