What Business is Saying
June 2, 2005 was a watershed moment. A rally echoed in the statehouse rotunda, complete with buttons, speeches and pumping placards. The usual suspects filled the marble stairs: advocates for the poor, lobbyists, nonprofit housing developers, policy wonks, legislators, supporters young and old.
Then, for the first time publicly on this issue, Mike McMahon, head of the state’s Economic Development Corporation, stepped to the microphone to plead the case for affordable housing. Michael Ryan, executive vice president of Narragansett Electric, spoke too. “There are some who might ask why would the business community get involved with an issue that doesn’t affect the bottom line,” his amplified voice boomed out to the crowd of hundreds. “Well, for the business community, this does affect the bottom line.”
The worry is simply this: the state’s severe shortage of affordable workforce housing is hurting our long-term business prospects.
In 2004, then-Fleet Bank released a research report titled “The Economic Impact of the Housing Crisis on Businesses in Rhode Island.” Among its conclusions, “There is evidence to suggest that increasing housing costs and slow down in new housing supply may place significant new burdens on employers and the Rhode Island economy.”
Joseph J. MarcAurele, president and CEO of Citizens Bank of Rhode Island, said on January 28, 2005: “The bottom line is affordable housing is a huge problem in this state. We consider it to be our problem. A lot of people who work for us or could work for us are starting their careers and finding how expensive the cost of living is. Someone has to step up to the plate and help.”
He’s not the only banker who thinks so. On June 14, 2005, Mr. MarcAurele and six other bank presidents and CEOs signed an open letter in the Providence Journal announcing their decision to join the HousingWorks RI movement, adding their weight to the hundred other organizations that are members, including many of the state’s chambers of commerce.
The letter in the Projo’s op-ed pages stated unequivocally: “We’re bankers. We’re taught to think in numbers, percentages, returns on investment. And we say this: Rhode Island’s skyrocketing housing costs are adding to a negative bottom-line effect on our state’s ability to grow, create jobs and attract new businesses.”
The letter laments, “For the 10,000 households we added from 2001 to 2003, we only built 7,800 new homes. Rhode Island is in crisis, one that threatens the vitality of our economy.”
“The link between economic growth and housing is not a new concept in Rhode Island,” Brenda Clement, executive director of the Housing Network of Rhode Island, has pointed out. “Mill owners understood that.”
It’s worth pointing out another historical precedent. After the Civil War, the last time business here solved its workforce housing problem, Rhode Island became for fifty years among the wealthiest places on earth.
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Something's Got to Give: Higher Wages?
A 1999 study* found that 47% of RI’s large businesses already had to “gross up” (increase) their compensation to convince employees to relocate to Rhode Island.
And since you can no longer rent a decent apartment anywhere in Rhode Island even if you work two minimum-wage jobs, there’s lots of pressure to increase service worker’s wages, and wages on blue-and pink-collar jobs.
But higher wages are only part of the business gloom. The 2004 Fleet research report warned, “A recent study by Economy.com found an important negative relationship between cost-of-living and employment growth. Higher cost of living areas tended to have lower employment growth rates than lower cost of living areas.”
Higher wages. Slower growth. Two profit-squeezing reasons why business wants to see new affordable rental and starter homes built as quickly as possible and is speaking at rallies, urging the state to help.
*Study conducted for Rhode Island Public Expenditures Council and the RI Economic Policy Council.
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