PROVIDENCE, R.I. (WPRI) – As a State House debate over the issue of affordable housing heats up, the median price of a Rhode Island single-family home has exceeded $280,000 for the first time since the boom-bust cycle that resulted in the Great Recession.
The Rhode Island Association of Realtors released new data Wednesday showing the median sales price of a single-family home sold in 2019 totaled $285,000, topping the previous peak of $282,900 back in 2005. Likewise, the median price of a condo totaled $234,900 last year, beating the previous high of $225,000 in 2006.
The median multifamily home, meanwhile, sold at $270,000 in 2019, which was still below the previous peak of $290,000 in 2005, although prices have increased relatively steadily since bottoming out at $90,000 in 2009.
Housing prices soared in the years leading up to the 2008 financial crisis, as banks approved risky mortgages without much scrutiny, helping to fuel the Great Recession. The economic downturn hit Rhode Island particularly hard.
“It’s important that we don’t forget how impactful the housing downturn was. Prices became extremely inflated at the height of the boom and the correction in the market meant that significant losses in equity were commonplace,” said Shannon Buss, president of the Rhode Island Association of Realtors. “We’re on a good track. Homeowners are in a good place again.”
The new milestone comes at the same time housing groups and some of the state’s top elected leaders are increasingly concerned about the affordability of housing in Rhode Island.
In its annual Housing Fact Book last year, Roger Williams University’s HousingWorks RI reported there are no municipalities in the state where a family with a household income totaling $50,000 or less can affordably buy a home.
“Rising home prices and rents, while generally benefiting current owners and landlords, remain a struggle for the average Rhode Island household,” the HousingWorks researchers wrote.
The increase in demand for houses, however, has not led to an increase in supply, with the number of building permits for new housing units remaining at historically low levels throughout the last decade. Critics have suggested municipal regulations and other red tape has made it too expensive to build, while many local leaders have said they fear the costs associated with significant additional development.
The surge in home prices — which is also a hot topic across the border in Massachusetts — has pushed housing higher on Democratic Gov. Gina Raimondo’s agenda. She discussed it in her State of the State speech last week, and her newly proposed state budget for 2020-21 introduces a new tax on all future home sales over $500,000.
Revenue from that tax would be used to create a dedicated funding stream to help build 250 affordable housing units for low- and moderate-income Rhode Islanders each year. Raimondo’s aides estimate the tax would generate about $3.6 million in state revenue next fiscal year, and $8 million each year afterward. They also say most other Northeast states already have similar programs.
During a briefing with reporters last week, Commerce Secretary Stefan Pryor said state officials chose the $500,000 benchmark for the new tax because they determined it wouldn’t have a negative impact on the housing market.
Democratic Senate President Dominick Ruggerio has expressed some support for the idea, while Democratic House Speaker Nicholas Mattiello said it needs a closer look.
“I look skeptically at creating any new taxes, but I will reserve judgment until the House Finance Committee holds a hearing on the proposal,” he said last week.
Buss, however, isn’t convinced.
“The Rhode Island Association of Realtors has historically been opposed to any new fees and/or taxes that create a disincentive to home ownership,” she said. “Rhode Island’s housing market is an important economic driver so we feel that it is critical that we avoid actions that could deter investment in the Ocean State.”
Ted Nesi contributed to this report.