When Gov. Gina Raimondo proposed new taxes on Rhode Island real estate, the plan threw a significant wrench in the state’s choppy housing recovery.
In order to cover rising expenses in the state budget, the governor called for taxing unoccupied homes that were worth more than $1 million to the tune of $2.50 for every $1,000 of assessed value. This tax-the-rich strategy might have seemed fairly innocuous at the time, but it sparked a united protest from the state’s real estate community which vigorously fought against a new tax.
For the past two months, though, the backlash was intense. People from all classes and industries came out against the measure – not just because it was unfair to the state’s affluent population who own gorgeous summer homes along Rhode Island’s majestic coastline, but also the middle class who depend on high-end homeowners for work and feared the precedent that a state property tax would establish.
The Rhode Island Association of Realtors was front and center, coming out against the proposal with op-eds and petition drives. Lila Delman Real Estate’s President, Melanie Delman, played a leadership role as a longtime leader in the Rhode Island luxury real estate market.
“It's difficult to understand the logic in imposing new state level taxes on property owners just as the economically important housing sector begins to recover,” Delman said. “Many years ago, administrators took away the Rhode Island Historic Preservation Tax Credit and those who supported the developments, the suppliers and builders, were left jobless. This would have had the same effect.”
Now, with just a few more weeks before the state adopts its budget in mid-June, it looks like the outcry was worth it. This week (May 11), Gov. Raimondo recently said that new estimates are showing that there will be an extra $173 million projected – enough funds in the budget to cover a previously forecasted shortfall. House Speaker Nicholas Mattiello also had come out against the measure leaving it with little to no chance of actually being passed. However, in terms of the market psyche and competition with neighboring states that do not have state property taxes, Delman warns that some of the damage has already been done.
“Being an important second home and tourist destination is significant to Rhode Island's economy,” Delman said. “We continually work to position ourselves against the more recognized Hamptons, Cape Cod, Nantucket and Martha’s Vineyard. The measures to increase taxes on second homes and rentals certainly would do harm to furthering that effort.”
Meanwhile, the spring market in Rhode Island has just kicked in and buyers are turning out in force to buy properties that are competitively priced. Delman said she expects this will trickle up into the luxury markets shortly, especially once the tax is removed from the equation.
“All signs point to an improved market in 2015 and we are glad to see the momentum gained in the housing market will not be diminished by this tax. The added taxation would have completely deterred second home and rental buyers from choosing Rhode Island. I for one am thankful that Governor Raimondo has reconsidered this proposition.”
For further information please contact Jeni Pardo de Zela, Marketing Director at Lila Delman Real Estate International on 401-848-2101 or JPardoDeZela@liladelman.com