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Obstacles To Building Affordable Homes

At the latest census count, Rhode Island had 462,516 housing units. This ranks Rhode Island 44th in the nation for the count of housing units, but second highest for average number of housing units per square mile. Since 2009, Rhode Island is one of only three states that did not increase the annual number of building permits issued. In 2014, Rhode Island had the fewest permits of any state, but ranked 13th highest in average construction costs per unit, meaning the cost of construction associated with a building permit is high. There are many nonprofit and for-profit developers in Rhode Island who know how to build quality Affordable Housing, but they may face additional obstacles to building. Here’s what holding them back:



Rhode Island's High Cost of Land
Maybe you can afford the structure. What you can’t afford is the land it sits on. Rhode Island land is prohibitively expensive, far above the national average. A finished lot in the Ocean State is 45 percent of the total house price. Nationally, a finished lot costs just 34 percent of the total.

Slow Permitting that Eats Up Profitability
From idea to CO (certificate of occupancy), a developer in Rhode Island can expect to wait two to five years before seeing a return on his or her investment of time and money. Much of that time is spent waiting for permits and approvals. According to an economic study released in 2004 by then-Fleet Bank and Rhode Island Public Expenditures Council, “it takes 2 to 2 1/2 years for approval of a new development” in Rhode Island. And that’s just approval. Then you have to build.

It doesn’t have to be this way. Quality projects and fast permitting are compatible, others have proven. In the rapidly growing vicinity of Dartmouth College, for example, permitting is now as quick as six weeks. It’s almost never more than a year.

Slow permitting makes affordable housing especially unattractive for commercial builders to attempt. Already-lean profit margins shrink while the clock runs and interest payments on the land purchase continue. Slow permitting is one reason big, expensive houses are so popular. “McMansions” are the only projects that yield enough profit so a developer can survive the long wait until a payday.