We burden Latinos (and other traditionally underserved communities) with expensive housing because of the widespread practice of using homestead exemptions in Rhode Island. By lowering the real estate tax rate, typically by 50%, for owner occupied housing, we dramatically inflate the tax rate paid by Rhode Islanders who are renting.
Echoing a newly filed lawsuit in New York City over discriminatory real estate tax regimes, this new report emphasizes the racist incentives built into our property tax.
Homestead exemptions are built on the belief that renters are non-permanent residents of communities, care less for the properties they occupy and neighborhoods they live in, and are worse additions than homeowners. Frankly, it is an anti-White flight measure meant to assure people that only those with the means to purchase and the intent to stay will join their neighborhoods. Wealthy, largely White, property owners see homestead exemptions as fighting an influx of “slum lords”, which is basically the perception of anyone who purchases a home or builds apartments and rents them out.
Rather than encouraging denser communities with higher land utilization and more housing to reduce the cost of living in dignity, we subsidize low value (per acre) construction that maintain inflated housing costs.
Full disclosure: I own a condo in Providence and receive a 50% discount on my taxes. In fact, living in a condo Downcity, my home value is depressed because of the limited ways that I can use it. I could rent my current condo at market rate and lose money because of the doubling in taxes that I would endure versus turning a small monthly profit at the same rent with higher taxes. The flexibility to use my property as my own residence or as a rental unit more than pays for higher taxes.
So while I do have personal reasons to support removing the homestead exemption, even if I lived in a single family home on the East Side that was not attractive as a rental property, I would still think this situation is absurd. Homeowners’ taxes should easily be 20% higher to tax renters 30% less. Maybe some of our hulking, vacant infrastructure could be more viably converted into housing stock and lower the cost for all residents. Maybe we could even see denser development because there will actually be a market for renters at the monthly rates that would need to be charged to recuperate expenses. At least the rent wouldn’t be so damn high for too many people of color and people living in or near poverty.