Newport’s new tax structure to encourage owner-occupied housing is now finalized, after legislation sponsored by Rep. Lauren H. Carson and Sen. Dawn Euer to authorize it was signed into law.
The legislation (2023-S 1092, 2023-H 6356), which is specific to only Newport, provided the required state authorization of the two-tier residential tax rate that the city has established. Under it, owner-occupied housing will be taxed at a lower rate than non-owner-occupied properties. Buildings of three rental units or less would also qualify for the lower rate if all the units are occupied by year-round residents who have leases that are at least a year long.
The bill passed the General Assembly June 12 and was signed by Gov. Dan McKee June 19.
The two-tier system was a recommendation of the city’s ad hoc Tax Relief Committee, which was created by the City Council to look into ways to provide relief to year-round residents. The council has already adopted an ordinance approving the system for the current tax year and accepted residents’ applications for qualification, but still needed this authorization by the state.
City officials intend to keep the annual total tax levy from all residential properties at its current level, making up the difference in revenue from the lower rate for owner-occupied housing by adopting a higher rate for the non-owner-occupied residential properties.
“As we know, our whole state and Newport especially are deep in an affordable housing crisis, and residential property tax relief is one tool to help address affordability. We applaud our local officials, particularly the Tax Relief Committee, for their work in developing this idea. Vacation rentals and short-term rentals reduce the availability of year-round housing, and while they do provide revenue, they contribute to our city’s housing crisis. Making a distinction between them will give residents the tax relief they need, and encourage property owners to create and maintain the permanent housing we desperately need,” said Senator Euer (D-Dist. 13, Newport, Jamestown).
Said Representative Carson (D-Dist. 75, Newport), “At its core, this legislation is about making housing more affordable in Newport. This is a way to lower the burden on year-round residents and to push back a bit on the trend of our city’s residential properties being bought up and used as short-term rentals. We’re happy to support this creative effort to provide tax relief and make living in our city more affordable and ultimately more accessible to our residents.”
Property owners must apply and provide documentation of their qualification annually to be taxed at the owner-occupied rate, otherwise the property will be taxed at the non-owner-occupied rate. Information and the application are available at cityofnewport.com.
State law already contained a provision allowing Newport to enact a homestead exemption, which is a common tool to provide lower taxes to residents. However, the city never actually put one into place, and doing so now would result in a reduction in the city’s tax collections that would require the city to raise rates, possibly shifting some of the burden onto businesses. The two-tier system sidesteps that problem.
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