RIPEC analyzes Rhode Island’s investments in housing
The Rhode Island Public Expenditure Council (RIPEC) today published an analysis of Rhode Island housing policy, with a focus on the state’s recent investments in affordable housing.
“Over the past few years, the state has made significant investments in affordable housing and enacted new policies to increase Rhode Island’s housing supply,” RIPEC says in a press release. “With the potential for additional funding through Rhode Island’s largest ever housing bond, as well as the new state housing tax credit program, RIPEC has analyzed the state’s return on investment and makes several recommendations for maximizing future funding”.
“Housing affordability is one of the most pressing public policy challenges facing Rhode Island and tackling it will continue to require the full attention of policymakers,” said RIPEC President and CEO Michael DiBiase. “We crafted this report to serve as a guide for state leaders to maximize future investments and support the goal of increasing the availability of both affordable and workforce housing.”
Decades of low housing production and limited state investment have created a shortage of available housing across the state and rising housing costs, including a dramatic jump in median home prices. In response, the state has invested heavily in housing in recent years, including the historic investment of $332.3 million in federal State Fiscal Recovery Funds (SFRF) towards housing, beginning in 2022, with the majority of this allocation going to affordable housing development.
Given the combination of strict federal timelines and the lack of alternatives among existing housing programs, the state relied on its past experience administering federal housing production programs and utilized SFRF-funded programs in combination with each other and other sources of funding. Of the state’s total investment, RIPEC found that $244.7 million in SFRF dollars and other state funding supported the construction of 1,515 new affordable and middle-income housing units. RIPEC found that adherence to a model of development centered on the federal Low-Income Housing Tax Credit Program and high project costs have limited production.
Among RIPEC’s key findings are:
- The development of units for very low-income and low-income households was prioritized. More than 70% of units were reserved for households at or below 60% area median income.
- Social and other goals supplemental to housing were favored in the funding of projects. Twenty-five of 32 new construction developments contained at least one supplemental goal, such as restoring historic buildings or providing commercial space.
- Mixed-income developments were not prioritized. The majority of developments were either 100% affordable or 100% middle-income, and of the mixed-income developments, two-thirds offered less than 25% of units for middle-income or market-rate households.
- Project costs were de-emphasized. Over half of the projects had total development costs of more than $400,000 per unit, and three exceeded $500,000 per unit.
Rhode Island voters have the opportunity on the November ballot to approve a $120 million bond referendum for housing, $100 million of which would be used to support the production and preservation of affordable housing. Under the state’s current funding model, RIPEC projects that this investment would produce 586 new affordable and middle-income housing units. If this projected total is added to the production from the recent historic SFRF investment, the state will have contributed to the production of an estimated 2,170 affordable and middle-income units, a 5.7% increase to the state’s existing affordable housing stock.
“State policymakers have made historic investments of federal dollars, expanded state programs, and advanced state policy,” said Michael DiBiase. “However, our findings suggest that to eliminate the wide gap in affordable housing in the Ocean State, we need both significant additional state resources and substantial improvement on the state’s return on investment.”
Based on the report’s findings, RIPEC recommends:
- The state should expand its range of investments to include more middle-income and market-rate housing.
- Rhode Island needs greater state investment in housing through a dedicated revenue source.
- The state should explore mechanisms to improve returns on the state’s investment of housing dollars.
- The state should seek to reduce the complexity of its housing programs.
- The state should develop innovative programs to tackle its overall housing shortage.
Find the report here. Find an executive summary here.