Why isn’t Providence building more apartments?
The evidence suggests lots of people want to live in Rhode Island’s capital city. The vacancy rate for apartments in Providence was just 2.9% during the second quarter, the 11th-lowest in the country, according to Reis Inc. data. More than 90% of units in buildings such as The Regency Plaza and The Foundry are occupied. There’s already a waiting list for the new micro-lofts coming to the Westminster Arcade. The Superman building’s owner is desperate to convert his white elephant into residential dwellings.
If people want to live in Providence, that’s a good sign for the Rhode Island economy. More residents means more customers, which means more businesses, which means more jobs, which means even more residents – a virtuous circle that drives economic growth. But they’re not going to come here without a place to live.
Slate’s Matt Yglesias made the point well in a recent post comparing New York and Texas (emphasis mine):
The American population is growing. And it’s largely growing in Texas. The overall gestalt is very growth-friendly. There are a lot of different ins and outs to it, but the main thing I would say to the residents and politicians of liberal coastal areas is that the Texas gestalt is growth-friendly because, quite literally, it welcomes growth while coastal cities have become exceptionally small-c conservative and change averse. But if New York and New Jersey and California and Maryland and Massachusetts don’t want to allow the construction of lots of housing units, then it won’t matter that Brooklyn, N.Y.; and Palo Alto, Calif.; and Somerville, Mass.; are great places to live – people are going to live in Texas, where there are also great places to live, great places that actually welcome new residents and new building.
It sure looks like Rhode Island doesn’t welcome new building. The Providence metropolitan area regulates housing growth more heavily than just about any other section of the United States. If you talk to developers, they say the costs of new construction in Rhode Island are just too high to make economic sense – relative to the rents they’d be able to get – without major public subsidies like the historic-preservation tax credit.
Regardless of how you feel about public subsidies for construction projects, state and city leaders who care about economic development should be looking seriously at why market signals are pointing to so much interest in renting apartments in Providence, and whether more can be done to meet that demand. At least when it comes to population growth, how can Rhode Island become more like Texas? And should it?
Think back to that apartment vacancy rate of 2.9% in Providence, the 11th-lowest in the country. That’s good for landlords (they can charge higher rents) but bad for renters (they have to pay higher rents).
Now look at Texas. The vacancy rate in Austin is 4.3%, which is 46th-lowest in the country, 35 spots below Providence. There are even more vacant apartments in other Texas cities: Dallas and Forth Worth are at 5.2%, San Antonio is at 5.7% and Houston is at 6.6%. Yet all those cities have lower unemployment than Providence:
• Related: Watch Executive Suite with Gorbea, Marcantonio on RI housing (Oct. 29)