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Massachusetts liquor-license quotas drive prices as high as $600,000, state report finds
A state auditor’s report says population-based liquor-license caps leave more than two-thirds of Massachusetts residents in communities where licenses are artificially limited. It recommends ending the quotas and giving cities and towns control, a change that could reshape a costly system for restaurants and other local businesses.
Massachusetts’ population-based limits on liquor licenses are creating artificial scarcity and pushing prices beyond the reach of some businesses, according to a new report from State Auditor Diana DiZoglio’s office.
The 181-page report, released this week, says more than two-thirds of Bay State residents live in communities where the number of licenses is constrained by state quotas. The caps do not account for seasonal population swings or higher demand in busy areas, including Boston, Brookline and Salem.
Prices reflect the uneven supply. A license can cost as much as $600,000 in Boston and $175,000 in Somerville, while one in neighboring Cambridge can cost about $2,500, the report says. Cambridge is among 26 communities that opted out of the state quotas during a window from 1978 to 1984. Those local-control communities have issued twice as many liquor licenses per capita as municipalities still subject to the caps.
DiZoglio recommends repealing the state quota system and allowing cities and towns to decide how many licenses to issue. That would put municipalities on “equal footing” to support local businesses and activate their neighborhoods, the report says.
“We need a liquor licensing system that is transparent, fair and gives all of our local businesses a shot at success,” DiZoglio said in a statement.
But changing the rules could affect businesses that have paid large sums for licenses they now consider valuable assets. Steve Clark, president of the Massachusetts Restaurant Association, said the state would need a transition plan rather than abruptly ending the current system. He suggested a license buyback program as one possibility.
The proposal is already part of the debate on Beacon Hill. Language to eliminate population-based quotas was included in the Senate version of an economic development bill that remains under negotiation. Gov. Maura Healey has also supported removing the caps, while some House leaders have raised concerns about giving mayors full control over licensing.
The report’s findings underscore how a rule intended to limit licenses based on population can produce very different costs and opportunities from one community to the next. Any move to local control would leave cities and towns with greater power over how alcohol-serving businesses fit into their neighborhoods, while lawmakers would still need to address the value restaurant owners have built around existing licenses.