Higher taxes, public development and rental assistance: RIPEC is embracing some new economic ideas around housing

“Just so you know, at RIPEC, we’re relatively uncomfortable about recommending raising taxes,” said RIPEC President Michael DiBiase.

The Rhode Island Public Expenditure Council (RIPEC) describes itself as "a nonpartisan and nonprofit public policy research organization dedicated to providing objective research and analysis that addresses the critical challenges surrounding public finance and economic opportunity in Rhode Island." Since its founding in 1932, RIPEC has placed itself at the center of significant issues, from reorganizing the governments of Providence and West Warwick to opposing necessary increases in the State’s minimum wage and so-called "fair pay" for women and minorities.

RIPEC might pride itself on "objective research and analyses," but that research and analyses are usually entrenched in outdated and largely discredited neoclassical economic theory. Under such a view, low taxes on the rich, a trickle-down economy, and a weak social safety net to discourage freeloaders become the order of the day.

So it was with some surprise that I sat through RIPEC’s presentation before a joint meeting of the Special Legislative Commission to Study Housing Affordability and the Special Legislative Commission to Study the Entire Area of Land Use on Thursday at 1:30 pm, and again when RIPEC presented the same report to the Special Legislative Commission to Study the Residential Landlord and Tenant Act two hours later.

RIPEC’s report is entitled “Housing Policy in Rhode Island – Analyzing Recent Investments.”

What surprised me?

1. A call for an increase in the State’s real estate conveyance tax.

“Just so you know, at RIPEC, we’re relatively uncomfortable about recommending raising taxes,” said RIPEC President Michael DiBiase. “That’s not what we’re about, but there needs to be more revenue in this area, and it would make the most sense to have it come from housing-related revenues. By the way, I think people know about a huge need in the homelessness area.”

2. Support for a public developer

“If you look at the private market right now, you can buy a duplex with three bedrooms on both sides - brand new construction - for less than $600,000. That means for $300,000 a unit, you could get a three-bedroom condo. The developer is also making a profit, [because] the construction cost is $250,000, $240,000 per unit,” said RIPEC Public Policy Analyst Jeffrey Hamill, who authored the report. “It’s difficult to justify some of these high per-unit costs in that environment. I understand construction is more expensive now than during the pandemic, but that is not an explanation for why these costs have increased so much. Imagine the State puts out an RFP on a piece of State land and says you’ve got to come in at under $300,000 a unit and don’t apply if you’re $425,000...

“I would like to see... a test project can be done more in a more cost-effective way... with the State maintaining a public asset either for a long period of time or as an asset you can then sell and use to fund future developments.”

3. Support for government-provided rental assistance

"I think there’s sometimes opposition to rental assistance because of the moral hazard, but I do think it’s worth considering, particularly for people who are disabled or folks who don’t have much in the way of other options. Because we’re using massive amounts of capital to subsidize those [people],” said RIPEC President Michael DiBiase.

You can watch the video here:

Special Legislative Commission to Study Housing Affordability and the Special Legislative Commission to Study the Entire Area of Land Use

Q & A

Special Legislative Commission to Study the Residential Landlord and Tenant Act:

Q & A