We're never getting to abundance if we reject market-rate development
And why making that case matters.

This morning, together with the fantastic Jen Hawkins, nonprofit developer extraordinaire, I published an op-ed in the Boston Globe making the case that “building more new [market rate] homes can reduce displacement, lower prices, and improve everyone’s housing quality.”
But many people doubt that new market-rate homes help improve affordability for everyday Rhode Islanders. With the median price for a new single-family home approaching $500,000 and new apartments regularly renting for upward of $2,500 per month, it’s no wonder!
What’s driving those high prices? First, it’s the scarcity of homes; bidding wars regularly drive up prices. Over the last decade, Rhode Island has consistently built among the fewest new homes per population in the country. Just to get to the national average, homebuilding would need to quadruple — meaning more of everything: rental and ownership; single-detached and apartments; income-restricted and market-rate.
Read the piece here.
A little more on why market-rate development is essential
I wanted to say a little more about why I felt like we needed to write a piece like this because there’s only so much you can say in 700 words. My perspective is the result of my experience on many sides of the housing issue: I’ve been a city planner, an educator, and now a neighborhood real estate developer. I’m also the co-founder of our statewide YIMBY group, Neighbors Welcome! RI. One of the things I’ve learned is that we have to both get the substantive policy right, but we also have to navigate politics through storytelling, pictures, and communications.
When housing prices spike it seems only reasonable that what we need are more affordable homes. When newly built market rate homes come with sky high prices or rents, people get naturally skeptical that market rate (“luxury”) housing is helpful to bringing down prices. How can they help, they cost more than the median home price! It seems obvious they would mechanically increase average housing costs.
As we detail in the op-ed, housing markets are more complex than that.
In 2024, researchers used detailed Swedish household data to show, first, that while primarily higher-income families move into newly constructed homes, lower-income families are well represented among those who move into vacated homes. They also found that in towns with higher construction rates, every income group gets newer housing and more space. And many other studies point in this direction: new market-rate development makes a housing market more affordable overall. For example, a recent report by the Upjohn Institute and the Philadelphia Federal Reserve Bank show new market-rate buildings lower nearby rents 5 to 7 percent.
But railing against “luxury” housing is good politics, even if it’s bad policy.
New homes can only get built if the sale price or rents can cover the construction cost. That’s the minimum threshold for building. If prices or rents don’t cover the total development cost, plus interest on bank debt, a market return for investors, and profit for the developer’s time, effort, and risk… then the building doesn’t get built. You get no new houses. If you’re not getting new homes for upper income buyers and renters, they will join the market for used homes and bid up the prices with their high incomes and demand for amenities.
Like newly constructed homes, new cars are also mostly unaffordable for low- and middle-income families. The average new car sales price last year was almost $50,000. The result is that many of us drive used cars, which cost much less after a few years of depreciation. During the pandemic, when a shortage of computer chips interrupted car production, used car prices surged as people who would ordinarily have bought new cars joined the used car market. Like building more new cars, building more new homes can reduce displacement, lower prices, and improve everyone’s housing quality.
When homeowners go to sell their house, they don’t ask themselves “what’s a reasonable return on my investment, I’ll offer the house for that.” The list their price for the market value. The same goes for landlords. Sellers and landlords can’t pick a higher rent because they want to, or they are greedy (like greed got invented last year). They may aim for the maximum price the could get, or they may charge less to help the home sell faster or have less turnover on rentals.
High prices are the signal saying the market needs more homes. If builders are getting good profits building those houses, it’s a signal that the should build more, faster. If you try to tank developer profits… that’s the signal that they should build less, slower.
And we need a whole lot of homes to be built a lot faster than we do now. Not only does RI build among the fewest new homes per capita in the country today, we’re 25,000 homes short of where we’d be if we’d kept building homes at the 1990-2000 average rate. The State’s new housing plan calls for 15,000 new units by 2030.
In Providence we talk about growing the city back to it’s 1950 population, 250,000 people, adding 60,000 new residents. That’s roughly 30,000 new homes or 30 million square feet of new residential development in Providence alone. Increasing the number of homes in RI by a modest 10% over perhaps a decade or more would mean building 50,000 new homes.
Whether you think it’s 15,000, 25,000 or 50,000 new homes, the scale of capital investment required is staggering. If you assume an average of 1,000 square feet per home (from single-families to small apartments), and a total development cost of around $350 per square foot, this translates to a minimum of $5 billion, and ideally $17.5 billion-with-a-B dollars of investment in new housing.
That’s not a problem that can be solved by any amount of public investment or subsidy. The state recently passed an historically large $120 million housing bond—just 2% of the $5 billion low end number. The State’s whole budget is $14 billion per year. There isn’t the fiscal capacity to fix the housing market writ large with public investment.
We’re going to need private investment. Huge amounts of private investment expecting risk-adjusted returns substantially better than the stock market or other investment options.
If we make Rhode Island a profitable place to invest in building homes, we’ll get the investment. If we don’t, we won’t.
Why making this case matters.
As I said above, market rate, so called “luxury” development is very unpopular. Recent surveys of public sentiments have shown that “developers making a profit” is most disliked feature of new housing development in people’s neighborhoods, ahead of traffic, shadows, character, school, etc. I get it—every Hallmark movie has a bad developer villain looking to tear down a cherished community landmark.
But we’ve got to find a way to get a critical mass of people to not see market-rate development as a necessary evil, let alone a positive danger. Private market-rate development is the friend of affordable housing, renters, aging homeowners on fixed incomes, and anti-displacement activists. Market rate development is good. It’s not something that we should shrink away from, apologize for, and seek to ameliorate.
We’ve got to start making that unapologetic case, to start turning the dial of public opinion in a more productive direction.
The reality is that the narrative has shifted over the last 2-3 decades - from how do we get more new homeowners and renters into homes to how do we keep these people in their homes. Turnover is important. Upward mobility is important. Make room so the next generation or next income class can have their shot. Can’t be done without building new supply at all price points. Affordable is important. Market rate is important. Luxury is important.
Hi Lee, I expect we come at this with some different priors. I'm curious, what is the housing growth rate, in % of existing housing stock terms? What are the demographics of new arrivals (i.e. who is bidding up home prices in individual instances)? Does the zoning ordinance that you say isn't restrictive require parking minimums?
I think it's possible to get a lot of growth without just horizontal expansion. I'm a big fan of LVT, though I'm not sure it'll make development more popular (you'll get less tax revenue from big new buildings), but the incentives will be much better on the private side.
My sense is that community is something that people have always created where ever they dwell together. Top down regulation, while necessary in some cases (where externalities are a problem in particular), don't seem to me to be where community comes from. I.e. you'll get more community from a town with 20 small developers free to work in their neighborhoods, than with a planning process with great "community engagement."