AT THE REVENUE Estimating Conference at the Rhode Island State House earlier this month, economists from Global Insight and Moody’s/Economy.com highlighted the central influence that local and national housing trends have had on the Rhode Island economy. According to Moody’s economist Andres Carbacho-Burgos, the lack of affordable homes in Rhode Island is key to the Ocean State’s ongoing foreclosure epidemic and current economic challenges. While the recent data paint a stark picture, the message is not new to Rhode Island; housing development is a key economic driver.

The housing market has had an enormous and perhaps unprecedented impact on the country’s current economic climate. As HousingWorks RI documented in its 2008 Fact Book, the rising costs of housing, food and utilities have thwarted families’ ability to save and spend on other goods or services. The overall decline in the housing market has reduced consumer confidence, and families unsure of their future economic security are less willing to make large purchases. At the national level, stabilizing the housing market remains a key part of economic recovery.

Rhode Island came into the foreclosure and financial crisis with a deficit of affordable homes. Rhode Island’s Five Year Strategic Housing Plan 2006-2010 called for building 5,000 affordable homes in higher-density designs that help “preserve the state’s unique features of compact settlement patterns surrounded by farmland and forests.” The total number of affordable homes built from 2006 to 2007 was less than 700.

Rhode Island still has a serious deficit of affordable homes. This is an important distinction, because unlike other areas of the U.S. that overbuilt during the real-estate boom, Rhode Island can responsibly use incentives in home building to help jumpstart the economy.

While local headlines on real-estate prices and foreclosures have given some the impression that homes are now affordable for most Rhode Islanders, HousingWorks RI has found that this is simply not true. Home prices have stabilized and declined in Rhode Island, but they still remain out of reach for many.

In September 2008, the median single-family home in Rhode Island sold for $230,000, down 19 percent from 2006. But to afford that home, a family needs to earn $74,000. The median Rhode Island household made just $53,568 in 2007 — a shortfall of more than $20,000. Clearly, there is still a very real gap between incomes and home prices in Rhode Island.

The story for renters in Rhode Island is not much better. The average cost of a two-bedroom apartment in Rhode Island in June 2008 was $1,100, as it has been since 2006. You need an income of at least $44,000, or about $21 an hour, to afford that two-bedroom apartment. Foreclosures are contributing to the problem as they decrease the numbers of apartments available in the cities.

Rhode Islanders understand the connection between affordable homes, vibrant communities and a strong economy. In 2006, voters overwhelmingly approved a $50 million bond issue to create affordable apartments and homes. This investment is already having a big impact. So far, 635 new, affordable homes (491 rental, 144 ownership) in 21 communities are being funded through the Building Homes Rhode Island program. The first $25 million of bond funds are leveraging $277 million in Rhode Island’s home-building industry.

This investment represents a thin ray of light at a time when there is little positive news about the economy in general. These funds are not just increasing the supply of homes that working families can afford, but this investment is also putting Rhode Islanders to work — right now. The National Association of Home Builders estimates that the construction of 100 single-family homes generates the equivalent of 284 full-time jobs in construction in the first year. In the current economic crisis the construction sector has been hard hit by job losses. Putting folks to work boosts Rhode Island’s overall economy.

The foreclosure crisis and its fallout understandably dominate the headlines today. Rhode Island has been hit hard by the rise in foreclosures, with the highest rate of foreclosures in New England and one of the highest rates in America. Foreclosures are having a devastating impact on families and neighborhoods. Congress has tackled the problem by creating the Neighborhood Stabilization Program, which will provide some relief for those affected by foreclosure. However, this aid will not resolve the fundamental, longstanding affordability gap in Rhode Island, and it must not distract us from increasing our supply of affordable homes.

As our leaders look to address this economic crisis and plan for a sustainable future, investing in the housing sector is an essential part of the solution for Rhode Island. Creating safe, affordable homes re-invigorates our cities and towns, puts people to work, and creates a climate for economic prosperity.

Barbara J. Silvis is chairwoman of HousingWorks RI and vice president and manager of loss prevention Web resources at FM Global, the insurance company.