This May Be RI’s Most Serious Problem — Housing Prices Freezing Out the Middle Class

Friday, April 23, 2021

GoLocalProv News Team

 

View Larger +

Rhode Island’s middle-class families are getting priced out of the housing market.

More and more RI is running the risk of being just a bedroom community to Boston and a vacation spot for New Yorkers to conduct zoom meetings -- a place with service jobs but an ever-shrinking middle class.

This has a profound impact on these family's ability to build wealth and stabilize the state's economic base.

GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST

The explosion of Rhode Island’s housing prices, the influx of out-of-state wealthy buyers, and all cash purchasers are having a dramatic impact on the ability of the middle class to compete to purchase a home in Rhode Island.

 

Priced Out

Families with two incomes that earn between $100,000 and $125,000 annually or lower are finding it difficult to purchase a home in most Rhode Island communities, according to multiple realtors.

“Everybody knows that the market is nuts," said Nelson Taylor with the Blackstone Team at Mott & Chace Sotheby’s International. He believes the market could cool slightly over the next year, but others warn that due to concentrated wealth, low-interest rates, and pent-up COVID demand this cycle could last two to three more years.

For years, advocates have lobbied to provide tools to help lower-middle-class Rhode Islanders become homeowners, but this crisis is different in that it is hitting an even higher strata of income in Rhode Island.

“With rising home sale prices, we are once again 'locking' people out of the chance to provide financial stability for their families through homeownership. Sadly, this is particularly true for minorities – the homeownership rate for Black and Latino Rhode Islanders is about one-half the rate for White Rhode Islanders,” said Brenda Clement, Director, HousingWorks RI. 

Last week, GoLocal wrote about a house built on Federal Hill in Providence on Depasquale Avenue that was built in 1993 for low-income homeownership and sold at the time for $40,000, has now entered into a contract to be sold at more than $400,000. The exact price has not been disclosed.

 

View Larger +

Governor Dan McKee PHOTO: Official Photo

State House Proposals  

Elected officials at the Rhode Island State House and gubernatorial candidates are offering up programs, but a GoLocal review finds that these proposals don’t come close to meeting the challenge.

Governor Dan McKee has proposed as part of his budget a real estate transfer tax

According to House fiscal staff, "The state currently levies a conveyance tax of $2.30 per $500 portion of a property’s purchase price. The Governor’s budget proposes to take 16 cents of the amount going to state general revenues and direct it to the new fund and double the tax levied on the portion of sales, of residential property only, over $700,000 to fund housing initiatives."

"The proposed budget assumes this will yield $1.7 million for the new fund, of which $900,000 is from the state general revenue share. However, according to the analysis from the House Fiscal Staff, it appears the general revenue share should be closer to $1.3 million. Annualized, the impact is approximately $6.9 million for the fund, of which about $3 million is from general revenues," writes House fiscal.

McKee's office defends the proposal which in total generates $6.9 million.

"The Governor is proposing meaningful and long-overdue action to increase housing production in the state. These proposals include a new dedicated funding stream for housing production, strengthened leadership and collaboration in state government, and new partnerships with cities and towns. The funds will be used to fill gaps in projects (akin to how the affordable housing bond program works) and to partner with cities and towns on enabling more housing," said McKee's spokesman Matt Sheaff.

"We would anticipate these funds, once fully implemented and investments mature, would produce close to 200 units of housing each year. This would represent around a 15 percent increase over the State’s housing production levels currently which would make a meaningful difference. This proposal is in addition to the $65 million housing bond passed in March. For too long, the state has fallen behind its neighbors on housing production. It is important that we build a system that will ensure investment year after year," said Sheaff, but the McKee administration could not provide a list of projects.

View Larger +

PHOTO: File

Clement supports the McKee proposal but said it does not go far enough to meet the needs. 

"Our state is not producing enough housing to meet current needs but also that this lack of supply is limiting our ability to expand and grow economically.   Seventy-three percent of our residential structures were built before 1980. Since 1980, residential development has not kept pace with demand resulting in home sales and rental costs increasing at a faster rate than income in our state.  There are no municipalities where the median renter income of $34,255 could affordable rent; there is only one municipality (Central Falls) where the median household income of $63,296 could affordably buy," said Clement. 

Clement tells GoLocal that the limits by local communities on land use are nearly paralyzing the construction of new housing units.

"Most decisions on where and what type of housing can be built are controlled at the local municipal level. Each year, developers and builders proposed residential developments in cities and towns across Rhode Island and often face neighborhood opposition and local regulations and zoning that are significant barriers to development and often take several years to resolve," said Clement.

She cites a blog series entitled “The Great Real Estate Reset,” by the Brookings Institute.

The series "notes that a mountain of research and a world of common sense tells us that place matters. There are so many essentials to the American dream that are geographically constrained, and the only way to ensure that Americans of all races and incomes have a fair opportunity is to build a world where good neighborhoods are not scarce, expensive, and exclusive, and where all households can put down roots and keep them. The attributes of communities of opportunity—good schools, proximate jobs, retail amenities, and parks—are tied to a place or home.  With rising home sale prices, we are once again 'locking' people out of the chance to provide financial stability for their families through homeownership."

"Sadly, this is particularly true for minorities – the homeownership rate for Black and Latino Rhode Islanders is about one-half the rate for White Rhode Islanders," said Clement.      

 

Related Articles

 

Enjoy this post? Share it with others.

 
 

Sign Up for the Daily Eblast

I want to follow on Twitter

I want to Like on Facebook