Over 24,000 units of income-restricted housing are still needed to close Rhode Island’s affordable housing supply gap, says a new report by the Rhode Island Public Expenditure Council. (Photo by Scott Olson/Getty Images)
Record amounts of attention and funding only made a dent in Rhode Island’s housing crisis, with more than 24,000 units of income-restricted housing still needed to close the supply gap, according to a new report by the Rhode Island Public Expenditure Council.
The 54-page report published Wednesday by the business-backed research organization analyzes the successes — and shortfalls — of Rhode Island housing policies and programs, and offers recommendations on how to get the most bang for the state’s buck.
So far, return-on-investment has fallen short.
The $245 million in federal and state funding set aside for affordable housing in Rhode Island from 2022 to 2024 yielded a combined 1,500 low and middle-income units across 32 projects, for an average state subsidy of $161,542 per new unit, according to RIPEC’s report. A proposal to borrow $120 million for state housing programs — one of four state bond questions put to voters on the November ballot— will yield just 586 more units if the bond is approved, according to RIPEC.
Together, the combined 2,170 new, affordable homes funded through state borrowing and budget allocations fills just 8.2% of the estimated 26,351 new units needed to close the affordable housing gap across the state, as measured by the National Low Income Housing Coalition.
“Our argument is, we need to do better,” Michael DiBiase, president and CEO of RIPEC, said in an interview on Tuesday.
Better, meaning, more housing units, faster, more efficiently and across a wider range of income levels. It’s a tall order, given national inflationary pressures and the unique constraints of a state plagued by aging housing stock, burdensome zoning restrictions and a history of “relatively little” state funding.
Until three years ago, Rhode Island relied exclusively on a handful of state housing bonds and revenue from a state conveyance tax on high-end real estate transactions to fund new, affordable housing. From fiscal 2015 to fiscal 2022, the Ocean State spent $145 per person per year on housing, the second-lowest among New England states and nearly six times less than Massachusetts, which spent $858 per person on housing in the same time period, according to the RIPEC report.
“We are playing catch up,” DiBiase said.
Federal pandemic aid offered an opportunity for the state to revamp its commitment to housing. State lawmakers devoted nearly 30% of its $1.1 billion federal windfall to housing programs — the second-highest allotment of any state. Doubling down on its new housing focus, lawmakers in fiscal 2023 also created the state’s first standalone housing department, headed by a cabinet-level secretary, and set up a state tax credit program for developers who build projects with income-restricted units.
DiBiase lauded the investments and attention the state has put on housing in recent years.
But intent and result weren’t always the same. More than 70% of the units funded through state and federal programs were reserved for low income residents, who earn at or below 60% of area median income — equal to $67,440 for a family of four in 2024. This left little funding for mixed and middle-income “workforce housing” projects.
“To us, that is the biggest missed opportunity,” DiBiase said. “It would seem to us to be a more effective approach.”
Effective both to state coffers, since market-income units would not require a state subsidy, and effective in creating socioeconomically diverse neighborhoods with projects that house residents of various income levels.
Also problematic, according to RIPEC’s report, are state scoring criteria, which prioritize projects that also preserve historic sites or promote commercial development, at the expense of more, or cheaper, housing units.
Our argument is, we need to do better.
– Michael DiBiase, president and CEO of RIPEC
Meanwhile, the fuzzy delineation between the new state housing department and the existing groups directed to administer state housing projects, including RIHousing and the Rhode Island Housing Resources Commission, created redundancies and excessive red tape.
“It is holding us back, having two or three agencies with the same responsibilities and authorities,” DiBiase said.
Not mentioned in the report is the lack of a permanent housing secretary; former secretary Stefan Pryor resigned in June, leaving the top post at the nascent agency vacant for the third time in its three-year history. Dan Connors was tapped to serve as interim housing secretary in July, but a permanent pick has not been named.
“To the extent we have leadership turnover, that’s not a good thing,” DiBiase said. “We would hope the department can get its feet under it and become a stronger voice.”
Especially as the state fights to keep top employers like Hasbro Inc. and CVS Health within its borders. Hasbro has already revealed interest in relocating from Pawtucket to Boston, while recent news that CVS might be breaking up its company has raised questions over the future of its Woonsocket headquarters.
“High housing costs make it more difficult for employers to recruit or retain workers, and it increases the cost of doing business, which makes places less competitive,” DiBiase said. “The inability to buy homes discourages younger workers to stay or to come to a place.”
And with federal pandemic aid coming to a close — federal requirements give states until the end of 2024 to allocate money, and 2026 to spend it — the need to rethink state housing policy is pressing.
Among the report recommendations is enhancing the existing real estate conveyance tax. Lawmakers in 2022 set a higher tax on sales over $800,000, reserving the $3 million annual revenue for new, affordable housing production.
RIPEC also proposed structural changes, such as setting up “strict cost standards” for housing projects seeking state funds and replacing the multitude of duplicative state and federal funding programs with a single, streamlined and easily trackable program.
It does not specifically mention creating a state public development arm, a proposal floated during the 2024 legislative session, with enabling language for a $10 million state revolving fund included in the housing bond.
But no idea is off the table in the eyes of Jeffrey Hamill, public policy analyst for RIPEC.
“We need to explore every available option,” Hamill said. “It would be shortsighted to reject any new approach.”
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