Authors: Michael Briggs - Bureau of Local Payments
The Community Preservation Act (CPA) is a Massachusetts law that allows cities and towns to create a local fund for affordable housing, historic preservation, open space protection, and outdoor recreation projects. Communities raise these funds through a local property tax surcharge of up to 3% and receive a matching grant from a statewide Community Preservation Trust Fund. Over the past five years, there has been a decrease in the state portion of the Community Preservation Trust Fund (CPF) payment in Massachusetts, due primarily to two interconnected factors related to the funding source for the state's Community Preservation Trust Fund:
- Declining Revenue from Real Estate Activity
- Dilution of the State Match Over Time
Let’s examine these two factors in the ensuing discussion below.
Declining Revenue from Real Estate Activity
The state's Community Preservation Trust Fund, which provides the matching payment to local CPA funds, is primarily sourced from surcharges on fees collected for recording various documents at the Registry of Deeds or Land Court. The primary funding mechanism for the Trust Fund is a specific set of surcharges on recorded documents. Currently, this includes a surcharge on deeds and a surcharge on most mortgage documents, including assignments and discharges. These relatively small, transaction-based fees are multiplied across the thousands of filings that occur daily at the Commonwealth's 21 registries.
The revenue to the state trust fund is highly dependent on the volume of real estate transactions, such as home sales and mortgage refinancings. When the real estate market is booming, with high sales volume and a frenzy of refinancings, the cumulative effect of these fees provides a robust source of state revenue.As shown below, there has been aslowdown in the housing market in recent years (particularly since late 2021) that has negatively impacted this revenue source. According to data from The Warren Group, these were recent annual sales:
- 2024: 66,734 sales
- 2023: 65,766 sales
- 2022: 84,044 sales
- 2021: 100,124 sales
- 2020: 92,796 sales
A major factor in this decline has been the Federal Reserve's aggressive monetary tightening, which began in early 2022. The rapid rise in the Federal Funds rate caused mortgage interest rates to double in a short period, effectively locking many existing homeowners into existing mortgages and dramatically decreasing the incentive for refinancing. Simultaneously, the higher borrowing costs significantly reduced buyer affordability, leading to fewer completed sales and, thus, fewer documents being recorded at the Registry of Deeds.
Limited housing inventory and record-high prices also contributed to fewer completed sales, further depressing the volume of documents recorded. The end result has been fewer real estate-related activity, meaning fewer document recordings, which directly leads to lower collections for the state's Community Preservation Trust Fund. This cascading effect results in smaller annual distributions to participating municipalities that we have observed in recent years.
The Dilution of the State Match Over Time
While legislative changes in FY2020 did increase Registry of Deeds recording fees to boost the fund, the long-term trend has been a decrease in the percentage of the local match. When the CPA was signed into law in 2000, the initial intent was for participating communities to receive a match. The historical high-water mark of the match occurred only in the earliest years when fewer than 50 communities participated, highlighting the profound impact of subsequent growth.
The number of cities and towns adopting the CPA has steadily increased over the years (reaching 196 communities by 2025, with several more joining in 2026).Because the state trust fund's revenue (even with the fee increase) has historically not grown as quickly as the total amount of local surcharge revenue collected by all participating communities, the available state money must be divided among more communities.
Furthermore, the state’s financial contribution is distributed in a tiered system designed to prioritize equity. The "first-round" distribution provides the largest percentage match to all communities based on their local collections. If funds remain, a smaller "second and third-round" distribution may occur, often providing a higher percentage match to communities with lower local tax bases.
The end result is a decrease in the size of the state match, as a percentage of the total local surcharge, from a 100% match in the early years of the program to approximately an 18% base match in 2024.
Summary and Implications
The contraction of the state match can have tangible effects on local planning and project execution. A reduction in anticipated state funds means communities may have to scale back the scope of planned open space acquisitions, delay essential historic building restorations, or reduce the number of units in a planned affordable housing development. The unpredictability of the annual state distribution, driven by the volatile real estate market, introduces a layer of risk that complicates long-term capital planning for local CPA committees.
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| Date published: | November 6, 2025 |
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