Short-term Rentals Reduce School Funding – Newport This Week

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At the Jan. 16 Town Council meeting, Middletown School Superintendent Rosemarie Kraeger reported that the Middletown High School student census will decline by 30 students. The Middletown Schools website reports that there are 606 enrolled high school students. This is a decline of 4 percent.

According to the Middletown financial office, each student represents an average loss of state funding of $14,000. The 30-student decline means a loss of $420,000 to the town.

HousingWorks RI reports that the housing stock in Middletown is comprised of 7,270 households occupied by year-round residents. The 606 high school students come from 8 percent of the households.


There are now 460 short-term rentals registered in Middletown. When Middletown finally prohibits the presence of short-term rentals in residential parts of town (as it must), that will add 460 new households to the town. Using the same percentage of 8 percent, the 460 new households will add 37 new high school students.

The result will be an additional state payment of $518,000 to the town. However, that is just the beginning.

Again, there are 460 registered short-term rentals in Middletown. If these houses were occupied by year-round residents, they would be paying Rhode Island income taxes. (Short-term rental real estate investors, by contrast, pay little or no state or federal income taxes, but that is a discussion best reserved for another time.)

Taking four income levels, $90,000, $70,000, $50,000 and $30,000, the average annual income tax would be $2,298 per household. The income tax revenue for the state would be over $1,000,000.

So, taking all this together, the town would receive $518,000 from the state. The state would increase its annual tax collections by $1,000,000. That means a net gain for the state of almost $500,000.

In addition, year-round residents will generate sales taxes in excess of those paid by visitors to short-term rentals.

With the elimination of shortterm rentals, over 400 houses will be immediately available for families to rent or buy. Compare this to the time period and uncertainty of the town’s current housing projects.

And consider the immediate downward pressure on housing prices, as well as rents, with these newly available homes.

Lawrence Frank Middletown

This post was originally published on this site

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