EDITORIAL: If You Think It Is Expensive to Rent or Own in Providence, Get Ready for More Pain
Monday, May 20, 2024
If you thought a monthly rent of $2,500 was not painful enough, get ready to double down on the painkillers.
Providence and state leaders better start paying attention to the impact of the downward spiral of the value of commercial real estate.
A move by Rhode Island Governor Dan McKee is about to make things even worse if approved by the General Assembly.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTOffice buildings represent five of the top 20 real estate taxpayers in Providence, and the top 20 taxpayers represent nearly 20% of the city's total tax levy.
As GoLocal unveiled on Saturday, the value of downtown's preeminent Class A office building has cratered.
100 Westminster, the gleaming glass tower owned by Paolino Properties, was valued at $65.3 million in an appraisal in 2013.
Now, the building’s value has been dramatically downgraded to $38.3 million — a decrease of more than 40%.
The occupancy at 100 Westminster pre-pandemic was nearly 100%; it is now on a path toward 70% — or lower.
That is just the beginning of what will be a major recalibration of the tax burden.
As commercial buildings lose value, their taxes will decline, and residential properties will be forced to take up the burden.
Rents are gobbling up the middle class's income, stagnating their spending in other sectors. With interest rates at 7%, the affordability of homeownership is becoming more and more distant for more and more of the population.
The median price of a single-family in Rhode Island is now $463,000.
On Providence’s East Side, homes that were once affordable are now nearly all priced at $1 million, and only cash buyers survive.
A collapse of commercial real estate values will increase taxes for residential homeowners and renters.
Add to the pain the horrific deal between Mayor Brett Smiley letting Brown University off the hook for any real contribution, which further exacerbates the burden on homeowners and renters. The non-profit, non-taxpayer, continues to avoid its responsibility.
Yale pays New Haven more than $22 million a year, and under Smiley’s deal, Brown pays just $8.7 million a year. Smiley’s excuse as to why Brown is barely paying a tad more than a third of what Yale pays is laughable — Yale owns more raw land than Brown does.
So to add insult to injury, McKee wants to take a leading state tenant — the Rhode Island Department of Environmental Management — out of the historic Foundry complex in Providence and, get this, buy a commercial building at twice its assessed value to move more workers out of the capital city.
The scheme will create another office hole in Providence. The Foundry is already marketing 230,000 square feet of office vacant office space.
McKee is seeking $33.67 million to fund the purchase of the Citizens Bank building — a building the City of East Providence assessed at $16.94 million.
So, at a time when office buildings are dropping in value, McKee wants to pay double the assessed value.
While the Governor claims to have little money to help support small businesses impacted by the failure of his administration to maintain and inspect bridges properly, he is going to waste more than $16 million as a payment tribute to Citizens Bank.
McKee continues to be oblivious about how one action has implications — the law of unintended consequences.
There are poorly conceived policies and, in this case, fiscally reckless strategies.
The McKee plan is blundering and will only further adversely impact the value of commercial real estate in Providence, thus making both renting and buying even less affordable.
An editorial is the opinion of a publication — specifically, the ownership.
While based on facts and news reporting, it is an opinion intended to discuss critical community issues. Often, the opinion is written with the intention of positive change.
GoLocal editorials have sparked conversations, change, and even the naming of a bridge.
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