Should Rhode Island Spend $500M on Affordable Housing?
Monday, October 04, 2021
The concept is big. Affordable housing advocates in Rhode Island are proposing spending nearly half of the state’s $1.1 billion of federal pandemic recovery funds from the American Rescue Plan to tackle the pressing issue.
Currently, housing unaffordability is at a near-record level. Cortney Nicolato, CEO and President of the United Way of Rhode Island and one of the coalition members calling for the spending said the problem of the lack of affordable housing is the most critical issue now facing the state.
"Economists here in the state of Rhode Island have shown that we are tens of thousands [housing units short]. I think the last number I saw was about 25,000 units short of safe and affordable housing here in the state," said Nicolato on GoLocal LIVE.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST“We are proposing $500 million of that $1.1 billion be utilized and leveraged for the building, maintaining, the accessibility for safe and affordable housing here in our state," said Nicolato.
Housing in Focus
In Rhode Island, the median price of a single-family home is nearing $400,000.
The WSJ reports, “The median American household would need 32.1% of its income to cover mortgage payments on a median-priced home, according to the Federal Reserve Bank of Atlanta. That is the most since November 2008, when the same outlays would eat up 34.2% of income.”
“Supercharged home prices in markets across the country are canceling out the impact of modestly higher incomes and historically low-interest rates, two factors that typically make owning a home more affordable. Prices rose at a record pace for the fourth consecutive month in July, driven by a shortage of houses for sale. Higher prices require buyers to take out larger loans, essentially signing them up to make larger mortgage payments each month for years,” adds WSJ.
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Out-of-Staters Are a Growing Factor
In Rhode Island, the problems are exacerbated by out-of-state buyers primarily from New York, Connecticut, and Massachusetts purchasing houses to work from home or for vacation homes.
An analysis of out-of-state buyers during the months of June through August shows a steady increase in buyers from other states. Historically, the coastal communities of Newport, Washington, and Bristol counties attract the most buyers from other states. This year, they accounted for 39.9% of total sales in Newport County, 35.5% in Washington County, and 31.5% in Bristol County. Providence County attracted 23.7% of its buyers from other states and 17.2% of Kent County buyers hailed from outside of Rhode Island.
In the luxury market, 59.2% of Washington County sales of high-end properties - those that sold for $1 million or more - came from outside of Rhode Island, while 55% of Newport County’s and 47.2% of Bristol County’s luxury sales involved out-of-state buyers.
“Rhode Island home prices have gone up, but properties are still a bargain compared to other resort areas. Our cities and towns are also more affordable than larger urban centers like New York and Boston. Outside of our borders, we’ve become known for coastal and cultural amenities that, fortunately, don’t come with a big-ticket cost compared to other locations. With prices rising everywhere and remote work now more available, we’re poised to see even more people moving to the Ocean State,” said Leann D’Ettore, President of the Rhode Island Association of Realtors.
The impact is the middle-class neighborhoods like the "fifth ward" in Newport are being gobbled up by out-of-state buyers pushing long-time Newporters out of the city.
Other Causes
The need is overwhelming in Rhode Island and the causes are diverse, say those calling for the federal funds for affordable housing.
Beyond the impact of out-of-state buyers, economists and housing advocates cite the following of the state:
- 30% of housing built before 1940
- 500 units lost each year to deterioration, demolition, or conversion
- Rhode Island’s local zoning and environmental restrictions are a major barrier — a recent study ranks the state as the 3rd most highly regulated construction market in the country
- Rhode Island’s rental vacancy rate was at a record low 3.1% -- a "healthy rate" is considered 7-8%
- 46% of renters are "rent-burdened" -- meaning more than 30% of monthly income goes towards rent.
"We're actually seeing more rental units come offline because of various issues, [such as] that they may have lead contaminants," said Nicolato.
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