While the level of operation for single-family building permits in Rhode Island is 25 percent below where it was five years ago, local home builders say they aren’t really losing business.
“From our standpoint, we aren’t losing any business,” said Alex Mitchell, managing director of Providence-based Meridian Custom Homes. “We have a lot of pre-sales already in hand for the next six months.”
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Despite “having all the business it can take,” the number of single-family building permits issued in the state in 2003 – 1,984 – is far off the high of 2,639 issued in 1999, said Executive Director of the Rhode Island Builders’ Association Roger Warren. With the fourth quarter still remaining in 2004, approximately 1,482 permits have been issued.
Warren surmises the reason the number of permits has dropped since the late 1990s is the capacity of the industry.
“(Construction) businesses have either left the area or haven’t grown,” Warren said. “The industry adjusts itself to meet the level of work.”
Ask Jim Tavarozzi, vice president of Titan Associates Inc. in Charlestown, and he’ll tell you business at his home construction company has been on a relatively even keel for the past five years.
“In fact, going into this month and next month we’re going to be even busier than normal,” Tavarozzi said.
While Rhode Island home construction companies haven’t seen a decrease in the volume of work, they have noted that a slowdown in the building industry could be attributed to the lack of available build-able lots and the amount of time it takes for projects to get municipal and other approvals.
“The (houses) that we’ve built are selling,” Mitchell said. “When we don’t have things to sell, it’s because it’s hard to find lots and get approvals for subdivisions, not because there’s no demand for it.”
Warren said consumers will likely feel the effects of the permit drop-off in two ways.
“If they want to book a construction project they might have to wait weeks or months because the construction firms have a backlog of projects,” Warren said.
Consumers will also feel it in their wallets.
“The demand is so high relative to supply that housing costs in Rhode Island are the highest in the nation,” Warren said. The median price for a single-family home in the state is $280,000. And the value appreciation factor in Rhode Island is almost three times the national average, he added.
Part of the reason Rhode Island is 25 percent below the production level it was at five years ago is because towns have restricted the ability of people to obtain permits through land-use requirements and building permit caps, so the ability to use land has been restricted, Warren said.
Philip Calabro, owner of Clearvue Designs Inc. in Cranston, said his company used to both design and build custom homes. However, the company stopped building last year because “building is a very difficult industry in this state.”
He said his business is off by about 50 percent when compared to this time in 2003.
The combination of skyrocketing home construction prices coupled with “unrealistic” consumer expectations prompted Calabro to abandon the construction aspect of his business.
Calabro said new home builders seldom realize what’s involved in the building process and that builders have to rely on a variety of skilled professionals in order to complete a project.
“And qualified help is difficult to find” to subcontract for projects.
“While there are a lot of very qualified people in this state, the other side of the coin is way too many under-qualified workers,” Calabro said.
Warren, too, said the skilled labor force in the state has shrunk in the past few years as professionals moved out of state, preventing builders in the state from increasing their production capacity.
Tavarozzi said construction projects may end up costing more and taking longer to finish because of poor communication among permit-granting agencies and municipalities.
“By the time you get all your permits, it costs so much money … and that’s one factor that’s driving up land costs,” Tavarozzi said.
Warren said the decrease in building permits could have an economic effect on the state as well.
“If we’re going to attract companies to Rhode Island, we have to provide housing for jobs,” he said.
A rough rule of thumb is that for every 100 jobs created, at least 70 units must be made available.
“We’re not doing that,” Warren said. “Companies don’t create housing anymore and the industry is being restricted.”
