An ordinance amendment that will provide a scaling, temporary tax exemption on increased home value assessment due to the construction of an accessory dwelling unit (ADU) was passed in a 4-1 vote by the East Providence City Council on Tuesday night, July 7.

The amendment, according to its written purpose, is intended to provide more incentive for people to build ADUs on their property and increase housing stock within the city.

“We want to maintain Townies living in East Providence,” said council vice president Frank Rego when he first introduced the amendment to the city’s existing laws on situations eligible for tax stabilization at the council’s June 16 meeting. “This is a way of Townies taking care of Townies.”

The tax stabilization measure would provide the opportunity for those who build an ADU to receive a five-year period of tax relief from the additional value that the ADU would add to their home’s assessment, starting at a 100% exemption in the first year and scaling down 20% each year until the owner pays for the full, assessed value in the sixth and all subsequent years.

The exemption only applies to the assessed value added by the ADU. For example, if a homeowner of a $500,000 home constructs an ADU that adds $100,000 to the property’s total assessed value, the exemption would only cover that $100,000 in new value.

The exemption must be applied for within 90 days of receiving a certificate of occupancy from the city for the ADU, and is available only to homeowners who live on the property where the ADU is located, and who receive the city’s homestead exemption. The fee to apply for the exemption is $100, and the exemption would only be granted after the city performs an inspection to determine the assessed value added by the ADU.

State law mandates that ADUs built by-right must not be used for short-term rentals.

Rego, explaining the amendment at the June 16 meeting, said that the measure would assist older East Providence residents looking to downsize by encouraging the continued building of more ADUs, as well as new homeowners who want to build an ADU to earn rent money to subsidize their mortgage, without requiring more open land to be developed.

“I have done a lot of research on this. I like to keep as much green as possible…but we can’t live in 1980 anymore,” Rego said. “What population do we need to help? Being in sales marketing, I look at, what’s our target audience? It’s the over-55, and it’s also some first-time homeowners.”

During deliberation prior to its first passage back in June, the council added an amendment clarifying that the tax stabilization would not transfer to a new owner if the property and respective ADU was sold within that five-year stabilization period. That amendment passed with the ordinance on Tuesday night.

Rego said that the amendment was supplemental to action the council took last year to reduce the total square footage required for a residential property owner to build an ADU by right — which was originally set at 20,000 square feet by a new state law passed last year — to just 5,000 square feet.

“This is a way of helping with the housing crisis in the city, the state, without having to build on land that we want to keep the city as green as possible,” Rego said on Tuesday evening.

Ward 2 Councilwoman Anna Sousa agreed during the June meeting that the measure could be a tool to help residents stay in their homes and provide new forms of housing for family members or whoever may need a place to live.

“Whether you’re repairing a basement and creating an ADU as an in-law, or you have enough space on your property to put a structure up, or you’re converting a standing structure, it’s a way to help someone who is a resident in the city,” she said. “I think it’s a win for a lot of residents in the city to have some type of relief, because construction is very expensive and building an ADU or remodeling a structure you currently have is not going to be something that’s cheap to begin with.”

The measure became effective immediately upon its passage. Ward 4 Councilman Rick Lawson was the lone vote against the measure.