Danger Zone

There is no denying that Providence is in the midst of an affordable housing crisis: For the 40 percent of Rhode Island residents who are renters, the market is failing. Currently, house prices are extraordinarily high due to artificial supply constraints implemented by restrictive zoning laws. To solve the pricing problem, Providence should look to Minneapolis as a model and relax zoning restrictions.

When the rent is due every month, renters find themselves digging deep due to a very simple incongruity in the Providence rental market. While the Providence metro area is the 18th most expensive housing market in the nation, it is 43rd in terms of real economic output. Thus, prices are outstripping productivity and leaving renters with no choice but to commit increasingly larger shares of their income to housing.

In fact, research by Housing Works Rhode Island reveals that “more than 145,000 Rhode Island households, or 35 percent of all households, are cost burdened, meaning they spend more than 30 percent of their income on housing costs. Of these 145,000 households, 44 percent of them are severely cost burdened, or spending more than 50 percent of their income on housing costs.” The same group found that only 12 percent of rentals are not considered a cost burden for a median income household in RI, which earns $63,870 a year. For those not lucky enough to snag properties in that 12 percent, the only recourse is to step into ritzier markets for high-rent places they don’t actually prefer.

These high prices spring from a lack of supply. Providence’s rental vacancy rate is just 2 percent, lagging behind the national average of 5 to 7.5 percent. A higher, healthier vacancy rate incentivizes landlords to keep prices low since they cannot be confident that every property on the market will garner interest. But because vacancies are nearly four times lower than average, renters are in no position to shop around, placing them at the mercy of landlords. When supply becomes too sparse, renters feel the heat.

Yet it’s not the landlords who are restricting housing supply. Though they do reap high profits from higher overall rental prices caused by a shortage of vacancies, these landlords would actually benefit from building more houses and renting each out at a slightly smaller profit margin. This balance feeds the higher vacancy rate nationwide.

The real problem lies with zoning: Providence is the most heavily regulated metro area for land use in the country. In particular, Providence’s residential housing zones limit how many households are allowed to live on one plot of land. The scale runs from single-family “Residential 1” to two- and three-family “Residential 3” zoning and higher. Naturally, a district zoned R-3 will, at maximum capacity, house three times more households in the same geography than an R-1 district. But too many of Providence’s districts are R-1 zones.

" The most straightforward solution to over-restrictive zoning is to loosen regulation and allow for denser development."

Zoning is problematic for reasons beyond high rent prices. Having too many R-1 zones suppresses all the benefits that should come with denser cities. Denser cities create economies of scale—they reduce travel costs for citizens, ease environmental costs, and stimulate the local economy. Chalk it up to efficiency: More people per square mile means smaller distances between people and the things they need and do. Services can be centralized, niche industries can thrive, and more of life is accessible by foot, bike, or public transit instead of by car.

Density can also do wonders for the fiscal health of the city government. For every square mile of low-density urban sprawl, the local government is accountable for a fixed set of perpetual financial obligations, from snowplowing to streetlight maintenance. These financial obligations are more easily met if there are more taxpayers within any given square mile. Since wealthier, sprawling parts of urban centers don’t actually pay enough in taxes to compensate for the costs of providing them such basic infrastructure, denser areas play an essential role in keeping cities fiscally solvent.

Apart from increasing the fiscal burden on local governments, improper zoning also has heavy social implications that trace back to zoning regulations’ long, dark history of problematic race relations. After the Supreme Court banned explicit racial zoning in Buchanan v. Warley,  legislators invented and rapidly expanded the notion of zoning to protect from unsightly apartment buildings and multi-family housing as a proxy for minority status. Rhode Island was no exception; evidence abounds of overtly racist advocacy related to this policy innovation.

Despite the good faith arguments of those who support zoning, the fact remains that such a tool invented with the explicit intent of segregating society is still serving its original purpose, even though the wielders’ intentions have changed. By one measure, restrictive zoning is responsible for 35 percent of all US racial segregation. Since race and socioeconomic status are so intertwined in the US, when policymakers restrict certain sections of the city to expensive, low-density uses, they trap the least advantaged people in the outskirts, far away from financial powerhouses. This fuels a vicious cycle and makes it even more difficult for low-income citizens to benefit from economic progress within city centers.

The most straightforward solution to over-restrictive zoning is to loosen regulations and allow for denser development. In this case, the straightforward solution may also be the most effective. Minneapolis, which has a housing issue similar to the one in Providence, just adopted reforms that provide a model for zoning reform. These reforms are detailed in a plan called Minneapolis 2040, which just passed last year. The main solution outlined is ‘upzoning’: Zone the city for three-family housing in all neighborhoods with lower zoning restrictions.

Simple, blanket upzoning—that is, increasing the allowed residential density for a district—removes the pressure of immediate, frenzied change that comes from only upzoning a little bit of the city at a time. In fact, upzoning a larger area allows for more gradual changes in any particular neighborhood since the current excess demand can be met by increased supply in a widespread region. Such an effort is better than smaller-scale upzoning projects. Trying to relieve the pressure of excess demand on a small area, say one small block of the city, might change that block rapidly in unintended ways. A broader effort disperses new tenants across different regions and thus aids in keeping the character and demographics of individual neighborhoods intact. Looking to Minneapolis, Providence should upzone the city and reap the easiest windfall of public benefits it’s likely to find this century. It really is that simple: Change the rules of the game, and elementary market forces will drive de-segregation, economic growth, and urban renewal in one fell stroke.

Photo: Providence, Rhode Island

About the Author

Austin Rose is a staff writer for the Brown Political Review.

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