In May 2023, Gov. Daniel J. McKee and other state officials issued a press release touting a $101 million investment of State Fiscal Recovery Funds to create 1,481 affordable housing units.
They undershot the mark.
According to a recent analysis by the Rhode Island Public Expenditure Council, significant cost overruns are challenging 21 of the 24 housing projects awarded money, requiring an additional $67.9 million over preliminary awards and an additional $47.8 million in state subsidies for 15 of the projects.
All told, the state will have invested roughly $260 million to produce 1,616 net new units, representing 6.7% of the projected need, according to RIPEC.
Now, McKee is proposing a $100 million housing bond be put to voters in November, “by far the largest such housing bond the state has ever issued,” RIPEC said, dwarfing the $65 million approved by voters in 2021.
If current spending trends continue, RIPEC said, the bond would only produce 431 net new rental units and 193 affordable homes.
“This pattern of underestimating costs associated with affordable housing production raises concern that once remaining funds are exhausted … there will be no additional funding available to cover the potential cost increases needed to complete the projects,” RIPEC said in its analysis.
Sen. Louis P. DiPalma, D-Middletown, says lawmakers are assessing the merits of the bond but agrees that Rhode Island is way behind where it should be in terms of housing production. And project delays have made it difficult to assess whether the state has been getting what it’s paying for in affordable housing.
“We categorically need housing. We needed it yesterday,” he said. “And the only way you bring costs down is if supply goes up. It’s basic macroeconomics.”
DiPalma says officials likely landed on the $100 million number due to the state’s borrowing capacity.
“We don’t want to go to the ceiling on bonding,” he said. “But is $100 million right? I don’t know.”
Details of the bond request emerged during a meeting of the House Finance Committee, where R.I. Secretary of Housing Stefan Pryor said he would direct $42.5 million to the “production and preservation” of affordable rental units; $30 million for the production of homeownership units; $7.5 million for a “priority projects fund” for vulnerable Rhode Islanders; $5 million for accessory dwelling units; and $5 million for community revitalization and mixed-use projects.
Another $10 million would be used for site acquisition, readiness and infrastructure to aid development.
Asked if $100 million was enough to materially address the issue, Emily Marshall, spokesperson for the R.I. Department of Housing, said it “is part of a series of investments needed to address the housing affordability challenges Rhode Islanders currently face.
“Addressing Rhode Island’s housing development challenges will require a significant and sustained commitment of resources,” she said.
Christian Belden, executive director of Church Community Housing Corp., a Newport-based nonprofit that helps people find affordable housing, says the single largest driver of cost increases is for materials, followed by labor costs due to a supply and demand imbalance in the Rhode Island housing market.
But he thinks the state so far has gotten what it has paid for on affordable housing.
“It’s a new world in terms of building costs,” he said. “Rhode Island underinvested in affordable housing for decades. And now we’ve gotten ourselves in this situation addressing a crisis that is happening because of the high cost of housing. That is really the lesson.”
