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STATE HOUSE – Newport will be able to establish a residential tax structure that encourages owner-occupied housing under legislation sponsored by Sen. Dawn Euer and approved by the Senate today.

The legislation (2022-S 2898A), which is specific to only Newport, allows the city to establish two residential tax rates: one for owner-occupied housing, and one for housing that is not owner-occupied. The city intends to set the rate lower for owner-occupied and year-round rental properties.

The bill was requested by the Newport City Council pursuant to a recommendation by the city’s ad hoc Tax Relief Committee, which was created by the council to look into ways to provide relief to year-round residents.

“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. I applaud our local officials, particularly the Tax Relief Committee, for their work in developing this idea. Vacation rentals and short-term rentals take away from 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).

State law already contains 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.

City officials intend to keep the annual total tax levy from all residential properties at its current level – about $79 million – but adopt a lower tax rate residential properties that qualify as owner-occupied. It would then make up the difference in revenue by adopting a higher rate for the non-owner-occupied residential properties.

The legislation is enabling, meaning the City Council would also have to adopt ordinances and regulations to actually carry out the idea. The plan being discussed by city officials would require homeowners to apply annually to classify their home as owner-occupied.

The legislation now heads to the House of Representatives, which has approved companion legislation (2022-H 8182) sponsored by Rep. Lauren H. Carson (D-Dist. 75, Newport).