Dear Mayor Bova and Council Members:
I represent the Rhode Island Association of REALTORS® (RIAR ), which is comprised of nearly 5,000 real estate brokers, salespeople, appraisers, and affiliated professionals. RIAR opposes the petition to the Rhode Island General Assembly that would amend Rhode Island General Law § 44-25-1 and authorize the City of Newport to levy an additional tax upon real estate property transfers. This proposal would be harmful to the Newport’s housing market and would have an adverse impact on the local economy.
Does Newport want to be known as the only municipality in Rhode Island to impose a tax on prospective homebuyers?
RIAR and our members are concerned that levying a new transfer tax on real estate transactions places a larger burden on a small percentage of Newport’s population relative to broader based taxes. At a time when inventory levels are shrinking in each Rhode Island municipality, residents look to our local and state leaders to reduce the financial burdens that have hindered our state from growing. According to a recent analysis of the U.S. Census Bureau, Rhode Island’s population continues to decrease, which will result in less representation in the United States House of Representatives by 2023. Asking prospective homebuyers to pay an additional tax to fund local government speaks to our state’s inability to grow its population. As a result, the transfer tax proposal will have a negative impact on housing purchases and therefore economic development.
Purchasing a home is considered the biggest financial transaction a family will make in their lifetime. Increased closing costs on the transfer of existing residential property are likely to reduce the ability of new and current homebuyers to purchase a home. Furthermore, the proposed regressive tax will be higher for middle class homeowners, while reducing the property values of homes throughout Newport. RIAR is concerned that city officials will be forced to raise property taxes, since the City will have to make up the loss in revenue as an unintended consequence of this proposal.
Currently, the low inventory levels referenced in this testimony continues to move prices upwards in Rhode Island’s single-family home market while demand continues to increase. According to the State-Wide Multiple Listing Service, Inc. Newport County has witnessed a 32 percent decrease in single-family home sales when compared to February 2018 year-over-year. Moreover, Newport specific real estate transactions decreased by 59 percent in February 2019 when compared to 2018 sales. As you are aware, Rhode Island ranks at the bottom of every list related to exorbitant property taxes when comparing similarly sized municipalities. Should the Newport City Council send a message to the rest of the country that our city is not a welcoming place to purchase a home, while validating our poor national standing?
According to the National Association of REALTORS® the Rhode Island real estate industry accounted for nearly 20% of the gross state product in 2017.3 Moreover, Rhode Island’s State-Wide Multiple Listing Service, Inc facilitated $5.1 billion in real estate transactions last year (2018), while Newport County accounted for $700 million in transactions (Newport proper $285 million). RIAR appreciates measures approved by the General Assembly and Governor Raimondo who, in recent years, has worked hard to improve our economy and national standing. However, that hard work would be rolled back at the expense of Rhode Island’s real estate industry if this proposal is approved. Levying a real estate tax on homebuyers is a poor choice for the City Council to consider, as this new revenue stream is an unpredictable, regressive tax that will certainly adversely impact our local economy here in Newport and throughout the State of Rhode Island.
For these reasons, the Rhode Island Association of REALTORS® respectfully urges you to oppose the proposed resolution. Thank you for your consideration.
Sincerely,
David A. Salvatore
Government Affairs Director
