A Rut Is a Rut

Rhode Island Housing Executive Director Richard Godfrey provides the Business section headline — "Short supply of housing may help lift R.I. from crisis" — when he says:

"Most of the country is overbuilt," said Richard H. Godfrey, executive director of Rhode Island Housing. "Rhode Island is still underbuilt. We have a housing shortage." ...

But that offers a ray of hope looking forward, he said. While parts of the country that overbuilt will have to clear excess inventory of housing before prices stabilize, the Ocean State won't have to, Godfrey said. "I think that Rhode Island will actually be better in the long run, and may come out of the real estate crisis sooner because housing is still in short supply here."

I'm not sure how (or whether) he reconciles that with a subsequent statement:

Following the 1989 slowdown, Rhode Island enacted planning and zoning regulations that made residential development harder, he said.

"It really put a lid on all new building," Godfrey said. "And we haven't kept up with the housing need. Unless we reverse that, we can never grow economically because there's no place for workers to live or for customers to live. So that is really Rhode Island’s long-term issue: How are we going to grow economically with all of the prohibitions and all the difficulties on building?"

Whether there's an over- or under-supply of housing, people can't buy real estate if they haven't any money because they haven't any jobs, but if there's an under-supply, they'll be even less able to afford it. The higher prices mean that Rhode Islanders require even more opportunity — more recovery, if you will — in order to get the real estate market back on track.

That our state is so unfriendly to business, and that we're likely to be last out of the recession, having been hit particularly hard, will more than overwhelm any advantage gained by not having an excess supply of housing. Folks who are starting from a post-recession place of lowered reserves would do better in a market with too much property on the market, because the prices are lower, and if anything, Rhode Island may have constructed a trap from which they cannot escape.

Of course, many will continue to escape to other states, locking our recession in for years to come.