New Legislation Would Raise Taxes On Some Low-Income Housing in RI

Friday, May 24, 2013


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New legislation would nearly double taxes on qualifed low-income housing properties.

A bill designed to increase taxes for qualified, low-income housing from 8% to 15% has provoked resistance from some housing advocates, who testified when the bill was taken up by the RI House Finance committee earlier this week.

Representative Lisa Baldelli Hunt (D-Woonsocket), a co-sponsor of the bill (H 5404), made the case before the committee and argued that many of these properties are owned by LLCs with guaranteed income from rent but who do not actually reside or contribute to the communities in which the properties exist.

“Back in 1995 language was added to the law that allowed for certain housing in distressed communities to qualify for 8% tax rate,” the Representative said. “Times have changed since then.”

The bill’s co-sponsor and fellow Woonsocket Representative, Stephen Casey, backed up Baldelli Hunt. “All the legislation for Woonsocket is at the request of the Woonsocket Budget Commission,” Casey told GoLocal. When asked whether he thought increased tax burden on property owners may be transferred to tenants who may already be struggling financially, Casey said, “Yes. There is a potential for that to happen.” Casey went on to explain that this was just one of a number of unfortunate taxes that are necessary to meet the budgetary needs of the city. In addition to the proposed increase in low income housing taxes, Casey mentioned increased car and individual homeowner taxes. “It was a tough decision to make, but we’ve tried to make it as palatable as possible. Nobody wants to hear their taxes are going up.”

Critics respond

Chris Hannifan, Executive Director of the Housing Network of Rhode Island, who testified in opposition to the proposed legislation, said, “Our members have produced 3,000 plus units. 8% passed because many below-market rental units are not allowed to raise rent.” She went on to say she was very concerned this measure would destabilize units across the state.

Peter Schafer of the League of Cities and Towns offered lukewarm support. Schafer testified he would support the measure if and when “these organizations meet qualifying elements.” He wanted data from the organizations providing assistance based living to provide data showing that they were not making profits from the tax breaks.

Amy Rainone, Director of Intergovernmental Relations at Rhode Island Housing explained that the law was passed in 1995 due to a number of lawsuits pertaining to taxing “deed restricted properties” versus “market rate properties.” Rainone said, “To arbitrarily change 8% to 15% would go against Rhode Island law.” She said that this isn’t a property that can be compared to “market rate” properties due to income restrictions of tenants and deed restrictions of owners.

Affordable housing

Christian Caldarone, Deputy Director of NeighborWorks® Blackstone River Valley told GoLocal, “A statewide economic impact study of the Building Homes Rhode Island (BHRI) program was recently conducted by HousingWorks RI and the results are clear. Public investment in affordable workforce homes has a tangible, positive impact on Rhode Island’s economy. Furthermore, there is a shortage of affordable housing units in Rhode Island, which is made worse because the great recession has actually increased the housing cost burden on the average family.”

According to Caldarone, the rent on affordable housing units (that may be affected by the proposed legislation should it become law) is capped by the government. Applicants must meet income eligibility guidelines in order to qualify for housing. By insuring that residents who move into affordable units have enough income for housing costs and other necessities such as food and clothing, the industry supports a family's ability to fully participate in their local economy.

Speaking specifically to the organization for which he works, Caldarone said, “In addition, the government grants that allow us to develop our housing come with many other limiting conditions. For instance, our units have deed restrictions that range from 15-50 years. This affordability term-limits a developer's ability to build reserves for the long-term preservation of our units and build any cushion for financial contingencies. The consequence of this virtual doubling of taxes would be dire as it would deplete important organizational resources that would be put back into the properties and community anyway and could result in driving many nonprofit housing developers out of business.”

The burden on municipalities

The final word by Representative Baldelli Hunt, in response to a request by Representative Larry Valencia, Acting Chair of the House Committee on Finance, was that her city of Woonsocket would net approximately $245,000 with an increase of 8% to 15% in taxation of these properties. She said, “This is a business. The reality is the municipalities can not afford to bear the brunt of these tax breaks any longer.”

Representative Casey said, “We made a commitment to provide (the Woonsocket Budget Commission) with totals based on a five year plan. I was a tough decision, but if you just make decisions based on being reelected, often it’s the wrong decision.” 


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