We Will Build Thousands of Affordable Homes
There is currently a shortage of over 22,800 affordable rental homes in Rhode Island.9 But our state is producing fewer and fewer affordable homes each year. In 2018, we produced 22% fewer affordable homes than we did in 2017.10 To address this problem, Rhode Island must create a $25 million annual budget line item to allocate a consistent and reliable stream of money towards building and maintaining affordable housing.
In 2006, Rhode Island voters approved a ballot measure that authorized the state to issue a $50 million bond to build affordable houses.11 This launched the Building Homes Rhode Island program (BHRI). In 2012, voters approved a similar $25 million bond to recapitalize the program, and in 2016, they approved another $50 million bond for the same purpose.12 In a way, this program has been very successful. During the first two years of the program’s existence, 31% of all housing construction in Rhode Island was supported by BHRI.13 And the BHRI program has ultimately helped produce thousands of affordable homes throughout the state.14 But because our state government pays substantial interest on the bond, this funding system winds up costing us millions of extra dollars. Creating a consistent budget line item would not only create a reliable stream of revenue for affordable housing construction, but it would also be far more fiscally responsible.
Rhode Island spends substantially less on affordable housing than neighboring states. Massachusetts, for example, annually spends about $100 per capita on affordable housing.15In 2017, Rhode Island spent $5.21 per capita, almost twenty times less.16 Funding for affordable housing in Rhode Island temporarily increased in the following two years following the passage of the 2016 ballot measure which provided a much-needed infusion of cash, but the money from that latest bond is almost depleted and once it is gone, funding for affordable housing is expected to plunge back to below $10 per capita.17 In order to effectively address our state’s housing crisis, and to catch up to our neighbors, Rhode Island must create a budget line item to provide consistent funding for affordable housing construction.
We Will Implement Rent Control
Because it is massively inconvenient to move homes, landlords can steadily raise their rents, extracting ever greater profits from their tenants even if the real value of their property stays the same. Unless they have the time and wherewithal to undertake a lengthy search for a new home, complete a thorough inspection, and transfer all of their possessions, tenants have no choice but to comply with their landlord’s demands. Additionally, because all landlords share the ability and incentive to raise their rental prices year after year, rental costs throughout the state are consistently overinflated, so tenants often have difficulty finding affordable housing even when they are willing to move.
Rent control is the most effective way to stabilize prices and protect tenants’ rights, ensuring that they are not unfairly forced out of their homes. Rhode Island must prohibit landlords from raising their rental prices by more than 4% annually. Additionally, the rent control law must specify that, unless the unit is vacant for at least five years, the landlord cannot charge the new tenants more than 4% of what the previous tenants were charged. This will prevent landlords from evicting the current tenants in order to circumvent the 4% cap. The base rate must begin at the price that a given unit cost one year before the rent control law was passed, preventing landlords from dramatically raising their prices immediately before the rent control law is enacted to evade the law’s effects. Finally, Rhode Island must create a state agency dedicated to enforcing the rent control laws, investigating alleged abuses, and prosecuting landlords who violate the rules.
Rent control will benefit Rhode Islanders enormously. Most importantly, it will protect people from being forced to leave their homes when they do not want to. Moving homes is an immensely difficult and time-consuming enterprise, disrupting the tenant’s life and sometimes even forcing them to find a different job closer to their new house or apartment. Additionally, protecting people from being forced to frequently move homes enables them to develop stronger and more meaningful relationships with their neighbors and encourages them to invest in their local community.
Landlords and their political allies typically argue that rent control laws will eventually reduce the supply of housing because developers will no longer find it profitable to build new units. This argument is not true. Contemporary economic research suggests that rent control laws do not reduce the supply of affordable housing.1819 The main reason for this is simple: Housing rental is an immensely profitable enterprise, even when the landlord’s ability to raise prices from year to year is constrained by rent control laws. Because moving is such a hugely inconvenient process, landlords routinely overcharge their tenants, setting prices that reflect the difficulty of moving homes rather than the actual value of their rental property. Rent control laws prevent landlords from overcharging their tenants, but they do not prevent them from making substantial profits. Because property rental remains extremely lucrative even under rent control laws, developers still have the necessary economic incentives to build new homes.
Affordable Housing Improves Our Economy
Increasing our state’s supply of affordable housing will improve our economy in a myriad of ways. Most directly, building houses stimulates the construction and real estate industries, sectors which collectively employ 10% of our state’s workforce and account for approximately 20% of Rhode Island’s gross domestic product.20 Moreover, the availability of affordable housing directly affects our ability to attract and maintain a productive workforce. In 2018, only 2.4% of the rental units in Rhode Island were vacant, making it very difficult for talented, prospective workers to move to our state and contribute to our local economy.21 People who qualify for affordable housing are typically office clerks, retail salespersons, nurses, and home health aides.22 If our state wants these industries to expand and create new jobs, we must ensure that these sectors’ employees have somewhere to live. An in-depth study of the BHRI program (discussed above) found that the first $50 million allocated towards affordable housing supported the creation of 6,120 new jobs, which generated $787,741,072 worth of economic activity.23
Additionally, making housing affordable substantially increases our residents’ disposable income, providing them with more money to spend in the local economy. Approximately 35% of Rhode Island households are cost burdened, each paying over 30% of their annual income on housing.24 This decreases the annual purchasing power of nearly 132,000 households by, collectively, about $940 million. This is nearly a billion dollars channeled towards landlords and mortgage lenders, which would otherwise be spent by ordinary residents supporting local businesses. All of this additional economic activity would also generate substantial tax revenue for the state. The first BHRI bond, for example, produced between $6.9 and $11 million in tax revenue by stimulating additional economic activity.25 Increasing the availability of affordable housing in Rhode Island will significantly improve our state’s economy.
The Current System is Broken
Rhode Island is experiencing an acute housing crisis. Over 140,000 Rhode Island households are cost burdened by housing, meaning they pay over 30% of their gross income on mortgage payments or rent.1 Over 84,000 are severely cost burdened, meaning they pay over 50%.2 This situation is getting worse. The ability to purchase one’s own home is an increasingly distant prospect for a rapidly growing number of state residents. In 2016, a household earning $70,000 could afford to buy a house in twelve Rhode Island municipalities without becoming cost burdened.3 In 2018, there were only four municipalities in which they could affordably buy.4 The cost of multifamily homes in particular is rising precipitously. Between 2017 and 2018, the price of a multifamily home in Rhode Island increased by 16.4%.5 The situation for renters is also rapidly deteriorating. In 2018, a median income household could find a place to rent in only eleven municipalities – down from twenty three in 2016.67 The affordable housing crisis also pushes many Rhode Islanders, including children, into homelessness. The number of homeless youth is extremely difficult to quantify, but researchers estimate that there are nearly 4,000 unidentified youth experiencing homelessness in our state.8
To end our housing crisis, all candidates in the Rhode Island Political Cooperative will fight to build thousands of affordable homes and to implement rent control.
*Reprinted with Permission from:
4 Ibid. 1, p. 8.
5 Ibid. 1.
6 Ibid. 3, p. 2.
7 Ibid. 1, p. 9.
8 Marjorie Pang Si En, Falling Through the Cracks: Homeless Students in Rhode Island (2019), p. 7.
10 Ibid. 1.
11 National Low Income Housing Coalition, State & City Funded Rental Housing Programs: Building Homes Rhode Island.
13 Housing Works RI, Special Report: Measuring the Economic Impact of Affordable Housing in Rhode Island (2010), p. 2.
17 Ibid. 1, p. 3.
18 John Gilderbloom and Lin Ye, “Thirty Years Of Rent Control: A Survey Of New Jersey Cities”(2007).
19 Joshua Ambrosius, John Gilderbloom, William Steele, Wesley Meares, and Dennis Keating, “Forty years of Rent Control: Reexamining New Jersey’s Moderate Local Policies after the Great Recession” (2015).
20 Ibid. 12, p. 6.
21 Ibid. 1.
22 Ibid. 12, p. 3.
24 Ibid. 1, p. 6.
25 Ibid. 12.