A lingering drag on R.I.’s economy

The housing boom that preceded the Great Recession left many households in untenable positions once the bottom fell out. Some found their mortgages underwater (in negative equity). Some found that the loss of income made what had been affordable no longer so.

One measure of the burden that the post-recession economy has placed on homeowners is the percentage of households that are “housing-cost burdened,” an official term that compares household income to the cost of owning a home. If you spend more than 30 percent of household income on mortgages or certain other debts on the property (such as home-equity loans), real estate taxes, insurance, utilities and fuel, you are considered to be housing-cost burdened.

The measure is one important way that affordable-housing advocates use to determine just how difficult it is to live in an area.

The 2014 HousingWorks Rhode Island Fact Book noted that more than 130,000 Rhode Island households are housing-cost burdened. The group estimates that the cost of too-expensive housing diverts $927 million from the Ocean State’s economy.

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In an August 2014 column, The New York Times’ Nobel Prize-winning columnist Paul Krugman postulated that greater economic growth in the Sunbelt was less the result of economic-development policies and more the result of too-high housing costs on the densely populated East and West Coasts.

For the entire state, roughly 35 percent of households that owned homes were spending too much on their housing in 2012, and as a result, surely a drag on the economy. Has expensive housing always been the case in Rhode Island?

Prior to the home price boom of the early 2000s, that was not as much the case. For instance, Barrington, with the highest median household income in Rhode Island, at $136,072, counts 34.7 percent of its homeowners to be housing-cost burdened in 2012. In 2000, that percentage was 24.3 percent. Central Falls, in which 55.8 percent of homeowners were considered housing-cost burdened in 2012, counted 25.5 percent to be so in 2000. Exeter went from 17.7 percent (the lowest in the state) to 31.5 percent in the same time frame.

As the state looks to find sparks to create a stronger economy, it might be a good idea to keep the salubrious effects of affordable housing in mind. •

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