As more communities develop mixed-use residential developments, housing advocates say that live-work tax breaks, such as a tax exemption recently implemented for owner-occupied business properties in East Providence, are becoming increasingly necessary to meet housing affordability goals.
The recently enacted “live/work” tax exemption in East Providence allows businesses that are also the residences of their owners – an arrangement that would mean the property would be taxed entirely at the commercial rate – to be split into commercial and residentially taxed portions.
City officials worked with nonprofit developer NeighborWorks Blackstone River Valley to create the initiative around an affordable housing development near City Hall called Ivy Place, which is the only East Providence property that currently qualifies for the exemption.
But city officials hope to establish more developments that benefit from the policy, according to Mayor Roberto L. DaSilva, who says the lack of affordable homes is one of the most frequently raised concerns from residents.
“What we hope this does is that it opens up the door to more people wanting to [create] these types of developments, where you give people who are income-restricted the ability to increase their income by owning a business,” he said."
The city has a commercial rate of $20.63 per $1,000 of value, and a residential rate of $13.07 per $1,000.
Eligible properties must be affordable housing deed-restricted, meaning they must preserve the occupancy or resell the unit to serve low- to moderate-income households for at least 30 years. Successful applicants also qualify for any additional residential exemptions the city offers.
Rhode Island Housing and Mortgage Finance Corp. Executive Director Carol Ventura, who supported the city in establishing the policy, called the break a “very creative tax exemption and “just another example of the city’s willingness to design housing options.”
The concept isn’t unheard of in Rhode Island, Ventura said. In downtown Providence, nonprofit community arts organization AS220 offers 14 “Live + Work” studios. The initiative, which goes back three decades, provides income-restricted housing at affordable rates for resident-artists.
But the most common method used to make living spaces more affordable is the 8% tax structure, she said. Instead of paying the normal tax based on the value of a property, a qualifying property owner pays a tax equal to 8% of the rent collected the previous year.
Advocates say that the system lowers and stabilizes taxes for building that provide affordable housing.
Ventura is encouraged by a broader "change in culture or mindset of community leaders” when it comes to affordable housing and the innovative approaches to providing more of it.
In towns where affordable housing was once stigmatized, more people “now view it as a positive impact on communities,” she said, “being able to provide housing for all the residents of a city or town.”
Melina Lodge, executive director of the Housing Network of Rhode Island, said that the East Providence tax break strikes her as “a practical solution” to maintaining an area zoned for affordable housing rather than a dramatic reform.
“I don’t think it’s revolutionary,” she said. “I think it’s a matter of what a municipality has in its arsenal of tools.
But “I think it was a necessary step,” she said, “and I think that it’s good that it happened.”
