Rhode Islanders overwhelming passed a slate of bonds on Election Day, including $120 million to deal with the state’s housing crisis amid soaring rental costs and the nearly 100% increase in the median price of homes since the pandemic.
Overall, the housing bond garnered 66% of the vote. That high percentage was beat only by the $53 million green economy bond, which passed with 67% of the vote.
Where will the money go?
The bond will be for $120 million. Here’s how it breaks down:
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$80 million: Increase/preserve income-restricted housing with $10 million that “may” be used to support a new public housing development program
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$10 million: Property acquisition and “redevelopment of existing structures”
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$5 million: Property acquisition for “redevelopment as affordable and supportive housing”
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$20 million: To build income-restricted homeownership units
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$4 million: Pay for pre-development and site infrastructure for income-restricted housing
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$1 million: Help municipalities “plan and implement changes that up-zone or otherwise enable additional housing development.”
What has this looked like in the past?
The state has lots of programs it uses to funnel money toward housing projects. Nonprofit developers have widely and loudly approved of programs to help buy land and offset the costs of site infrastructure.
When it comes to home ownership, the state has supported programs to help developers build new single-family houses and duplexes, like SWAP Inc.’s five duplexes in South Providence. There, the city gave the developer the land and paid for remediation while the state subsidized the purchase price, bringing down the asking price to $309,000 – about a $300,000 subsidy per duplex.
Starting on Jan. 25, 2023 and lasting until Oct. 27, 2023, the state doled out an estimated $30 million in American Rescue Plan Act, or ARPA, funds, to pay $17,500 toward the down payment for “first-time homebuyers,” who made less than $112,555 as a couple or less than $129,438 as a household of three or more.
Rhode Island Department of Housing Spokeswoman Emily Marshall wrote in an email that the down payment grant program won’t be coming back.
“Instead, in line with the language approved by the General Assembly, the funding will primarily focus on supporting new developments and increasing the availability of affordable homeownership opportunities,” she wrote.
There is no plan for what to do with the money yet, but “discussions are underway to determine how the funds will be allocated,” she wrote.
When it comes to big projects, RI Housing subsidies projects through loans with interests rates below what is available on the private market.
Is $120 million a lot of money?
The $120 million the state will borrow for the housing bond will likely go a long way, aiding a wide variety of projects across seven different categories of funding.
How far would that $120 million go if it were only spent on building housing? Not very far.
Based on recent project estimates, the per unit cost to build an apartment building ranges from $431,818 for a high rise with elevators down to $306,521 for three-story walk-up buildings.
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Crossroads Rhode Island’s Summer Street project, 176 one-bedroom units in a five-story building, has an estimated total cost, including plans, insurance and financing, of $76 million, or $431,818 per unit. Construction alone is estimated at $55 million. The project has 17 funding sources.
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In East Providence, an initial proposal for 160 units in a former nursing home on Taunton Avenue was estimated to cost $60 million, or $373,000 per unit.
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In Westerly, a proposed 2,300-unit apartment complex that would replace a golf course has an estimated cost of $705 million, or $306,521 per unit.
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In Central Falls, the city built two three-story single-family houses for about $600,000 a piece
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In Providence, SWAP Inc. built five duplexes on city-donated land for $600,000 each, or $300,000 per unit
How many units would $120 million build if it were spent solely on construction?
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At $431,818 per unit, it would build 278 apartments
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At $306,521 per unit, it would build 391 apartments
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At $600,000 per house, it would build 200 houses
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At $600,000 per duplex, it would build 200 duplexes, but 400 total units
What are developers saying?
For SWAP Inc. CEO Carla DeStefano, the point is state leaders should be looking at how bond and federal stimulus funds were used in the past and what “creative ways” the money can be used to maximize the return on investment.
With Providence’s Comprehensive Plan allowing for denser building in much of the city (most of the city’s single-family zoning was left intact, while all duplex zones will be turned into 3-family zones), there is a lot of potential for new housing funded by the bond.
“I’d like to see more for-profit developers getting into entry-level building again,” DeStefano said.
The state’s new “turnkey” program, currently a $1 million pilot project, could be another way to maximize the impact of the housing bond and increase income-restricted housing outside of Rhode Island’s urban core. Providence allows some of the densest development in the state.
The pilot program offers developers, or anyone building a house or multifamily building for sale, a straight subsidy if they agree to put an income restriction on the deed of the unit, lasting for 15 years. That income restriction limits the income of who can buy the house and how much it can be sold for, but only for 15 years.
For DeStefano, one of the ways to stretch the funds to create more units is to encourage building duplexes instead of single-family houses, like her South Providence development. That would; however, require many cities and towns to allow duplexes instead of solely single-family homes.
“In suburban settings, on same lot that a 1-family can go, just go up a level,” she said. “I think that might be something be more palatable to some of the suburban communities.”
A duplex lowers the actual cost of buying by bringing in income to offset the mortgage payment, opening home ownership to people who would otherwise be shut out.
With high interest rates, expensive land and construction inflation, there is a “fair amount of subsidy needed” to make a new unit cheap enough for low- and middle-income families, she said.
At Pawtucket Central Falls Development, Executive Director Linda Weisinger said the state’s previous site acquisition programs have been a huge help, and allowed the organization to buy a former group home, which it renovated, and to buy a former medical building in Pawtucket it is converting into 15 new apartments. Her group also constructed five new townhouses in Pawtucket and sold them at a steep discount, but they took a while to sell.
Weisinger said her organization is lining up projects for the next few years and the $120 million bond, however the money goes out, will help leverage other private and federal subsidies to create more housing units.
“We’re laser-focused on creating housing and addressing the need for affordable rentals,” she said.
For Housing Network of Rhode Island Executive Director Melina Lodge, the money to help buy properties is a critical resource, especially as the state has limited land available for development. Helping purchase that land speeds up the building process.
Another critical component for Lodge was the money that will be used to keep income-restricted housing on the books. Most deed restrictions, and the subsidies that came with the restriction, last for 30 years. After that, income-restricted housing owners usually look for funds to renovate the apartments and to continue to subsidize the rent, keeping them at below-market rates for the next 30 years.
“We need to make headway on this crisis so we don’t find ourselves back in this space,” Lodge said.
How big was the margin and where did the bond pass?
The housing bond garnered 66% of the vote, 303,321 to 158,855. It passed by a majority in all of Rhode Island’s 39 cities and towns, but in a few, it barely squeaked by.
In most cities, the housing bond won by a landslide, at 88% in Providence, 79.7% in Pawtucket and 68% in Cranston.
Some notable tallies:
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Burrillville: Passed 50.2% (4,007) to 49.8% (3,977), a difference of 30 votes. There, 9.76% of housing stock is income restricted
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Exeter: passed 50.5% (1,927) to 49.5% (1,890), a difference of 37 votes. There, 7.28% of housing stock is income restricted
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Scituate: passed 50.5% (3,134) to 49.5% (3,070), a difference of 64 votes. There, 0.87% of housing stock is income restricted
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Coventry: passed 52.5% (9,789) to 47.5% (8,858), a difference of 931 votes. There, 5.06% of housing stock is income restricted
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Newport: passed 72.9% (6,682) to 27.1% (2,486), a difference of 4,196 votes. There, 15.64% of housing stock is income restricted
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Pawtucket: passed 79.7% (16,788) to 20.3% (4,281), a difference of 12,507 votes. There, 8.21% of housing stock is income restricted
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Providence: passed 88.3% (41,753) to 11.7% (5,513), a difference of 36,240 votes. There, 14.31% of housing stock is income restricted
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This article originally appeared on The Providence Journal: Voters approved a $120M housing bond for RI. Here’s how it will be spent.