Five Questions With: John Marcantonio

"We estimate that up to 40 percent of the cost of a new housing unit is due to local and state government regulation with land policy, infrastructure and low density as the key problems."

John Marcantonio is executive director of the Rhode Island Builders Association, a trade association that represents the interests of more than 1,000 member businesses, including real estate professionals and home builders. In a recent exchange with the Providence Business news, Marcantonio argued that construction of middle-class housing has lagged in Rhode Island as a result of government regulation and low density requirements.

PBN: A recent and widely reported study on land values rated Rhode Island as having the second most-expensive, per acre, in the U.S., after only New Jersey. How does this affect housing construction?
MARCANTONIO
: It’s a major problem but it’s also self-inflicted and there is a way to fix it. We estimate that up to 40 percent of the cost of a new housing unit is due to local and state government regulation with land policy, infrastructure and low density as the key problems. So, the cost issue is not really because of our size, it’s because almost anywhere you go in Rhode Island to build something, you can’t get high enough density to dilute the costs associated with building here.

PBN: Where is the activity in new housing construction, at the high end or the low end? Where is the most need?
MARCANTONIO
: With government policies currently driving construction costs sky-high, the state has seen its new, middle-class housing stock regulated almost entirely out of existence. In response, many policy folks have responded by pushing housing subsidies as a solution, and it is needed. However, when you ignore the overall cost problem, the end result is you get what we have now – primarily luxury and subsidized product being built. What we really need, what the market demand is really for, is middle-class housing. With no new, mid-range housing being built, middle-class home buyers are stuck choosing from the current housing stock, which is very old, outdated and often of poor value. It’s a competitive problem for the area that policy folks need to pay attention to, because it’s a major reason why people leave.

PBN: Where geographically in the state is there most demand for new housing?
MARCANTONIO
: The demand for new housing is very high throughout Rhode Island and if the industry could build to a price point that most folks could afford, without subsidy, we would have a growing population. As for where building starts are active, there are some areas in the state showing increased activity and some major developments are scheduled to start (like the East Providence waterfront). But overall, it’s really still very sporadic and inconsistent.

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PBN: How would you describe the current state of residential construction in Rhode Island?
MARCANTONIO:
The state has yet to see a return to normal construction starts, but we are hopeful that in the months to come that will change. I would say we are recovering slowly. Again, it’s what the industry can build that is the concern, as in order to build to a middle-class demand, local and state leaders have to focus on lowering the cost of construction. Simply, it currently takes too long to get projects approved, the densities are too low, the infrastructure has to be expanded and we have to stop deliberately adding costs to housing, excess permit fees, high impact fees, etc…

PBN: What state or local policies would encourage more activity?
MARCANTONIO:
This is a bit more complex because what we really have is a structural problem that doesn’t create an incentive for growth. A recent economic study has shown that residential growth benefits the state financially much more than the town in which it occurs. It is primarily because of the way we structure education and its funding. When a town sees little financial gain in allowing growth – especially residential growth with kids – they discourage it by increasing the cost of housing. This has to change. The state has to do more to help itself. Doing something to help towns cover educational expenses, or fundamentally restructuring education in Rhode Island is a way to do it. Secondly, to have greater density, the key to affordability, towns and cities need to expand water and sewer infrastructure, but because that burden is entirely on the town it is just too expensive. The short answer is, if the state wants to grow its population, it has to become more directly involved in paying for water and sewer projects. Without this kind of investment, density will stay low and Rhode Island will continue its current journey of building luxury- and subsidy-based housing.

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