Providence Metro sees lowest rate of home construction in country in 2022

The Providence-Warwick Metropolitan area saw the lowest rate of approval for new housing units nationwide for 2022, according to a new report by a construction consulting group. 

The report, released Wednesday by Construction Coverage, found that the area produced 2.9 new dwelling units per 1,000 pre-existing homes, the lowest among metro areas of 1 million people or more. The Providence-Warwick Metro area includes all of Rhode Island and parts of Connecticut and Massachusetts. The report analyzed data from the U.S. Census Bureau and U.S. Department of Housing and Urban Development.

The total number of 2,122 authorized housing constructions was slightly higher than that of the number two zone — New York’s Buffalo-Cheektowaga Metropolitan Area — with only 1,597 total units authorized. That came out to three units per 1,000 existing.

“It gathers and supports data that we’ve seen consistently for the last few years,” said Brenda Clement, executive director of HousingWorks RI, in her assessment of the report’s findings.

The report revealed no change between 2020 and 2022 in terms of new housing units built in proportion to those already existing, though the quantity of new dwelling units approved increased nearly 3%.

That means bad news for housing costs in the Ocean State. The 2022 Housing Factbook from HousingWorks RI said rents statewide increase annually at about 24%, the fifth-fastest climbing rental rate in the country.

According to a policy review by the Providence City Council’s Housing Crisis Task Force presented on July 24, Providence saw a nearly 7% increase in average rent between July 2022 and July 2023. Though the city’s median household income is about $49,000 annually, households must earn about $88,000 in order to afford the average rent of around $2,200 a month.

The Construction Coverage report credited the low rate of housing construction nationally with increasing mortgage rates spurred on by the U.S. Federal Reserve’s decision to raise interest rates in an effort to combat inflation. That means fewer people are looking to build new homes.

“While a leveling-out in demand may have helped to slow down price growth, these measures cannot solve another fundamental challenge in the U.S. housing market,” the report read, “a major shortage of housing supply.”

But that has been decades in the making in Rhode Island, a state which has seen an underinvestment in housing since the mid-1980s, Clement said. Over 80% of housing units in Rhode Island were built before 1980, she added. 

“We have been focused on the fact that, on a per capita basis, Rhode Island has, for decades, lagged behind on housing production,” said Joe Lindstrom, spokesman for the Rhode Island Department of Housing. “The McKee Administration has been clear that we need to invest and take other actions to remedy this problem.”

The solution indeed lies with policy makers in the eyes of the Rhode Island Builders Association.

“The industry builds the municipal plan, plans are local, and locally, generally, with few exceptions, the town plans have been to build as little housing as possible,” said John Marcantonio, the association’s CEO. “To build more, don’t look to the industry, look to your local leaders. For the industry, our biggest problem is having the workforce to actually build it.”

The study adds support to the policies the Housing Department is pursuing to increase construction, Lindstrom said.

“It should be noted that this problem has accumulated for decades, so it won’t be solved overnight,” Lindstrom said. “That said, we are working to make progress every day.”

But that’s changing in large part due to 13 bills signed into law by Gov. Dan McKee following the 2023 General Assembly Legislative Session. Among the measures in the legislation: reforms to zoning regulations, streamlining the permitting process, prohibition of rental application fees, incentives for the development of affordable housing, and funding to encourage housing development around transit hubs.

Between June and August, Rhode Island Housing reported attending or plans to attend events related to the construction of 182 units across the state.

“There’s a lot of projects that have been recently approved,” Clement said. “We expect to see that take effect in the next year or two.”