The Providence economy may need some more apartments

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:

Apartments_unemployment_RI_Texas_May_2013 • Related: Watch Executive Suite with Gorbea, Marcantonio on RI housing (Oct. 29)

18 thoughts on “The Providence economy may need some more apartments

  1. In some ways I agree with the overall gist of your argument, but I’d note that some regulations on developers are good.

    A great first step for Providence would be deregulating its parking requirements to allow people to more easily build without providing so much space for cars. That would be certainly be better than the present situation. But I would also eventually like to see parking maximums. Many growing cities (and generally the ones that people have fond feelings about and want to visit) have no parking minimums, but *do* have parking maximums. So it’s partly about having the right regulations, more than regulations being bad all the time.

    I know you get this issue, but for your general readership, this is a great Yale lecture that explains what the heck I’m talking about: http://www.youtube.com/watch?v=K8vkbfz8PU8.

  2. The providence rental market is skewed by
    Risd , pc, brown and Johnson and wales students.

    Any idea how many rentals for students there are on the east side and
    Elmhurst. Over 50% must be students.

    Not only do students occupy a lot of the rental units, they also tend to overpay which artificially
    Inflates rents.

    Also, probably at least half of providence is not desirable to most potential renters.

    If the market demands more rentals then the private sector can build them.

    • Lost in RI you are correct, Let business decide what is profitable. The local governments of Rhode Island are myopic and self centered about taking care of their cronies. There are enough vacant buildings that need to be torn down and redeveloped. Build real apartments not the triple deckers they are ghettos. Most renters went the amneties of a nice apartment complex such as privacy and safe parking. Most Americans would not live in areas such as Silver Lake, Federal Hill, Valley, Manton and even parts of the East Side.

      • Triple deckers, if well maintained, are exactly the kind of starter residence that can supply lower cost rentals for younger singles and families. They are compact buildings and can fit nicely into the dense Provdience environment. Unfortunately, bureaucrats decided long ago that dwellings needed to be above a certain size, making triple deckers illegal to build in Providence. In order to change this, we would need to ammend the zoning ordinance.

      • Aaron, triple deckers are obsolete. They were made for three families which two did not have cars. Tear down the areas I mentioned and build apartments like the rest of the country with all the amenities such as the pool covered or garage parking, a club house. When one triple decker catches fire the potential is for at least 4 more buildings to catch fire. Another thing with triple deckers, when most of these were built they used newspaper as insulation. Next how long to you think the materials last such as pipes last? Not only in the building but in the street? Again it is time to teardown all these triple deckers and build modern buildings. This means with PRIVATE MONEY, not government funds such as the projects, section 8.

      • I understand your point Ed. However, I would not discount the demand for housing units on the scale similar to what a triple-decker provides. There are house seekers that will find the triple-decker unattractive, and I understand that some may have not initially been constructed using the highest standards. However, there is a market for some looking for housing in a city like Providence who may be willing to trade a yard or a pool for a smaller dwelling, like a triple-decker, in a city with shops, attractions, and jobs within close distances where a car is not needed. I know a lot of people live in suburban single-family homes. But that style of development does not work in Providence where most of the city was built before cars.

  3. I was talking about this with some people the other day. Providence seems to have low vacancies but there’s no apartment construction downtown without subsidies. In city after city of equivalent regional size around America, there is an apartment construction boom. Generally these do involve some subsidy, but often fairly (certainly no worse than many suburban projects often get). So why can’t Providence build? “Regulations” is a good one and clearly the state isn’t developer friendly, but there needs to be a more fine grained analysis of what actually needs to change.

      • It’s very friendly in attracting violence…

        This is the new America, which can be easily found on a Firday night in Providence.

        Illegal aliens cleans toliets at crooked business owner’s places under the table all week long and take money out of ATM with EBT card. They use EBT money to but new outfit, get nails done and tattoos for a night out.

        They go to club to do salsa dancing, while DJ spins garbgage like Beyonce, Justin Beiber, Lady Gaga and Rihanna on the turntable, do drugs and get drunk along the side the young liberals who think this is hip–most of these liberals attending URI and Johnson & Whales.

        Night ends with a shooting.

        Yeah, lets build more apartments in Providence to attract these type of people.

      • HA! And the only ones that would be able to afford these high priced high rised apartments on Westminster would be college students from out of town and don’t-have-a-clue-parents righ enough to send their kids to Brown, Johnson and Wales and RISD…..As long as you don’t have a car and want to take the bus to get to places, you’ll be OK to live there…

  4. In terms of being myopic and taking care of cronies (ahem):

    http://news.providencejournal.com/breaking-news/2013/07/ri-will-pay-31m-for-land-across-from-state-house-1.html

    I’d agree that a lot of people want car-based development, but I’d question why. A lot of what makes driving attractive and cheap are subsidies by the government. The gas tax doesn’t pay to cover the roads, meaning that although drivers are taxed, they are taxed much less than the benefit they’re receiving in return. Government has used eminent domain to take land for highways at lower than cost. Government has bought up large tracks of land for parking without charging users for it (in the above citation, one acre is enough land for just one hundred parking spots, but the state is paying for it at $3.1 Million–$30,000 a spot; in another instance, you can talk about all of the on-street spots that will be repaved at great expense around Providence using the mayor’s $40 Million bond, but which will then not be metered). Government gives subsidies to driving by allowing people to claim expenses on their taxes, but not offering the same for public transportation users or cyclists. And so on. . .

    What you get is a landscape in which you need a car to get around. And who could blame a person for wanting a car then?

  5. An interesting debate, with some interesting data behind it. It’s a bit presumptuous to suggest a relationship between unemployment and rental vacancy without looking at more data. Issues of housing and the development of housing are very, very complex.

    Anecdotally, I would agree that rents here are a bit higher than they should be, and that single family homes are also higher than necessary. There are lots of reasons, and the student effect on housing is an important one.

    I own a three family house, and it has been great for a struggling creative person to have renters helping with the mortgage. That said, I couldn’t sell it for what I am in it for and turn around to buy a single family as my family needs change. A single family home is often times more expensive than what I could see a nice East Side three family for.

    Demand, market forces, lack of new development, regulations towards development, and high taxes all factor into our current housing situation.

    • You know how many people in your circumstance sell their property to the insurance company? With what you mentioned their is no incentive to spend money maintaing property in Rhode Island unless absolutely neccessary.

  6. I think a similar argument could also be made for housing in both this state and our neighboring states. The housing prices are nearly 40% higher in this region than in places like North Carolina, Texas, etc.

  7. to prove my point— suppose risd, brown, pc and jonny wales built enough dorms so that their would be no need for off campus living.

    the providence vacancy rate would be huge!!!

    agreed?

    another case in point is the arcade – private student money

    another the new apartments built by gilbane at brown – private student money

    another factor is that waterplace park units are being rented for $1000’s per month less than they should be. there was a huge private investment which didnt work out and the owner is now renting units at way below market.

    if the demand is so strong, private industry will find a way to supply it.

    if the government gets involved, all they will do is make it more costly and screw it up

  8. Hey Lost in RI,

    Your point misses the mark for two simple reasons: 1) universities can not pack up and move to another city, 2) there is very little free land left for the universities to build enough housing to meet their own demand and even if there were a significant number of students will always prefer to live off-campus.

  9. More apartments?

    For what? To attract more illegal aliens and EBT card recipiants?

    I think Providence is doing fine the way it is as a ghetto city without the increased need of attracting more low class, gun carrying drug pushers…

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