Committee on Ways and Means passes 8 Law ordinance and the BUILD Act 

Providence, RI – Tonight, the Committee on Ways and Means unanimously recommended two ordinances to the full council addressing housing and fair taxation.

The first, Providence 8 Law Qualifications, establishes local rules for how Providence grants the 8% tax treatment within the city. According to sponsors, the 8 Law ordinance would end misuse of a low-income tax treatment by wealthy developers, who use it for largely market rate or luxury properties.

Per state law, low-income housing may receive a special tax rate, with taxes calculated at 8% of their gross scheduled rental income. Because the law lacks clear eligibility standards, that benefit has been applied more broadly than intended, including to luxury apartment buildings with only a limited number of affordable units, and even to commercial portions of mixed-use developments. The Providence 8 Law ordinance would close these loopholes by defining exactly what properties are eligible for the 8% tax rate, ensuring that the low-income tax treatment is actually used for low-income and affordable housing.

“Providence is in a crushing housing crisis, and every tool we use to support affordable housing should actually benefit low-income residents,” said Council President and Act Sponsor Rachel Miller (Ward 13). “This ordinance makes clear that the 8% tax treatment is for low-income housing, not a giveaway for ultrawealthy developers to do with as they please. After the mayor vetoed this effort last year, the Council listened to feedback from the tax assessor, affordable housing partners, and community stakeholders. This reintroduced version reduces administrative burden, aligns eligibility with other low-income housing and taxation standards, and protects existing affordable housing that relies on this tax treatment. I’m grateful to Chair Pichardo and the members of the HOPE committee for advancing a fair, practical ordinance that will help ensure public dollars are used for their intended purpose: keeping Providence affordable for the people who live here.”

In April 2024, the City Council passed by a 13-2 vote an 8 Law ordinance that would have applied the low-income tax treatment only to the restricted units themselves. The ordinance was then vetoed by Mayor Brett Smiley. Rather than just applying to individual units, the new version heard this evening sets affordability thresholds that align with other low-income housing programs. Working closely with affordable housing developers, the sponsors put forth an ordinance that aligns eligibility with the federal Low-Income Housing Tax Credit.

Additionally, existing properties will continue to be eligible as part of a clause that preserves eligibility for property where either:

• at least 20% of residential units are restricted to households earning 80% or less of the area medium income (AMI) or
• at least 40% of residential units are restricted to households earning 120% AMI or less.

The second, the BUILD Act, would eliminate taxation during the construction period of affordable housing development, in a move that sponsors say will reduce one barrier to affordable housing development.

Currently, 8 Law only goes into effect upon occupancy of the rental units, since the tax treatment is determined by rental income. In between the start of construction and occupancy, properties are taxed at the regular rate. This is especially problematic when unexpected delays arise, forcing developers truly committed to building affordable housing units to face tax bills they may not be able to afford.

The BUILD Act will change that by providing a two-year tax stabilization period for eligible affordable development projects before tenants move in and they are taxed at 8% of scheduled rental income. By removing the tax burden from the start, the BUILD Act would clear a difficult barrier to the construction of more affordable housing, especially the deeply affordable housing needed by the lowest income households.

“These laws work together to make sure 8 Law in this city is fair to all,” said Councilwoman and Act sponsor Mary Kay Harris (Ward 11). “No more giving money away to developers and landlords who don’t act in good faith. Instead, we’re going to help legitimate affordable housing developers make their projects possible. Appropriate 8 Law taxation is finally coming to Providence.”

Alongside these efforts to build a more just housing and taxation landscape in the City of Providence, the Council has taken a host of actions to address the housing crisis, including working to increase the supply of affordable housing by allocating tens of millions of dollars in new funding for the Providence Housing Trust Fund, prioritizing inclusionary zoning policies in the 2024 Comprehensive Plan, and passing rent stabilization which was then vetoed by Mayor Smiley. The Council also created a requirement for the Housing Trust Fund to be used strictly for low- and moderate-income housing (below 80% AMI). To learn more about the City Council’s work to combat the housing crisis, visit the Housing Hub.

The BUILD Act and 8 Law ordinances will be considered for the first time by the full council at the June 18th City Council meeting on the third floor of City Hall.