Representative Morales introduces tax rebate pilot program to increase affordable rental supply
"As a result of this housing scarcity, combined with a growing state population, renters all across RI are experiencing increasing rents of nearly 15% on an annual basis.”
Rhode Island State Representative David Morales (Democrat, District 7, Providence )testified before the Housing Affordability Commission last Thursday on his legislative proposal that would create a pilot program to administer a “Tax Rebate” to eligible landlords providing a 12-month lease agreement with “affordable monthly rents” to tenants earning 80% or less than the Area Median Income (AMI).
Representative Morales brought his proposal to the Commission per the request of Speaker Joseph Shekarchi (Democrat, District 23, Warwick). The hope is that the Commission members will see enough value in the proposal to work on it and provide some immediate relief to cost-burdened rent-payers.
You can watch Representative Morales' testimony here:
Let me try to break this down:
“...as we are all familiar, our state is in a severe housing crisis, which in large part is due to the lack of housing supply that exists, specifically affordable housing,” said Representative Morales. “As a result of this housing scarcity, combined with a growing state population, renters all across Rhode Island are experiencing increasing rents of nearly 15% on an annual basis.”
This rent increase has led to housing displacement and renters being forced to leave their apartments in search of more affordable rent.
“I have heard of specific cases in my neighborhood where we have had families of five that are forced to downsize and go from a three-bedroom apartment to a two-bedroom apartment because it is more affordable for the household,” said Representative Morales. “To put this into context, the 2022 rental survey conducted by Rhode Island Housing in February 2023 noted that the average rent for a two-bedroom apartment in Rhode Island was $1,996, an increase of 8.7% from the previous year. Providence, our capital city, was reported to have experienced the highest rent increase nationwide, according to Zillow's 2023 fall report. In that, they noted that the average rent in Providence for a two-bedroom apartment went from $1,400 in 2019 to $1,800 in 2022 to $2074 in 2023.
“It is easy to understand why nearly 50% of renters across Rhode Island are considered to be housing cost-burdened, which means that they're spending more than 30% of their monthly income towards rent...
“The need is clear,” continued Representative Morales. “The working people and families of Rhode Island need affordable rents. We need statewide policies that will encourage rents that people can afford without being housing cost-burdened. Currently, however, there are no state or local policies that encourage or require landlords to offer affordable rents.”
Recognizing that rent control is unlikely to be achieved at the state level, Representative Morales is hoping to generate support for a market-based incentive that could help increase the supply of affordable apartments.
“I'm proposing a one-year pilot program that would administer a tax rebate to eligible landlords that are offering a 12-month lease agreement with affordable monthly rents to tenants earning 80% or less of the area median income,” said Representative Morales.
Affordable rent will be determined using HUD and Rhode Island-Massachusetts areas metrics. The effective rates for 2023 would be:
$1,171 and under for a One-Bedroom Unit
$1,409 and under for a Two-Bedroom Unit
$1,697 and under for a Three-Bedroom Unit
$1,873 and under for a Four-Bedroom Unit
$2,048 and under for a Five-Bedroom Unit
To be eligible a tenant must meet the following requirements:
Income-Restricted to households earning 80% or below of the Area Median Income (AMI) and/or a Housing Choice Voucher Program Recipient
Must be living in a legal rental unit with a verifiable residential address (e.g., cannot be a makeshift garage or storage shed)
Cannot be a relative of the landlord.
Landlords must meet the following standards:
Live in the same residential building where they are renting out units to their tenants (owner-occupied)
Follow all existing housing and tenant laws, not limited to Code Enforcement.
Agree to abide by ‘Just-Cause’ eviction policies. In other words, if they want to evict a tenant while being a part of the program, it must be for a “just cause” such as non-payment and/or intentional property damage.
If a tenant is evicted with just cause during enrollment in the program, the Division of Taxation would still be able to provide a prorated rebate to the landlord.
Landlords would be eligible to receive tax rebates of up to $3600 a year.
Affordable 1-Bedroom: $1,200 Rebate
Affordable 2-Bedroom: $1,500 Rebate
Affordable 3-Bedroom and plus: $1,800 Rebate
The program will be run by the Rhode Island Division of Taxation and the one-year pilot would be funded by a $2 million item in the FY2025 budget. Representative Morales projects that the program would directly benefit between 1,000 and 1,600 Rhode Island households.
“I believe that this program can be a cost-effective policy measure that would support our neighbors, our families, and our seniors who are in desperate need of affordable housing options,” said Representative Morales.
“I want to express my appreciation for bringing this to us. We've spent a lot of time over the past couple of years talking about process and production and financing, but have not focused enough on tenants and on trying to provide immediate relief to them,” said Representative June Speakman (Democrat, District 68, Bristol, Warren), who chairs the Housing Affordability Commission. “I appreciate that waiting for buildings to be constructed is frustrating for many of us, so I appreciate this kind of proposal. It's different from what we focused on.”
During questioning, Commission members worried about the size of the rebates being sufficient to cover landlord costs, the overall cost of the program, and the potential for fraud and abuse.
Whether the program has legs or not will become apparent over the coming legislative year.
worth a try, Rep Morales is to be commended for proposing this innovation.
That Providence had the highest rent increase in the nation should be a major headline in the media.
3 factors underlying the high costs:
1 opposition to density almost everywhere, -understandably most residents don't want a lot more people living adjacent, and democracy implies city/town governments pander to that; but the net result is not enough housing, expensive housing, and that built is often paving over the countryside adding to sprawl, congestion, and climate emissions;
2 the Assembly's decision to give property tax relief only on motor vehicles, not on where people live - in comparison to the $2 million Rep Morales asks for, the state budget allocates $235 million for ending the car tax, disproportionately helping those with the most cars and most expensive cars while providing little or no help to low income renters;
3 population growth - underappreciated, but RI had added about 150,000 people in a generation - on the same amount of land supply and demand inevitably drives up prices.