Rhode Island Could Create a 'Public Developer' to Address Housing Crisis

Rhode Island is increasing its public investment in housing.

Last month, voters approved a $120 million housing bond, the largest in state history, to be allocated for planning, land acquisition, construction, and preservation of housing for low- and moderate-income people. Included in the referendum was a phrase indicating that as much as $10 million “may be used to support a new program for public housing development.” While it’s not clear exactly how the program will work, or even whether it will happen, advocates have been pushing for the state to create a public development entity similar to one used in Montgomery County, Maryland. There, the county invests directly in mixed-income housing projects, and instead of profiting off the market-rate units, it uses the income to subsidize reduced rents for lower-income people and reinvests its equity in other projects.

It’s a model for a type of social housing — broadly defined as publicly developed housing for people with different incomes — that has been slowly percolating in other cities as well. Atlanta uses a nonprofit entity to build mixed-income housing on public land. Chicago has a revolving fund for developing “green social housing.” Seattle created the framework for a social housing developer last year. Unlike traditional public housing, which provides federally subsidized apartments for low-income people, the new programs are meant to increase the supply of both market-rate and reduced-rate housing without massive ongoing operating subsidies. And given the uncertainty around federal housing policy under the second Trump administration, state and local governments may have more incentive to use their own money and power to address their housing challenges.

President-elect Donald Trump made few specific housing commitments during his campaign. But he has vowed to cut government spending, and Republicans in recent years have cut fromSection 8 housing vouchers and other Department of Housing and Urban Development programs. During his first term, Trump proposed cuts to housing assistance programs in all of his budget requests.

“The likelihood that there’s going to be an expansion of federal subsidies and incentives is very low for the next four years,” says Paul E. Williams, executive director at the Center for Public Enterprise, a Brooklyn-based think tank focused on building capacity in the public sector. “So any opportunities that you have to expand your production of [housing] yourself in a sustainable way, independent of those programs, is going to look more appealing.”

Rhode Island officials have taken a much greater interest in housing policy over the last few years than they ever had before, advocates say. Many of the state’s low-income renters pay more than they can afford for housing, and state officials say housing costs are too high for most people.

“Like many states, Rhode Island has too few housing units to meet the needs of people up and down the income scale, but especially too few for middle- and low-income people,” says Rhode Island state Rep. June Speakman, who supports the state creating a public developer.

Before the COVID-19 pandemic, Rhode Island hadn’t traditionally put much money into housing. The affordable housing that was built there was largely built with federal Low Income Housing Tax Credits, which nonprofit developers use with other sources of financing to build projects. But the pandemic cast a light on housing instability around the country, and Rhode Island put more of its American Rescue Plan Act (ARPA) funding into housing than most states. It dedicated more than $330 million in ARPA funds to low-income housing projects, more money than it had spent on housing in the previous decade-and-a-half combined, according to a recent report.

But the existing system of affordable housing development, using Low Income Housing Tax Credits, is costly and inefficient, says Jeff Hamill, a policy analyst at the Rhode Island Public Expenditure Council, which tracks public spending. The state’s ARPA investments only helped produce around 1,500 units. That’s in part because they were mostly geared toward people with the lowest incomes. The average subsidy per unit was a whopping $161,542, according to the report. Based on the efficacy of previous investments, the new housing bond could result in just 586 units being built around the state. RIPEC recommended a variety of strategies to improve housing investments in Rhode Island, including creating a public developer that could help produce more mixed-income housing.

For Melina Lodge, executive director at the Housing Network of Rhode Island, an association of community development organizations, the high cost of the ARPA-funded units is just the reality of providing housing assistance to the neediest residents. Construction materials and labor have gone up in recent years, and housing for low-income people has always required a subsidy. The state was right to focus its attention on the lowest-income people, she says.

“You do have to prioritize people,” Lodge says. “So the question becomes: Do you prioritize the people who are easiest to help so you can give them a couple dollars and say, ‘Oh, we helped so many more people?’ Or do you really double down on more meaningful help [for people who need it the most.] Those are policy choices, and you have to work through that.”

Lodge helped organize support for the housing bond, which will direct millions to the types of projects her members build. She says she’s open-minded about the public developer program, but is skeptical it’s the most effective way to meet people’s housing needs.

“If it costs $10 million to build out an entity, couldn’t we have spent that $10 million on housing?” she says.

Questions remain about how the state will administer the bond proceeds. Rhode Island created a statewide housing department for the first time last year, but there has been rapid turnover in the department leadership positions. “The devil’s in the details,” says Speakman, the state representative. “Someone, somewhere is going to have to sit down and write out exactly what this will look like.”

Daniel Denvir, an organizer with the progressive group Reclaim Rhode Island, which has pushed the state government to create a public developer, says he’s hoping it will result in a pilot project in the near term. It’s important to demonstrate that the model will work, using market-rate rents to subsidize reduced rents and returning the equity to the state for more investments. Then it could be scaled up.

“It’s clear that the private market is not going to build what we need to confront the crisis. That’s true whether it’s for-profit or nonprofit housing, and yet we spend a ton of money on affordable housing,” Denvir says. “With public development and public investment, the investment results in a public asset.”