The development of housing has economic impacts from the pre-occupancy stages of planning, construction, and real estate marketing through the moment residents move in and beyond. A supply of housing that is affordable helps households participate in the local economy.
Housing Development and Jobs
In 2016, building permits valued $236,520,915, which represents approximately 10% of the contribution that construction made to the state’s Gross Domestic Product. Beyond the value of actual development and building of housing, the National Association of Home Builders (NAHB) estimates the residential construction jobs in the state to be 12,735, or 2.4% of the civilian labor force. Moreover, a number of jobs related to residential construction and real estate pay hourly wages that exceed the estimated "State Housing Wage" of $19.49/hour needed to afford a 2-bedroom rental home, according to the National Low Income Housing Coalition's Out of Reach 2017.
Households' Contributions to the Economy
The 2016 Housing Fact Book examined the decreased purchasing power of owners and renters due to paying more than 30 percent of their incomes toward housing, or what is called "cost burden." Based on nearly 56,000 cost-burdened owners and more than 76,000 renters, HousingWorks RI estimated decreased annual purchasing power of $8,711 for owners, and $5,971 for renters. Collectively, this means an estimated $941M paid toward housing costs that could have otherwise flowed through the economy or gone to building economic security for these households.
Housing is where jobs go to sleep at night.
- Nicolas P. Retsinas, Board Chair, RIHousing
Rhode Island Investment in Long-Term Affordable Homes
Given the importance of the value of residential construction, the investments made into the state’s long-term affordable homes is even more apparent. As detailed in the State’s 2015-2019 Consolidated Plan, during the first Program Year (PY), the state anticipates nearly $11M of Federal investment as well as an additional input of $6.4M of state funds toward the creation and rehabilitation/mediation of nearly 1,100 long-term affordable and healthy homes.
Despite the economic importance of the development of these homes, the state’s per capita investment falls far short of most of our New England neighbors. Four of our five New England states have permanent funding streams for per capita investment in long-term affordable homes that range from $18.03 (ME) to $99.72 (MA). Not only does Rhode Island lack a permanent funding stream for affordable homes, the current level of investment from bonds and smaller state programs financed by Rhode Island Housing measure only $8.26 per capita.
Recovery from the Recession
Rhode Island has made substantial gains since the Great Recession that began in 2007-2008. However, while the overall unemployment rate of 4.9% at the close of Q4 2016 has recovered to pre-recession levels, there are still weak spots within demographic groups, where the rates for youth under 19 and 24 are triple and double the overall rate. Similarly, foreclosures have decreased 45% and seriously delinquent loans have fallen 57% from their highs in 2009. Yet, in 2016, foreclosures were 32% higher than 2015, and the rate for seriously delinquent loans is still ninth highest in the U.S., which is more than double pre-recession rates.
Learn more about The Economics of Housing Families.