Demand far outweighs supply. People will accuse me of “oversimplifying” by framing it so plainly, when in reality many are overcomplicating the issue by making speculative claims about rental dynamics, investor practices and intentions, etc.

Objectively I think there is a clear case to be made that prohibitive zoning laws keep new construction from happening, and that this lack of new supply being introduced is our underlying failure. If there were more abundance in housing then we simply would not be experiencing such dramatic price spikes, or at the very least the intensity would be diminished.

Rhode Island cities and towns have authority over their respective zoning decisions as well as commanding the finer details via ordinance. The minimum dimensional requirements of homes and their corresponding lots prevent more modest builds and result in construction that is necessarily more expensive. It is important to note that it is wholly possible for structures and lots that don’t meet some of the local dimensional minimums to still be completely safe or useful. The dimensional requirements are arbitrary to a large degree, and are not accommodative of the greater community’s needs.

Beyond setting a price floor in practice, there are also zoning/ordinance limitations at the other end of the spectrum, preventing us from building larger or more numerous units, and limiting the potential use and value of our property. This is the density problem you will hear people talk about all the time. We have a TON of developable land, and a TON of airspace to build upwards, but we are for arbitrary reasons not allowed to use it as we see fit, or in a way that would be most useful to us. We are not building out to the degree we need to. This is strongly evidenced by US census data which demonstrates we are national losers in new residential development in both absolute and per capita terms.

This is where we get into matters of zoning variances, special use, and the associated political bullshit. If you want to build/develop anything of substance around here, you need the blessing of local town officials/representatives who frequently have NIMBY stances, or are trying to “preserve the character of the community” by shooting down ambitious projects. Homeowners think they are preserving the value of their property by disallowing further development, but they’re actually hamstringing their own property rights and values. Is your property worth more if you’re allowed 3 units on your lot by right, as opposed to one? You bet your ass it is, especially in this market climate.

So the new supply is (or always has been?) throttled, and at the exact same time we see basically unbelievable amounts of money pour into the market because of lax lending standards, historically low rates, etc. Snapping up everything that’s decent. Anyone who owned property before and had any sense whatsoever has also refinanced into those low rates. Now you have a population of property owners who will basically never sell because their financing arrangement is so favorable when you look at macro trends. This exacerbates the supply issue further, and actually excites demand at the same time, because you have a rather numerous class of folks who have sizable discretionary income and favorable debt arrangements making it much easier to clear the bar for another purchase.

I could go on about this forever. It’s a massive problem.