What new residential construction there is in R.I. rarely matches state’s needs

On Morningside Drive in North Kingstown, developer Hugh Fisher raised his voice to be heard over the clanging sounds of active home construction. He described the diversity of families who have moved into the new development, or are waiting to move.

One of the popular design choices, a single-family home with an attached guesthouse, with a separate, discreet entrance, has attracted buyers who want to generate rental income.

“The people who bought this one over here, I understand they rented [the guesthouse] for $1,500 a month,” Fisher said, pointing to a house sold to a young couple.

The large, single-level house across the street is being built for a couple in their early 80s, downsizing from a 4,000-square-foot home in East Greenwich.

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A few doors down, three generations of a family already have moved into a two-level house with an attached “casita,” or single-bedroom carriage house. The grandparents live in the roomy, single-bedroom house, which has its own entrance, but shares a wall with the main house. Their daughter and her family live in the three-bedroom, main structure.

Reynold’s Farm, the emerging neighborhood of single-family homes and condos, is one of the largest housing developments under construction in Rhode Island. It’s also something of a rarity. Although permit activity has increased, new construction of housing has yet to rebound from the Great Recession, according to builders and state officials.

And where residential building is taking place, it generally is not taking the form of multifamily or increased density. But that is exactly what the state needs, according to housing advocates.

A recent report commissioned by Rhode Island Housing found the state has insufficient housing options for individuals and families across a variety of incomes and housing styles, but most acutely at lower-income and middle-class levels, and in rental and multifamily structures.

The state’s housing stock is the fourth-oldest in the nation. And for multifamily rental housing, Rhode Island has the oldest inventory, with the greatest share in the nation of apartments built before 1940, according to Barbara Fields, executive director of Rhode Island Housing.

The report, prepared for the agency by HousingWorks RI at Roger Williams University, found that the existing inventory is insufficient for the current population of the Ocean State, driving up rental rates to unaffordable levels for many families, and encouraging many homeowners to move in search of more options.

In addition, the research found the Rhode Island population is growing older and diversifying in ways that will encourage more housing demand. The state’s population is expected to grow over the next decade by an estimated 3-5 percent, the report found, with the higher rate reflecting an accelerated economy.

Even at the low end of the projected growth, demand for housing will require a faster rate of construction than has been seen in years. The state will need another 34,600 to 40,200 housing units by 2025, the report stated.

“We need more of everything,” Fields said.

WHAT IS BEING BUILT?

Based on permit activity, housing construction has increased over the past three years but remains well below the pace seen pre-recession, and well below the 3,500 units a year needed to meet the anticipated demand.

The total number of permits for new multifamily and single-family construction has remained below 1,000 units for each of the past seven years, according to the U.S. Census Bureau.

On a per-capita basis, Rhode Island has been among the least active of slow-growing states. The state averaged 849 units annually from 2010 to 2014, the report found, or one new unit allowed for every 1,294 people. That was the lowest rate in the U.S. More recently, production has ticked up, but it still is well below what housing experts say is needed.

In the first quarter of this year, a total of 220 new-construction permits were issued for either single-unit or multiunit homes in Rhode Island, consisting of 196 single-family permits and 24 multifamily permits, according to census data.

That number has increased somewhat from the same period in 2015, when 130 permits were issued, with 116 for single-family homes and 14 for multifamily uses.

Moreover, while the focus of new construction is on single-family residences, this isn’t where the most need is.

As a result of changing demographics in the state, the report projects that 70-73 percent of the future demand will be for rental and multifamily residences, including condos, apartments and denser development that is affordable for families whose incomes are 20 percent or more below the median income in Rhode Island.

That hasn’t been the focus of what little new construction is taking place.

Because land costs and construction costs in Rhode Island are high, the economics of building has encouraged residential builders to focus on higher-end homes, according to John Marcantonio, executive director of the Rhode Island Builders Association, an advocacy organization for the residential building sector.

In addition, local communities have not encouraged density in development that would allow builder-developers to create homes at an affordable, or middle-income price. In many cases, builders say, the towns have actively discouraged new development through restrictive zoning, including large minimum requirements for lot sizes.

His organization lost more than one-third of its membership through the recession, as builders found other ways to make a living, or their businesses failed. The membership fell from a peak of 1,400 to 900 last year, but has increased somewhat over the past six months, he said.

The work now available for homebuilders is at the two ends of the economic spectrum, he said.

“There is always going to be demand to live in Rhode Island,” Marcantonio said. “The problem is the affordability side. The affordability side is being driven by the cost-of-construction problem. That is a massive problem in this state.”

The association estimates as much as 40 percent of the cost of a unit is related to regulation. The regulation isn’t just fees paid by builders, Marcantonio said, but a host of requirements for new construction, including the expense of building roads and extending infrastructure such as water and sewer to the new housing site.

Rhode Island has some of the largest minimum-lot sizes in the country, he said. And regulations imposed by towns and cities concerned about the impact of new housing, particularly on schools, has led to a series of impact fees that add directly to the unit cost.

They range from $593.43 per lot in eastern Cranston to $8,572 in Smithfield.

If the number of housing lots is restricted due to concerns about density, it becomes difficult to divide the cost of the development without charging more for the completed houses, he said.

“It becomes extremely difficult for any developer-builder to build anything other than a luxury, high-end home, where the numbers work,” he said. “Or a subsidized product where the numbers would work.”

In the middle of the market, builders have found a market among consumers who want options, but financially, it is not feasible.

“The state fundamentally, [at] a micro-level, has discouraged residential housing construction,” he said. “That’s the fundamental problem. Most towns do not want more people, particularly more kids. To slow down residential growth, or to stop it, the towns have all the keys to the costs.”

From the perspective of many towns, the issue is managing growth.

Coventry this year has had a burst of new construction. Planning Director Paul Sprague estimates some 200 units are under construction in various developments, most single-family houses. The town charges an impact fee of $7,596 per unit to help soften the capital expenses associated with the growing population, things such as road and sewer improvements and school renovation. About 40 percent of that fee goes to schools, he said.

Years ago, pre-recession, when the growth in the town was far more dramatic, Coventry enacted a building moratorium. That was found to be unconstitutional, he said. Coventry has since revised its approach, and is now permitting housing developments under a local program that encourages inclusion of low- and moderate-priced homes. When the town started its program, in late 2005, about 3.6 percent of its housing stock was considered affordable. It’s now at 5.4 percent, Sprague said.

Once the construction now underway is counted in that inventory, Sprague said he expects the town will achieve the state standard of 10 percent for affordable housing.

The homebuilders have returned to the town to start up on developments that were approved before the market crashed. If many Rhode Islanders still think the state is stuck in recession mode, Sprague said the activity in Coventry tells him otherwise. Four different housing developments are underway, he reported, including one with 75 single-family homes.

“I hate to say this. The Rhode Island mindset is that we’re still in a deep recession,” he said. “That nothing is happening. The builders don’t see that. Developers don’t see that.”

AFFORDABILITY A FACTOR

The keenest demand for housing is among Rhode Islanders whose earnings fall below the median family income.

Rhode Island Housing has invested millions in new affordable-housing projects, and into renovations of existing complexes designed to keep them affordable. But, by design, most of the federal money the agency receives is required to be directed to housing options for residents with low incomes.

The agency can assist middle-income residents in finding mortgages, but Fields refers to this segment of the housing market as the “missing middle.” Private contractors, she said, will follow the market, where the demand for housing will satisfy the highest return.

“They’re going to go for the middle-to-high end,” she said. “The resources we get from the federal government are helping us to get at the low-to-moderate end. And then there’s this moderate-to-middle (end).”

Overall, there is not enough housing being created, she said, and the permit statistics tracked by the organization bear that out. “It’s very sobering to know that for five years running we’ve ranked 51st in the country, if you include the District of Columbia,” she said.

She argues for state investment in housing as a form of economic development.

“We see it as the third piece of the larger puzzle to grow the economy,” she said, in addition to job creation and investment in workforce training.

At the request of Gov. Gina M. Raimondo, the General Assembly this month is expected to authorize a ballot question that would ask voters to approve a $40 million bond for new housing investments. The proposal, a part of Raimondo’s budget package, was approved by the House Finance Committee on June 8.

“What we’ve been arguing at the state level is for state investment,” Fields said. “We are not at all on par with Massachusetts, Connecticut or Maine.”

One of the Ocean State projects that has received financing help from Rhode Island Housing is in Burrillville.

A community-based developer, NeighborWorks Blackstone River Valley, several years ago identified a large tract of undeveloped land in the town. Its plan to develop a portion of a 227-acre site into a mix of single-family and apartment homes was embraced by the community, according to NeighborWorks Executive Director Joseph Garlick. The project involves construction of 96 apartments and 30 single-family homes. More than 115 acres will remain undeveloped and preserved through a conservation easement.

With this one project, Burrillville will reach its 10 percent affordable-housing goal. The construction is set to begin in late June and will be finished within two years.

“They understood it. It wasn’t a hard sell. It was a thoughtful process,” said Garlick of town officials.

In those communities where new housing is being created, particularly at the mid-income ranges, the demand is high enough that new units seldom remain unsold, or in the case of Providence, unleased.

The 50 Sankofa Apartments units under construction in Providence’s West End neighborhood are nearly completed, according to Sharon Conard-Wells, executive director of the West Elmwood Housing Development Corp. The new construction has filled in nine empty lots in the area.

Built partially with federal funds administered by Rhode Island Housing, apartments in the scattered-site development are reserved for families with incomes between 50-60 percent of the area’s median income. That shuts out many applicants. Nevertheless, the housing-development corporation has received more than 650 applications for the 50 units, Conard-Wells said.

These families and individuals are now housed in the community, struggling to pay bills.

“There’s a need for affordable housing for low-income families, the working poor,” she said.

According to the housing report, Providence is only going to get more populated. By 2025, the city will see 29 percent increase in growth, according to the report, based on current trends that include an increase in younger residents, those aged 20-44.

The statistics don’t surprise Arnold B. “Buff” Chace Jr., the managing partner of Cornish Associates, which has developed 240 units in renovated historical buildings downtown.

“We are 100 percent leased,” he said.

The apartments created from older buildings often feature a range of sizes and rental rates, created in part by the peculiarities of old buildings. So that creates opportunity for lower-rate units, as well as above-median rates in the larger or corner apartments. Cornish units are leased in a range from 50 percent of the area’s median income, to 200 percent. Chace referred to this as “small a, or generic” affordable housing, which doesn’t involve a state or federal subsidy.

Several years ago, people would look quizzical if he talked about downtown housing as a form of economic development. The redevelopment of the Industrial Trust bank building, commonly known as the “Superman” building, could conceivably add 280 more apartments, of varying sizes, he said, to the downtown landscape. That project is one he and other supporters are continuing to pursue as a form of economic development. The project did not advance to the General Assembly this year, but advocates are continuing to negotiate with the R.I. Commerce Corp.

“Now everybody understands” the relationship between housing and economic progress, Chace said. “They’re pushing back because of the size of the subsidy that’s required to make it into housing. They’re not pushing because the use is wrong. That is a significant change.”

Reynold’s Farm, the development under construction off Post Road, has 26 single-family houses under construction, according to Fisher. All have sold, or have lot deposits. In an adjoining section of his project, an area is being cleared for townhouse-style condominiums. The first six of 18 will soon be under construction, he said. In all, the planned development will include 200 homes.

The project took several years to reach approval through North Kingstown. One of the major benefits that allowed its development: sewer and water and other utilities were already near the area, which is close to Quonset Business Park.

The development, which has homes that sell from the mid-$300s to the high $500s, features high-end finishes such as granite countertops and hardwood flooring, and design that takes into account family needs.

All have two-car garages, “drop-zones” inside the front doors for mail and keys and electronics, and high-end laundry rooms located on the same level as the master bedroom.

For the single-level homes, a design favored by residents who do not want or cannot navigate stairs, “curb-less” shower doors, and entries that are wide enough for walkers or wheelchairs are included.

The design will allow residents to “age in place – with grace,” Fisher said. “Anything we build in a single-family home, single-level, this is included,” he said, referring to the modified bathroom design.

In one of the new houses, George and Sandra Watts live in a roomy, one-bedroom casita, sharing a roof with their daughter and son-in-law, and two grandchildren, who live alongside in the main house.

The families had previously lived in separate, single-family homes in North Kingstown. A series of events combined to make multifamily living a more practical option, said George Watts, 62.

He and his wife, Sandra, 59, are approaching retirement, have had some health issues and were concerned about the ongoing maintenance of their large house, according to Watts. His daughter, meanwhile, is now a full-time student. It seemed to make sense to join forces on a mortgage.

In the initial years, the grandparents will cover the mortgage, while the younger couple takes care of the property, with the idea that as they retire, the burden will then shift to the younger generation.

“It gives them those years to get themselves established,” Watts said. In the meantime, he loves living near his two grandchildren, ages 5 and 7, and can help care for them.

“So far, it’s been good,” he said.

The family looked for houses with in-law apartments across Rhode Island, but found little available in South County communities. In northern Rhode Island, the apartments tended to be basement units, which wasn’t what they wanted.

In Reynold’s Farm, they found something that worked well. The houses are roomy, without having so much space that the property maintenance becomes a burden, George said. “Reynold’s Farm was aligned with what we all were looking for.” •

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