Coming together and understanding the way developments are achieved is important for the addition of housing during this great time where units are greatly needed.
Originally published by the Providence Journal on February 11, 2024 at 6:15 a.m.
Read the original here and repost below:
Apartment construction booming across US. Why not RI? | Opinion
Cliff Wood
Guest columnist
Cliff Wood is the executive director of The Providence Foundation.
You might not realize it when driving through Providence, but apartment construction is booming throughout the United States. More units will become available in 2023 than in any year since the early 1970s. Cities ranging from Austin to Charlotte to Nashville have seen inventory growth as high as 90%. But there aren’t many cranes over our capital city. By at least one measure, the Ocean State ranks last in the nation. Why?
The problem isn’t a lack of demand. People want to live here — something that cannot be said for many other places across the country. So why haven’t developers erected more homes in Rhode Island, particularly in the places where demand is greatest, like downtown Providence? That question could elicit a range of answers, but the reality comes down to two — one economic and the other strategic.
The economic challenge revolves around the return a developer gets on any proposed project. Building materials are just as expensive here as they are in Boston, or on Cape Cod — concrete, lumber and the like. The cost of labor is similar as well. But the rents a developer can charge in Providence are a fraction of what he or she will get after constructing the very same unit in, say, Cambridge or Newton, which brings us to the strategic reason development is so often thwarted in Rhode Island: The Ocean State too often neglects to employ the tools that can help to level the playing field to attract investment.
Rents aren’t the only thing that bear on whether a developer chooses to add to a state’s housing supply. Tax burdens, bureaucratic rigmarole and market uncertainty also play a role. If Rhode Island could best Massachusetts on those fronts, developers would surely migrate here. But far from using these tools to level the playing field, Rhode Island is widening the gulf, incenting developers to go elsewhere and leaving renters here to pay the rising rents born from the reality that we don’t have enough housing.
Consider what’s happening in Boston and Providence today. Boston’s mayor is proposing a program that would allow developers who convert commercial buildings into apartments a 75% reduction on their property taxes — so much that, in one example, a building now paying nearly $250,000 in taxes each year would see its bill to the city drop to less than $30,000. Meanwhile, Providence’s City Council is bringing a lawsuit so that the city can renege on a tax agreement they already approved with a local developer building workforce housing downtown, increasing rates that had already been ratified by a judge.
Put simply, the two capital cities are sending vastly different messages to builders equipped to erect more housing at a time when market conditions already favor Boston. And that’s a shame because Providence can get a lot of development done when it works cooperatively with developers. The successful and popular Farm Fresh project would not have been built if the state and city had refused to reduce the tax burden on the underlying lots.
None of these projects would have been possible without partnership between the public and private sectors — meaning financial incentives for those willing to invest in the Ocean State. But if the government treats builders as pariahs, the Ocean State will lag. When growing demand isn’t met with growing supply, rents rise for ordinary families.
It’s up to Rhode Island’s leaders to find common ground that works for the greater good.
