01:37 AM EDT on Wednesday, May 11, 2005

BY LYNN ARDITI
Journal Staff Writer

The number of single-family house building permits issued in the state during January, February and March declined 19 percent, to 334, the lowest since 1991, according to the Rhode Island Builders Association.

"There's no reason permits should be down," said Roger R. Warren, the association's executive director. "Basically, the problem is that cities and towns have pretty much closed down the doors in terms of issuing building permits."

Communities concerned about the cost of educating their growing school populations have tried to limit new house construction, Warren said, by declaring building moratoriums, setting permit caps and raising permit fees.

For example, Smithfield recently imposed a new house-construction "impact fee" of $8,500, Warren said, to cover the cost of providing town services. For a duplex, the impact fee is $7,500 per unit, he said, or $15,000.

Henry C. "Chuck" Lemire Jr., regional director and executive vice president of ReMax of New England, said builders also are being squeezed between the spikes in land and lumber prices.

"There's plenty of land out there," Lemire said, but "sellers believe their land is worth more than what it really is" so they are asking too much money. For a builder, "if you're only going to make $10,000 on a $500,000 house," Lemire said, "are you gonna go through with it? No."

In Rhode Island, land represents more than 45 percent of the cost of building a new house, compared with 34 percent nationally, according to the builders association.

Journal photo / Andrew Dickerman

Richard Jimmis of North Kingstown installs plasterboard at a house on Wilshire Lane in Cranston.

As a result, more and more "working Rhode Islanders" are finding that buying a new house is unaffordable, said Warren, of the builders association.

"Housing prices are increasing faster than income, which means less people can afford housing," he said. "Sooner or later, only the very, very wealthy will be able to afford single-family homes."

Lemire, of ReMax, however, said he is more optimistic. "It's just a point in the marketplace. I call it the pendulum," he said. "At some point in time, the pendulum will swing back."

Lynn Arditi can be reached at 401-277-7335 or by e-mail at larditi [at] projo.com