09:26 AM EST on Thursday, November 17, 2005

BY RANDAL EDGAR
Journal Staff Writer

There's a reason more and more Rhode Islanders are feeling squeezed by the high cost of housing. The median price of a house in the state stands at $264,700 - meaning an equal number of houses have been sold above and below that figure. A new study concludes that a household would need a gross income of $85,380 a year to afford a house at the median price. Six out of 10 households in the state, however, have annual gross incomes under $50,000.

A $50,000 household income might allow a nice car, a large-screen TV and even a summer vacation, but there is one big thing it won't do: buy a median-priced single-family house -- anywhere in Rhode Island.

Even in communities where housing prices are lowest, $50,000 won't cover a mortgage, taxes and insurance and leave enough for food, clothes and other essentials, a new study concludes.

A $75,000 household income doesn't do much better. It's enough to buy a median-priced single-family house in six communities -- Central Falls, Pawtucket, Providence, Warwick, West Warwick and Woonsocket.

Buyers who really want a choice need to earn around $100,000. That's enough to buy a modest house in 20 of Rhode Island's 39 cities and towns.

The findings come from a 55-page report that's being released today by HousingWorksRI, a coalition of more than 100 agencies, businesses, corporations and developers that have banded together to bring attention to the state's housing shortage.

Coalition members said yesterday that the study bears out what housing advocates have been saying for years: Rhode Island has a housing crisis, one that is stretching household incomes too far, hurting the state's economy and adding to record numbers of homeless people.

Without more housing, they said, the state's economy will stagnate, hurting everyone -- people who already own homes, people who want to buy and those just trying to make ends meet.

Journal photo / Bob Breidenbach

This Warwick home is selling for $124,900. It has 3 bedrooms, gas hot water and heat. It was built in 1925 and has 988 feet of living area. The estimated taxes are $1,386 per year.

"Either we stop growing, or we have to have a place for people to live and work. You can't have it both ways," said Richard Godfrey, executive director of the Rhode Island Housing and Mortgage Finance Corporation and a HousingWorksRI co-chair. "These numbers put it down very graphically."

The report compares data from two years, 1999 and 2004, a five-year span during which the median price of a single-family house in Rhode Island jumped 110 percent, from $126,000 to $264,700.

The numbers tell the story of two distinct groups.

People who bought their homes five years ago or before might see the dramatic markup as great news, coalition members said.

The other group, renters and recent buyers, includes people who are stretching their incomes too far. Some might have mortgages with low front-end costs -- such as interest-only payments -- that will eventually mushroom to levels that force them out of their homes, Godfrey said. Others might be relying on income from two jobs or sacrificing on food or other essentials, he said.

William Hatfield, president of Bank America Rhode Island, a HousingWorksRI member, stopped short of saying the state's housing market is hurting his bank's ability to recruit out-of-state employees. But he said housing is an an issue that Rhode Island needs to address "head on."

"I see it truly as an economic development issue, I see it as a jobs creation issue," he said. "You compare Rhode Island to other parts of the country, and that's where there is a significant difference. As a major employer in the state, it's something we're very conscious of."

THE REPORT'S findings are based on the federal standard that housing, to be affordable, must consume no more than 30 percent of the gross monthly household income. For owners, that includes the mortgage, house insurance and taxes. For others, that means rent.

Godfrey acknowledged that households can exceed the 30 percent figure by a few points and still get by, but he noted that the acceptable percentage already has moved up to accommodate rising prices. It used to be 20 percent, then it went to 25, and then to 30, he said.

Journal photo / Bob Breidenbach

North Providence. $119,900. 2 Morrill Lane, Marieville section.
Two bedrooms; gas hot water and heat; built in 1930; 672 sq. ft. of living area; estimated taxes: $1,491 per year.

Based on the 30-percent standard, the report paints a bleak picture for Rhode Islanders who hope to buy.

Fewer than half the state's households, 42.4 percent, earn at least $50,000, the figure that won't cover a median-priced house and still be within the federal standard. The percentage in the report is based on the median Rhode Island household income of $42,090 from the 2000 U.S. Census. By 2004, the median household income reached $48,722, according to Ari Matusiak, director of HousingWorksRI.

"It means that all those families that did not get in before the housing market took off are in a lot of trouble," he said. "It means that the American dream of homeownership and wealth creation and equity, all of those things, are not there."

And while 60 percent of Rhode Islanders own homes, the state ranks 47th nationwide in homeownership, Matusiak said. The national average is 66.2 percent, he said.

The news is also bleak for renters.

Using a Rhode Island Housing and Mortgage Finance Corporation survey of newspaper apartment ads from 2004, the report concludes that the average rent for available two-bedroom apartments is out of reach for households earning less than $35,000.

Noreen Shawcross, chief of the state's newly created Housing and Community Development office and until recently the director of the Rhode Island Coalition for the Homeless, said the high housing and rental costs have a cascading effect that is pricing the lowest wage earners out of the rental market. According to the report, 1,200 of the 6,000 people who passed through the state's homeless shelters last year had jobs. And the number of people needing shelter this fall is at an all-time high, Shawcross said.

"I constantly say to people that homelessness is not just about the people who are homeless," she said. "It's about the housing market."

THE REPORT suggests that building the housing Rhode Islanders need and can afford won't be easy. Of the 50,000 new jobs projected by 2010, 24,000, or 48 percent, will pay wages too low even to rent a two-bedroom apartment, the report states. Godfrey said the fastest-growing job in Rhode Island is a food service worker, who earns about $13,700.

"So if you had four food service workers in a family, you're barely making it," he said.

While the state has taken steps, increasing money for programs to prevent homelessness and affordable housing production, and rewriting its affordable housing law, coalition members agreed the numbers in the report make it clear that these moves are not enough.

Journal photo / Bob Breidenbach

Providence. $119,900. 21 Bergen St. Mount Pleasant area.
Three bedrooms; oil hot water and heat; built in 1927; 1028 sq. ft. of living area; estimated taxes: $2000 per year.

A new Low and Moderate Income Housing Act, adopted by the General Assembly last year, encourages communities to take an active role in finding sites that are suitable for affordable housing. The law requires each community to work toward a goal: that 10 percent of its housing be subsidized and income-restricted, meeting the state definition of affordable.

But community by community surveys in the report suggest that even 10 percent across the board won't be enough.

For example, Burrillville needs 151 affordable-housing units to reach 10 percent. But the town has 503 households that are spending more than 50 percent of their income on housing, the report states.

Central Falls, with 837 affordable units, has already reached 10 percent. But the city has 1,575 households spending more than 50 percent of their income on housing.

Matusiak, the HousingWorksRI director, one part of the solution will be a statewide strategic housing plan, now in the works, that will serve as a "policy roadmap" on housing issues.

While housing advocates have said the state needs to spend more on affordable-housing production, Godfrey said the state also needs to find ways to allow denser zoning that lowers development costs.

He also said the state needs to tackle the issue of education aid so that communities will be more welcoming to housing for families.

"As long as each town is going to pay to educate kids, they're going to say I don't want kids," he said.

Coalition members said the first step is to increase public awareness of the housing issue so that people, even those who already own and are not overwhelmed by their monthly payments, see it as a critical issue.

Formed last year, HousingWorksRI has two other co-chairmen, in addition to Godfrey: Ronald V. Gallo, president and CEO of the Rhode Island Foundation, and Anthony Maione, president and CEO of the United Way of Rhode Island.

Awareness is the first step, members said. Once the group achieves that, it can start to get things done, Godfrey said.

"You have to have acceptance first," he said. "The people drive the politicians. The people have to embrace the issue and tell the governor and the General Assembly this is a problem."

Find more data on housing affordability throughout the state, in the full HousingWorks RI factbook, and talk about how the price of housing has affected you, at:

http://projo.com