One reason for Rhode Island's lack of construction, say industry experts, are restrictive zoning laws.

01:00 AM EST on Wednesday, November 16, 2005

BY LYNN ARDITI
Journal Staff Writer

Amid Rhode Island's biggest surge in condominium developments in two decades, the construction of single-family houses has sunk to its lowest level in years.

The number of permits issued in Rhode Island for single-family house construction from January through September fell to its lowest level in nearly 15 years, according to the Rhode Island Builders Association, an industry group.

Rhode Island now ranks fourth in New England for single-family house construction, after Massachusetts, Connecticut and Maine, according to data from the National Association of Home Builders.

During the first nine months of this year, building permits for single-family houses in Rhode Island were down 8 percent, the national association reported, compared with an average increase in New England of 3 percent. The national rate is up 4 percent.

Roger Warren, the Rhode Island Builders Association's executive director, said that zoning laws, land-use restrictions and development fees, coupled with rising land prices, are discouraging construction of houses -- particularly, affordable ones.

"It's why when you drive down the street and see new construction, it's all this large, $600,000 or $700,000 homes," Warren said. "You've got about $200,000 in land [costs]. So in order to get those land costs back, they build at the high end of the market."

The high end is where Bob Baldwin is doing most of his work. The owner of R.B. Homes Inc., in Lincoln, Baldwin recently completed houses on one-acre lots in a Greenville subdivision that are selling for $650,000 to $750,000.

"I understand cities' and towns' concerns about maintaining the rural character," said Baldwin. "But you cannot put 25 houses on 100 acres and solve the housing shortage in the state of Rhode Island. You can't do it."

The high price of land is one reason why house builder Gregory Richard's company, Kirkbrae Country Estates, in Lincoln, stopped building single-family houses.

"Maybe 10 years ago, house lots were $80,000 to $100,000," said Richard, the company's president. "Now that same lot is $250,000. . . For the builder to get the most out of what he's paid for the land, he's got to build a 4,000- to 5,000-square-foot house."

Restrictions that limit what portion of the land the builder is allowed to build on, Richard said, also drive up the cost. Towns often enforce strict requirements -- wetland buffers, slopes, underground utilities, granite curbing -- that require builders to acquire more land.

"So now instead of having a half acre a lot," Richard said, "it may take you an acre of land to come up with a half acre" to build on.

Not so with condos. Kirkbrea Country Estates is currently building 54 condo units in the Rumford section of East Providence. The one-bedroom and two-bedroom units run about 1,000 to 1,270 square feet. The condos cost from $239,000 to $299,000, he said. The buyers, he said, are mainly empty-nesters and some younger couples.

In Providence, developers are building more than 400 luxury condo units priced at $400,000 to $2.5 million.

Rhode Island's flourishing condo market, however, is not expected to satisfy the state's housing needs. Even if all the condo units built this year were added into the mix, the number of residential housing units built so far would amount to just 1,700 or 1,800, said the builders association's Warren. "We would [still] be declining," Warren said. "It's still a supply imbalance and it's still feeding a price appreciation."

Meanwhile, Rhode Island's population is growing. During the last five years (1999 to 2004), the state's population of just more than 1 million grew at an average rate of about 0.8 percent per year, said Bernard Markstein, director of forecasting and a senior economist at the National Association of Home Builders. That means the state gained about 84,000 people a year, based on the 2000 census data which reported a population of about 1.05 million.

Bernard Markstein, director of forecasting and a senior economist of the National Association of Home Builders, said that the population growth rate in Rhode Island does not explain the slowdown in single-family house construction.

"I suspect it's more zoning issues," Markstein said, "a combination of taxes, labor costs and zoning."

The decline in single-family house construction in Rhode Island helps to restrict supply -- and that, in turn, keeps prices up.

"The great majority of what we've been able to build in the last four, five years is at the top of the market," said Warren.

"If you could build adequate supply," he said, "you could bring some of those prices down. That would help the work force and some of the lower-income [buyers] that wouldn't be able to get in the housing market -- and still can't get into the housing market today."

Contact Lynn Arditi by e-mail at larditi@projo.com or call (401)277-7335