Governor Daniel McKee is Rhode Island’s billion dollar man.
Just days after Governor McKee took office earlier this month, President Joe Biden signed into law the American Rescue Plan Act, a consequential federal relief package which includes an estimated $1.8 billion for Rhode Island and its municipalities – money intended to help manage the COVID-19 pandemic, prevent layoffs and jump-start economic recovery. The new governor and the General Assembly must now decide how to appropriate the state’s estimated $1.1 billion share of the incoming dollars.
Beyond filling existing budget gaps, McKee has said he hopes to prioritize investments in infrastructure. But what exactly is infrastructure? While the term often invokes roads and bridges, it can be applied to a much broader range of projects and programs that improve quality of life and increase economic performance. And with the federal government expected to pass a trillion-dollar-plus infrastructure package – likely to center on surface transportation upgrades – later this year, the time is right for state leaders to think outside the box. McKee and lawmakers would do well to focus on fixing structural challenges in Rhode Island that are unlikely to be addressed directly by Congress in upcoming legislation.
Here’s one worthy infrastructure endeavor: Unleashing a money cannon to solve Rhode Island’s housing shortage.
A 2016 report from HousingWorks RI found that the state would need to produce at least 35,000 new housing units by 2025 – 3,500 per year – to meet demand. Rhode Island has failed to clear even this low bar. Since 2016, just 1,280 residential units have been approved for construction per year, far short of the modest 3,500 goal. The state consistently issues the fewest residential building permits per capita of anywhere in the country. The consequence is a housing affordability crisis: Three in four registered voters in the state say the cost of buying or renting a home is a very serious or somewhat serious problem, a 2018 poll from Roger Williams University and WPRI found.
At this rate, it will take nearly three decades to build the amount of housing demanded in one. And that’s just to keep up with the current lethargic trend of population expansion. Had the number of Rhode Islanders continued to grow at the rate experienced in the first three quarters of the 20th century, the need would be much, much greater, as WPRI’s Ted Nesi pointed out in a recent column. Reversing Rhode Island’s population woes will require an even more ambitious target.
By dedicating a substantial portion of Rhode Island’s relief funds towards financing and incentivizing the production of thousands of homes, state leaders can alleviate the housing shortfall and affordability crisis while reinvigorating the economy. Think of it as a moonshot mission – but rather than sending people into space, we’re ensuring Rhode Islanders can afford to put a roof over their heads.
Rhode Island has both the need and economic capacity for major investment. Take the example of the state’s construction workforce. Employment in this industry peaked just before the 2007 housing crisis and Great Recession. It never recovered from that downturn, and has fallen further off track during the current one. Rhode Island now has 15% fewer construction workers than in January of 2007, a sign the economy has substantial room to grow.
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Looking economy-wide, the share of Rhode Islanders who are either employed or looking for work has fallen steadily over the past 15 years, reaching lows never before seen in the era of the two-earner household. Some of the reduction in workforce participation is driven by Rhode Island’s aging population, to be sure. But economic factors like a scarcity of good, well-paying jobs are also driving the decline. By ramping up spending on home production, state leaders can boost the demand for workers in select sectors and across the economy – helping to raise wages and draw Rhode Islanders back into the workforce.
Local resistance to such an ambitious plan should be expected. Zoning board and city and town council meetings are full of residents raising concerns about the financial downsides of new housing: it will cause school enrollment to increase, it will burden wastewater infrastructure, it will dent property values and thus property tax collections, and on and on. Contentions like these are often unrepresentative of the desires of communities at large. Nonetheless, they have long been a major stumbling block preventing progress on housing goals.
It doesn’t have to be this way. Perhaps more than any governor in Rhode Island’s recent history, McKee is well-suited to deliver the message to municipalities that they should come to the table. A former six-term mayor, he is known for being closely attuned to the opportunities and concerns facing Rhode Island’s 39 cities and towns.
And with a billion dollars to spend, state leaders can literally afford to assuage local concerns. They can win over officials and residents by pledging state money to fill funding gaps caused by the arrival of new neighbors. Need to expand a school building? The state will cover part or all of the cost. Need to upgrade the town sewer system? Ditto. Need to fill a temporary dip in tax revenue? No problem. (Of course, increasing the tax base itself is bound to be good for revenue collection.) The same approach can help the state encourage localities to adjust their land use rules to allow more housing density, a concept Massachusetts has piloted.
Collaboration with municipal leaders is the core of Governor McKee’s governance style. He should deploy this aptitude to communicate to leaders and residents alike that, as HousingWorks director Brenda Clement puts it, “We’re building things that we want to be assets for the community, not detriments to the community. Trying to address the underlying regulatory and funding barriers are things that we need to work on together.” And if that alone doesn’t do the trick, a money cannon should help.