Rising Housing Costs and Family Structure in Rhode Island

The Housing Crisis in Rhode Island

The prohibitively rising cost of housing in Rhode Island has affected both the nuclear and extended family. Rising housing costs may force family members to move to less expensive areas, causing a breakdown in both extended and nuclear family structure. However, this may be balanced by the increased tendency of young adults — who cannot afford the high housing costs in Rhode Island — to live at home.

Data outlined below indicate that the housing crisis in Rhode Island is very real and immediate. Individuals across Rhode Island society are beginning to feel the constraints of the difficult housing market, and low-income individuals are feeling the greatest strain. Given that federal and private agencies are unable to keep up with the increasing demand for housing assistance for low-income residents, the housing crisis will only continue to grow. As a result, the pressures on the nuclear and extended family are expected to intensify into the foreseeable future.

The rising cost of housing is affecting Americans nationwide. Rapidly increasing home prices can have many effects, from changing the condition and size of the home that a family can afford, to often pricing them right out of the market for buying a home altogether. In a recent study by the National Association of Realtors, 44% of Americans said rising housing costs had forced them to rent rather than buy, and 56% said that costs forced them to buy a smaller home than was needed (Real Estate News).

The Statewide Housing Action Coalition for Massachusetts notes, "There is a critical shortage of affordable, accessible, decent housing in our state." Since 2000, the median sales price for a single-family home in Massachusetts increased to $164,800 in 2002, a 21% increase. The median price of a single-family home in Rhode Island surpassed $184,000 in 2002, a 19% increase over the year before (Arditi). Condominium sales fell 7% in the second quarter, but prices climbed; the median price of a condo in that quarter was $147,900, up from $118,500 a year earlier — a gain of nearly 25% (Arditi).

The housing situation in Rhode Island is dire for many residents. Habitat for Humanity Rhode Island reports that in 1998 there were 23,000 "worst case" households in the metro Rhode Island area who paid over half their incomes for rent — or were living in substandard housing — and had incomes 50% below the area median income. The agency also reports that in 1998 there were 967 Providence households on the waiting list for HUD assistance (Habitat for Humanity: Providence, RI). Additionally, 11,000 worst-case households were living in suburbs across Providence, Kent, Washington, and Bristol Counties in Rhode Island, and Norfolk and Worcester Counties in Massachusetts (Habitat for Humanity: Providence). The average monthly fair market rent for a two-bedroom apartment in the metro area was $655 (Habitat for Humanity: Providence).

Rhode Island's increasing population suggests that housing price increases are likely to continue into the near future. In 1990, Rhode Island's population was 1,003,464, and it rose to 1,048,319 in 2000, representing a significant population increase of 4.5%. Newport County showed a 2.0% loss in population from 1990 to 2000, while Washington County showed a 12.3% increase (Economic Research Service, County-level). Further, only 8.1% of Rhode Island's population lives in non-urban areas. The high urban population, combined with significant population growth over the past ten years, suggests that the pressures on housing in Rhode Island will not decrease in the foreseeable future (Economic Research Service, County-level).

Per-capita income for the metro area of Rhode Island was $28,709 in 2000, with the non-metro area at $33,659. Statewide per-capita income was $29,113. The poverty rate for the metro area was 12.4% in 1999, and 7.1% for the non-metro area, with a statewide poverty rate of 11.9% (Economic Research Service, Rhode Island). The unemployment rate was also relatively consistent across the state: in 2002, 4.7% of state residents were unemployed, compared to 4.8% of metro residents and 3.8% of non-metro residents (Economic Research Service, Rhode Island). Both the per-capita income and poverty rate for Rhode Islanders are very similar to those for Massachusetts as a whole. As such, the problems in providing low-cost housing in Rhode Island are likely not due to an inordinately low income or poverty rate among residents. Clearly, other factors — such as local real estate demand and pricing — must play an important role in the prohibitive cost of housing in Rhode Island.

Habitat for Humanity, Providence sees the current housing crisis as the result of both a decline in federal funding and recent trends in labor and housing markets that have put affordable housing out of the reach of many residents. The organization states that "the result of the trends in the labor and housing markets, and the abandonment of the poor by the federal and state governments, is a squeeze involving declining incomes and a declining stock of affordable housing" (Habitat for Humanity: Providence, RI).

Rhode Island housing prices are rising due to two main factors: a sluggish stock market and low mortgage rates. Low mortgage rates encourage first-time buyers to purchase homes, and they also encourage investors to put their money into real estate rather than the market. People in search of summer homes are also driving up real estate prices (Arditi). The returns on real estate investment have been striking: "If you bought a house in Providence last spring for $95,000, you could probably sell it today for $120,000 — a rate of return of over 26%" (Arditi).

At the moment, real estate prices in Rhode Island are expected to continue to rise. However, the stock market's prolonged decline could eventually result in decreased consumer spending. When spending decreases and the stock market continues to fall, that may ultimately hurt the housing market in Rhode Island as well (Arditi).

The housing problem in Rhode Island has far-reaching effects, from its impact on the nuclear and extended family, to homelessness, to a negative effect on Rhode Island's economic expansion. The State of Rhode Island General Assembly succinctly defines the serious extent of the problem:

"Housing costs consume a disproportionate share of income for many Rhode Islanders; housing affordability is a continuing problem, especially for first-time home buyers and lower- and moderate-income renters; the high cost of housing adversely affects the expansion of Rhode Island's economy. Housing affordability and availability affect conditions of homelessness. The high cost of housing and the lack of affordable, decent housing for low-income households is a source of hardship for very low-income persons and families in Rhode Island."

Housing Assistance for Rhode Island Residents

Government agencies like the Rhode Island Housing and Mortgage Finance Corporation were created to help provide assistance to individuals and families facing the exorbitantly high cost of housing in Rhode Island. The agency is important in attempts to preserve housing stock for both low- and moderate-income families (State of Rhode Island General Assembly). The Rhode Island Housing and Mortgage Finance Corporation is a semi-public, self-supporting corporation that funds most of the state's affordable housing programs. Funding is obtained through both private sources and federal funds, and the agency has programs and projects geared toward affordable home ownership and rental properties for low- and middle-income citizens (U.S. Department of Housing and Urban Development, HOPWA).

However, the Rhode Island Housing and Mortgage Finance Corporation is currently facing financial challenges that could seriously impair its ability to address home affordability. The agency carried operating deficits for 2001 and faces the choice of either increasing revenues or reducing programs. As such, its abilities to assist low-income residents and first-time buyers will be compromised (State of Rhode Island General Assembly).

Despite its current financial difficulties, the Rhode Island Housing and Mortgage Finance Corporation has played an important role in finding affordable housing for Rhode Island residents. Since 1973, the agency has helped 175,000 residents find affordable homes and apartments. Household incomes for the home ownership program cannot exceed $54,500 for a household of one or two people, and home prices for most of Rhode Island cannot exceed $190,500 for existing single-family homes or condominiums. In certain areas — including Middletown, Newport, Portsmouth, and Block Island — the limit rises to $245,000 for existing single-family homes or condos (The Rhode Island Housing and Mortgage Finance Corporation).

In addition to the compromised financial status of the Rhode Island Housing and Mortgage Finance Corporation, first-time homebuyers receive precious little help from the federal government. According to the State of Rhode Island General Assembly, "The federal government has been reducing its commitment to housing since 1981, and there is no indication that earlier levels of federal support for housing will be restored."

Given the high cost of housing in Rhode Island, many individuals will want to turn to public housing authorities for help. However, public housing authorities are seriously impacted by decreases in federal funding, as they rely extensively on federal support (State of Rhode Island General Assembly).

The most powerful and influential source of federal funding is the U.S. Department of Housing and Urban Development (commonly called HUD). HUD offers potential assistance to families dealing with the difficulties of the expensive Rhode Island housing market. HUD's mission is to create "a decent, safe, and sanitary home and suitable living environment for every American" (U.S. Department of Housing and Urban Development, Mission). As such, the agency provides assistance for low-income individuals, attempts to create and maintain affordable housing, and works to expand opportunities for home ownership.

Encouragingly, recent funding initiatives from HUD have indicated that federal funding may provide a much-needed financial boost for Rhode Island. In August 2002, HUD announced that the City of Providence would receive more than $10 million in federal assistance. Of this amount, over $7 million would be targeted to community development, while over $2.3 million would go to promote affordable housing through Home Investment Partnerships (HOME) funds. HOME is a program specifically designed to create affordable housing for low-income Americans; nationwide, over 200,000 first-time homebuyers have received assistance through the HOME program (U.S. Department of Housing and Urban Development, News Release, BUSH).

In addition, Woonsocket, Rhode Island received a grant of $2.2 million in HUD assistance, of which $550,000 was directed to the HOME program. Housing and Urban Development Secretary Mel Martinez remarked: "These grants do so much good for so many people. This money helps communities do the critical work of stimulating business development and job growth, providing affordable housing and helping our most vulnerable neighbors" (U.S. Department of Housing and Urban Development, News Release, BUSH).

Another agency that works to ensure housing access for all Rhode Island residents is Rhode Island Fair Housing. Rhode Island Fair Housing ensures that housing practices "comply with the Federal Fair Housing Act, originally passed in 1968, and similar state and local laws" (Rhode Island Fair Housing). While this agency has no direct impact on housing prices or the provision of loans, it prohibits discrimination in housing transactions based on "race, color, national origin, sex, religion, disability and familial status" (Rhode Island Fair Housing). As such, the agency inadvertently acts as a safeguard for many low-income families who may face discrimination based on race or nationality, and it likely results in higher numbers of low-income families becoming homeowners.

Private agencies also play a role in the development of affordable housing in Rhode Island. The Housing Network is an association of nonprofit community developers that includes the well-regarded Habitat for Humanity, as well as organizations such as Action Community Land Trust, Advent House Inc., Blackstone Valley Community Action Program, Church Community Housing Corporation, East Bay Community Civic Corp., Elmwood Foundation, Family Housing Development Corporation, Greater Elmwood Neighborhood Services, Habitat for Humanity of South County, Housing Development of the North End, Olneyville Housing Corporation, OMNI Development Corporation, Pawtucket Citizens Development Corporation, Providence Preservation Society Revolving Fund, REACH, Smith Hill Community Development Corporation, Stop Wasting Abandoned Property, TriTown Community Action Program, West Elmwood Housing Development Corp., and Woonsocket Neighborhood Development Corporation (Habitat for Humanity: Providence). However, the contribution of community groups like the Housing Network remains minimal — 10 members of the Housing Network built just 75 housing units in 1997 (Habitat for Humanity: Providence, RI). This is certainly a laudable effort, but it is simply a drop in the bucket when the overall need for affordable housing is considered.

The Effect of Rising Housing Costs on the Nuclear and Extended Family

The rising cost of housing may seriously affect both the nuclear and extended family in Rhode Island. One of the most immediate results of rapidly escalating housing prices is that family members may be forced to relocate to less expensive areas. In a recent study by the National Association of Realtors, 37% of New England residents noted that "the cost of housing may force members of my family to move farther away" (Real Estate News).

The high cost of housing in Rhode Island may thus force many nuclear and extended families apart, as members move to neighboring states where the cost of housing is considerably lower. Those who are forced to move are often the lowest-income segments of the population, which largely consist of young adults and seniors. If the trend toward rising housing costs continues, Rhode Island may see a gradual migration of young people and seniors to lower-cost areas of the country.

This trend would not only remove older family members from the area but would also result in fewer young adults remaining in Rhode Island. Ultimately, with fewer young adults in the state, fewer babies would be born. As such, the rising cost of housing may eventually lead to a population shift toward empty-nesters and a decreased population of young families, gradually reducing the number of traditional nuclear families.

However, one important line of evidence suggests that rising housing costs have had little overall effect on Rhode Island's population to date. From 1990 to 2000, Rhode Island saw an overall population increase of 4.5% (Economic Research Service, County-level). People do not appear to be leaving Rhode Island en masse, so large-scale relocation caused by rising housing costs has likely not yet had a significant effect on extended and nuclear family structure.

The rising cost of housing may also force young adults to continue living with their parents. Even if they cannot afford to buy, renting is also an expensive proposition in Rhode Island, especially for those with low incomes. Habitat for Humanity Rhode Island notes, "A renter would need an hourly wage of $12.63 an hour to afford an apartment at the current market rate." As such, many young adults cannot afford to rent in an expensive market like Rhode Island.

The high cost of Rhode Island housing may therefore force many young adults to return to their parents' homes. Nationwide, there has been a widespread trend toward adult children returning home to live with their parents. The trend is so prevalent that these adult children are often referred to as "boomerang kids." Boomerang kids have frequently been labeled as lazy and dependent by the popular media (ETP Inc.).

Currently, 4 million adults — or approximately 10% of adults aged 25 to 34 — live at home with their parents. Fifty years ago, the figure was only 5%. Young adults return home for a variety of reasons, including layoffs, separation, difficulty finding or keeping a job, and alcohol or substance abuse. High housing costs have been specifically noted as an important factor in children returning home (Frazier), lending credence to the theory that young adults in Rhode Island may choose to return to their parents' homes as a result of escalating housing costs. Internet job search services Jobtrak and Monstertrak both report that 60% of graduating college seniors anticipate returning home to live with their parents, and 21% intend to stay for more than a year (ETP Inc.).

Broader societal changes also appear to contribute to the boomerang kid phenomenon. Factors that may be driving this trend include delayed marriages, higher divorce rates, greater emphasis on advanced education, high housing costs, a tighter job market, economic recession, and a more conservative social mood (Frazier). Young people today are also delaying many of the traditional markers of adulthood: the average age of marriage is now 26, four years later than it was in 1970, and childbearing is being postponed until couples are well into their thirties (ETP Inc.).

When young adults return to the parental home, there is often an intense period of adjustment. ETP Inc. notes that "while the re-formed family may actually be more successful than recent reports in the media depict, this reconstituted family environment can be extremely stressful for parents and their adult children. This can be particularly true if this living arrangement is not approached with planning, foresight, and a full appreciation for the consequences of this decision for all who are involved."

The phenomenon of boomerang kids also has the very real potential to damage the nuclear or extended family. Children, parents, and extended family members may all be left with bitter feelings if the situation is not handled carefully. Therefore, the boomerang kid phenomenon may have a potentially negative effect on nuclear and extended family cohesion in Rhode Island. On a more positive note, ETP Inc. observes that "the benefits of the boomerang situation — mutual support, pooling of resources, and shared household tasks — may significantly offset the negative impact of the unexpected in parents' lives."

Conclusion

The rising cost of housing in the Rhode Island area has an enormous potential effect on both nuclear and extended families. Rapidly increasing housing costs may have a twofold effect: possibly forcing family members to move to less expensive areas, and forcing young adults to move home after a period of independence.

Pressures on the nuclear and extended family from the rising cost of housing will likely not ease in the foreseeable future. The continuation of a sluggish stock market and the stability of low interest rates indicate that housing prices in Rhode Island may continue to rise. Furthermore, federal and private agencies are unable to keep up with the increasing demand for housing assistance for low-income residents. Taken together, these facts indicate that the housing affordability crisis will only continue to grow. As a result, the social and economic pressures brought on by rising housing costs will also continue to bear on nuclear and extended families in Rhode Island into the near future.

Works Cited

Arditi, Lynn. "House prices in R.I. soar in 2nd quarter. Low mortgage rates and a sluggish stock market promote heavy interest in real estate." The Providence Journal (projo.com), 30 July 2002. 30 October 2002.

Economic Research Service. County-level population data for Rhode Island. 30 October 2002.

Economic Research Service. Rhode Island State Fact Sheet from USDA/ERS. 30 October 2002.

ETP Inc. News and Information Resource. "BOOMERANG KIDS: Strategies for The Not-So-Empty Nest." Last updated: May 31, 2002. 30 October 2002.

Frazier, Billie H., Ph.D. Selected Resources on Adult Children Living at Home. December 1991. 30 October 2002.

Habitat for Humanity: Providence, RI. The Need For Affordable Housing in Providence. 30 October 2002.

Real Estate News. "Pricey Housing Changing American Lifestyles." 30 October 2002.

Rhode Island Fair Housing. "What do we mean when we say 'Fair Housing'?" 30 October 2002.

State of Rhode Island General Assembly. TITLE 42. State Affairs and Government. CHAPTER 42-128. Rhode Island Housing Resources Act of 1998. SECTION 42-128-1. 30 October 2002.

Statewide Housing Action Coalition. Rhode Island is Facing a Housing Crisis. 30 October 2002.

The Rhode Island Housing and Mortgage Finance Corporation. 30 October 2002.

U.S. Department of Housing and Urban Development. Mission and History. 30 October 2002.

U.S. Department of Housing and Urban Development. HOPWA Programs in Rhode Island. 30 October 2002.

U.S. Department of Housing and Urban Development. News Release. August 1, 2002. "Bush Administration Announces More Than $11 Million in Housing and Community Development Funds for Rhode Island." 30 October 2002.