PROVIDENCE – It’s no secret that a blistering housing market has driven property values through the roof.
But some Providence residents were surprised by what that meant for their own homes. Property values citywide soared, in some cases nearly doubling, under the statistical revaluation, which was completed in 2021, according to data shared by the city.
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Mayor Jorge O. Elorza sought to offset the higher property values by proposing major cuts to residential and commercial tax rates as part of his fiscal 2023 budget, which is also required to keep the overall increase in the city tax levy under the state’s 4% cap. Even with the proposed tax cuts, many property owners are still poised to bigger tax bills, particularly multi-family homeowners and landlords who don’t live in their homes, according to city analysis shared with Providence Business News.
Meanwhile, other other cities and towns have sought to delay their own triennial evaluations, hoping to protect taxpayers from suffering the tax consequences of an overinflated housing market that economists project will cool off by the end of the year.
Of the 18 municipalities due to update or completely redo their property evaluations in 2021 – which would be applied this year – five have submitted requests to the R.I. General Assembly to postpone their revaluations, according to information provided by the R.I. League of Cities and Towns. (The legislature has to give the go-ahead for a municipality to delay its property revaluation).
Among them is Providence’s neighbor, East Providence. The city forked over the $178,000 to pay for the property revelation update in 2021, as planned, but after seeing the results, wants a do-over this year.
Mayor Bob DaSilva explained that the low volume of sales and inflated figures gave the company that conducts the statistical revaluation little to work with, leading to what he believes are overly high valuations.
“We don’t want to stock residents for the next three years with inflated valuations, when we hope the market will stabilize to more normal numbers” he said.
DaSilva also highlighted the economic burden that higher valuations, and in turn, higher tax bills, would pose for city residents who have already faced financial hardships during the pandemic.
Warwick Mayor Frank Picozzi expressed a similar sentiment in his decision to delay the city’s property revaluation
“People are struggling,” he said. “Gas is over $4 a gallon, groceries are costing more. This has been a hard year for people.”
Higher property values themselves aren’t the problem. In fact, many home and business owners want their property values to increase, especially if they plan to sell.
“Higher property values is one the healthiest objective signs of economic growth,” Elorza said.
The issue is when higher property values translate to bigger tax bills.
In Providence, even with Elorza’s proposed tax cuts, 87% of residential properties that don’t qualify for the city’s homestead exemption – meaning the owners don’t live there – would see their tax bills rise in the coming fiscal year. And while nearly two-thirds of owner-occupied single-family homes would pay less taxes, a majority of multi-family homes, even with owners living there, would also have larger tax bills.
While critics have suggested that Elorza’s plan could increase the already-high renting market, he wasn’t convinced that increasing landlord’s taxes would cause rents to skyrocket.
“On the whole, landlords charge what the market will bear,” he said, pointing out that city rents have gone up significantly in the last three years even without a revolution or tax rate hike that would have increased their tax bills. “Over the long term, landlords will have to bring rent to whatever the right market level will be.”
Elorza’s proposal to increase the tax break to property owners who live in their homes also helps fulfill his goal of preventing existing city residents from being priced out of their longtime homes, he said.
One difference between the capital city and nearly all other municipalities is that Providence’s commercial and residential tax rates aren’t tied together. Under state law, all cities and towns except Providence and Glocester cannot increase their commercial rate to more than twice the residential rate. That makes it difficult to tailor their tax policies to the most recent market changes, which could prompt some cities and towns to want to postpone their revaluations, said Jordan Day, interim executive director for the R.I. League of Cities and Towns.
Neither Picozzi nor DaSilva have introduced proposed fiscal 2023 tax rates for their cities.
Meanwhile, the city of Woonsocket is forging ahead with its own property revaluation after having pushed it back from 2020 to 2021. Mayor Lisa Baldelli-Hunt wasn’t concerned over the increase in property values, which she thought were accurate and would stay high for at least the next three years.
Rather, the city postponed its initial revaluation because of the logistics involved. The initial 2020 timeline to conduct the revaluation coincided with the height of the pandemic, making it difficult for the consultant they hired to run the numbers and review them with adequate time, she said.
The town of New Shoreham has also asked to delay its property revaluation for pandemic reasons. Unlike the statistical update that municipalities conduct in two out of every three revaluations, New Shoreham was due in 2021 for what’s known as a “full revaluation” that involves entering and inspecting each individual property. Lingering pandemic fears made that difficult to do in 2021, with the island essentially shut down to outside visitors for part of that time, said Town Manager Maryanne Crawford.
Most of the Rhode Island municipal leaders who have asked to delay property revaluations said it was the first time in their memory – or perhaps ever – that their city or town had not stuck to the regular every-three-year schedule. But the “unprecedented” move makes sense after an equally unprecedented chain of world health and economic events, said DaSilva.
“To add strain to an inflated housing market doesn’t seem right,” he said. “It’s worth waiting.”
Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com.
