The Groden Center
The number of single-family building permits were the most this decade and
represented a 14% increase over last year. There were 2,542 permits for new,
single-family units pulled in Rhode Island last year, 312 more than in 1997. In
an interview with Roger R. Warren, executive director of the Rhode Island
Builders Association, he stated Residential construction is a fundamental
indicator of Rhode Island's economic strength. These strong building permit
figures are an assurance that the state's economy continues to grow. Although
Johnston, Providence, and Scituate, experienced decreases in permits issued,
many more towns have seen dramatic increases, as much as 48% in Coventry. There
are several factors that help to explain this trend. General economic conditions
such as interest rates affect whether people can afford new homes. Low interest
rates, and an unemployment rate just under the national average have put new
homes within reach for many people. Further, the average cost of homebuilding
hasn't experienced more than a 12% increase in the last 10 years. These facts,
together with increasing personal income adds on even more permits. Demographics
have also had a significant impact on home purchases this decade. People tend to
purchase their largest and most expensive homes during their 40s, near the peak
of their earnings.
The majority of the 80 million baby-boomers have reached
their 40s during the 1990s and into the early part of the 21st century. At least
two forces of change will affect management in the homebuilding industry as a
result of these trends. Much of Rhode Island's undeveloped land is restricted,
which will result in an eventual cap on building. Bryant College economist
William B. Sweeney said; The increase in construction falls in line with other
indicators of a strong economy ahead. But even if there are enough customers who
want to purchase homes, Rhode Island may be getting max out. Wetlands make up a
large portion of RI, precluding a lot of development. The other force of change
occurs in communities where proposals have been made to establish fees which
will increase the cost of new homes. Research has begun to determine the impact
that each new home built has on a town's resources. Residential construction is
placing an increasing burden on police, fire protection, schools, library,
sanitary sewers and water supplies. Officials in North and South Kingstown have
responded with the construction of a new high school and middle school
facilities costing over 43 million dollars. To cover the cost of these upgrades,
towns such as Coventry and Scituate have began to examine the financial impact
of each new home and are considering imposing a fee and on each new home built
to offset a long-term cost of these expansions.
