The rising cost of housing in Rhode Island will slowly choke the local business
community and place a burden on employers to compensate for the housing shortage,
unless private and public entities develop a housing production strategy, a
recent study says.
“Bottom line – if we don’t have adequate affordable housing in Rhode Island, it will have a direct significant impact on our ability to keep business here,” said Gary Sasse, executive director of the Rhode Island Public Expenditure Council, which performed the study with FleetBoston Financial. “It’s apparent when we talk to CEOs and managers that they’re having difficulty attracting middle management because it’s difficult to find housing.”
Developing a housing production strategy for work force housing; creating a housing land trust; exploring a possible sales tax refund for new home buyers; reforming state financing of public schools; and employer-sponsored housing assistance programs are some possible solutions to the housing crisis, the study says.
“We’re still relative (in housing prices) compared to surrounding states, but the wages we’re producing do not commensurate with our housing prices,” said Jim DeRentis, executive vice president of retail banking for Bank Rhode Island. “The problems are the rate at which we’re producing housing and that the level of jobs are not keeping pace.”
There is really no system in place to address these issues, Sasse said, and neither public nor private groups have the organizational infrastructure to address the problem.
“When the Amgens come in and their mid-management can’t find housing, it’s rapidly impacting the cost of doing business here,” said Neil Steinberg, chairman and CEO of Fleet Bank Rhode Island. “Whether it’s a small or large company, our work force is struggling. If we want to add jobs in Rhode Island, people simply need a place to live. Every constituency needs to be concerned with the production of more housing.”
“It’s a wake-up call for a lot of community leaders – it’s an issue that affects everybody, not just the down-and-out,” said Scott Wolf, executive director of Grow Smart Rhode Island. “Every community should be responsible for this issue.”
Employers may feel increased pressure to raise wages so employees can afford a home or even rents. According to the study – released on March 12 – for companies to just keep pace with rising housing costs from the third quarter of 1999 to the last quarter in 2002, the state’s personal income level should have grown by 46 percent, or an additional $15.6 billion. In comparison, during that time, it only grew 16 percent.
“The business community will say they need to keep pressures down, but (keeping pace is) one of the major concerns,” Steinberg said. “We’ve met with legislators and the governor – we’re adding a voice that wasn’t there before. We’re going to push to get some policy, not just Band-Aid solutions. From a business point of view, it needs to be a business-like housing production strategy.”
Higher housing costs mean a less competitive state economic climate, the study said. As prices continue to rise, it may affect the state’s ability to attract and create additional jobs.
“If you’re a 22-year-old graduate from the University of Rhode Island, an engineer, with a family, if you can get a job paying the same anywhere and can afford a starter home somewhere else – it’s a big issue,” Sasse said. “When you look at the things that drive business costs – energy, tax burdens, and you put housing on top of that, it’s increasingly unfavorable.”
Few companies in Rhode Island offer major housing benefits, while in other states and cities, employers offer a variety of programs. BankRI offers grants to employees looking to buy a first home. A simple supply increase, however, would definitely help, experts said.
“Supply is the problem,” said Peter Marino, director of policy for RIPEC. “If we’re able to increase supply, it will ease the pressure on wages.”
Out-of-state buyers moving into Rhode Island are considered part of the problem, and another is that residents stay in their homes longer – 35 percent have been in their homes for at least 24 years, compared to the national average of 27 percent.
Between 1995 and 2000, the state added 3,000 households through population migration, 27,000 of those people from Massachusetts, the 2000 Census said. The average incomes of at least 60 percent of the relocations to Providence County are 12 percent to 15 percent higher than those of existing residents.
“Massachusetts (residents) are complicating things, and Connecticut and New York are squeezing us from the other end in South County,” Sasse said.
Housing stock in Rhode Island has also been changing during the last few years – between 2000 and 2002 single-family permits nationally rose 11 percent, but dropped 3 percent here. The lack of available suitable land, development costs and land-use regulations have also taken a toll on pricing, and it’s common for 45 percent of new home costs to be the land.
BankRI’s DeRentis said the state needs to focus on existing stock for new housing.
“The amount of assets in our urban centers is overlooked – we have some incredible infrastructure not being utilized,” he said. “Why do we need to build more roads and buildings if we already have them?”
The affordable housing controversy has opened legislators’ eyes to the heart of the issue – that the housing crisis is no longer just about affordable housing, but also work force housing, Sasse said, and businesses play a role in developing a solution.
“Business leaders remember when they made $50,000 and could afford a home,” Steinberg said. “Seeing a $250,000 home as on the lower end is ridiculous.
“The point of this is the recognition (from companies) that many employees – at a wider salary range than they thought – are having a difficult time finding housing,” he added.
“We are dependent on the economic vitality of the state for our business, so we will meet any of the objectives” outlined in the study. “People are struggling here with this, and it’s ranging from the homeless up to middle management, and that’s a lot of people to be affected.”
