EXCLUSIVE: Providence Has Highest Rents in RI
Thursday, October 31, 2013
A Providence resident who earns $38,922 annually must pay 35 percent of his income to rent a $1,126-a-month two-bedroom apartment, according to the data provided by the Providence Apartment Association. No other community comes close to such a high rate of unaffordability. The second highest rents were in Central Falls, where median income earners pay 32 percent of their wages towards their rent. Next were Woonsocket and Pawtucket, both at an income-to-rent ratio of 31 percent.
Generally, housing is defined as “affordable” if it costs no more than 30 percent of household income.
The new data challenges a common perception—fueled, in part, by the annual HousingWorks RI fact book—that rents in Providence are within the limits of affordability.
The difference arises from whose income is counted. HousingWorks RI looks at the incomes of those who work in a community and ask if they can afford to live there. But, for a city like Providence, that includes many high earners who commute to work in the city but live in suburbs. Instead, the Providence Apartment Association says it’s better to focus on the incomes of those who live in a community.
“When income of residents in the city of Providence is considered, Providence ranks last in affordability. Providence [residents] pay approximately 35 percent of their income towards rental housing. This is the highest in the state,” the association said in a statement provided by board member Keith Fernandes, a local investor.
The association lays the blame squarely in one place: rising property tax rates.
Councilmen call for change in property taxes
“I agree 100 percent,” said Providence city Councilman Michael Correia. “They’re right. The burden gets passed on to … tenants.”
Correia, who represents Ward 6—the Mount Pleasant, Manton, Olneyville, and Fruit Hill neighborhoods—said he has heard from his own constituents that they are struggling to cope with higher rents. He said the city has to get out of the cycle of cutting services and raising taxes. “We need to come up with up with some type of formula and a better way to stop this from happening,” Correia said.
“Affordability for renters in Providence has become tenuous at best,” added Councilman Luis Aponte, who represents Ward 10, encompassing Lower South Providence and Washington Park.
Aponte agrees that higher property taxes only make matters worse for tenants. Since higher taxes cut into the profit margins for landlords, he said it's inevitable they will pass those costs on to their tenants. “The folks that are in this are … not followers of Mother Teresa,” Aponte said. “They’re business people. They’re trying to make money.”
The city needs to rethink its tax policy, Aponte said. After a national study found that Providence had the highest commercial tax rates in the country, the city froze the commercial rate for the current fiscal year, in an effort to spur economic growth. But Aponte said the housing industry is also an engine of economic growth. Both sources of economic growth should be fostered, he said. “We need to make sure we’re not punishing one to favor another,” Aponte said.
But housing advocates say that high property taxes aren’t the only problem.
“The other part of the picture is 40 percent of the tax base is zero,” Aponte said, referring to tax-exempt colleges, universities, and hospitals.
Those institutions impact rents in other ways as well, according to Donna “DeeDee” Williams, the outreach and engagement coordinator for the Housing Action Coalition of Rhode Island. She said employees at local colleges and hospitals want to live close to where they work. Those employees can afford higher rates, she said. So, as they move into the area, they contribute to a rise in property values.
Local politics is another factor. In the past, local nonprofit developers had a close working relationship with the city administration, according to Aponte. “Over the last three years, that has not been the case,” he said.
Yet another cause for higher rents is the foreclosure crisis, according to Williams. Former homeowners have been driven into the rental housing market, which may not have had a sufficient supply of affordable apartments for them, according to Williams.
Overall, the data reflects the reality on the ground, according to Williams. Every year, her organization works with thousands of low-income residents seeking affordable housing, Williams said. Some no longer qualify for Section 8 or subsidized housing and are looking for homes that meet their still-low incomes. Others have lost their homes due to the foreclosure crisis and are entering the rental market.
One common refrain from them all: “They want to live in Providence and they can’t afford it,” she said. Other than Providence, Williams hears that second least affordable community is Pawtucket, which ranked fourth on the Providence Apartment Association list.
A spokeswoman for the organization known for producing annual reports on the state of affordable housing stressed the common ground between the new data and what has previously been reported.
“So, for example, the Providence data pages in the 2013 Housing Fact Book shows that the median renter household income for the area is $27,657. On the East Side of Providence, the income needed to afford the average 2-bedroom rent ($1,313) is $52,520. For the rest of Providence, the income needed to afford the average 2-bedroom rent ($1,089) is $43,560. That is quite an affordability gap,” Nichole Lagace, spokesperson for HousingWorks RI, wrote in an e-mail.
The big difference between the HousingWorks RI data and that used by the Providence Apartment Association is whose income is used to calculate the affordability of local housing. At the municipal level, workers in Providence earn $52,728. But not all of those people live in the city. The median incomes of those who live in the city—regardless of whether they work there or not—is $38,922, which is 35 percent lower than the city worker figure.
Overall, Lagace said the new data affirms a larger message: Rhode Island has a housing affordability problem. “However you look at it, almost half of renter households in Rhode Island spend more than 30 percent of their income on housing,” she said. “That is problematic no matter what municipality you’re talking about.”
Stephen Beale can be reached at email@example.com. Follow him on Twitter @bealenews
The Most Affordable Communities for Renters
In the below slides, communities are ranked from most affordable to least affordable. Affordability is determined based on the ratio of the median income in a community the average rent for a two-bedroom apartment. Find out where your community ranks.
About the ranking: Data was provided by the Providence Apartment Association. Median income figures are taken from the U.S. Census Bureau’s American Community Survey, which provides a five-year sample of incomes between 2007 and 2011. Rents are taken from survey data collected by Rhode Island Housing. Because of the insufficiency of rental data, the following 11 communities are not in the ranking: Exeter, Foster, Glocester, Hopkinton, Jamestown, Little Compton, New Shoreham, Richmond, Scituate, Smithfield, and West Greenwich.
Note: Since median incomes were only available for Providence as a whole, and not able to be broken out separately for the East Side, the apartment rental data for the East Side is included with the rest of the city. The data for the rents in the East Side and the rest of the city was merged using a weighted algorithm based on the approximate geographic range, putting one sixth of apartments on the East Side and rest in the city.
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