The National Low Income Housing Coalition (NLIHC) has released its Out of Reach 2013 report, detailing the state of housing affordability in the United States. As is to be expected, the report finds the state of housing affordability to be abysmal. To afford a two bedroom apartment at fair market rent (FMR) in the United States (the Department of Housing and Urban Development requires that a household pay no more than 30% of its income on housing costs for housing to be considered “affordable”) a person would need to earn $18.79 an hour, working a 40-hour job 52 hours a week. The average U.S. renter earns $14.77 per hour.

In Rhode Island, the situation is worse. The FMR is $949 a month, making the wage to afford renting $18.18 an hour (slightly cheaper than the average national FMR). For comparison, the average renter earns a mere $12.10 an hour (over $2 less than the average American renter). If you’re earning minimum wage, that translates to having to work 94 hours a week, 52 weeks a year. Just possible for a two-income household.

The problem deepens when you look at other issues. Rhode Island ranked 5th in the country in 2012 for largest losses on non-foreclosure short sales; people selling their homes for less than they owed on those homes; with the average seller taking a $100,000 loss on their home. Housing is unaffordable.

Likewise, according to the Nebraska Energy Office, Rhode Island is also 8th in the country for most expensive energy prices (a cost no one should underestimate when it comes time for deepest winter or summer). This isn’t necessarily the result of government policy hampering costs; Nebraska energy (9th cheapest) is supplied solely by publicly-owned enterprises (I’ve started thinking of this and North Dakota’s state-owned systems as “Great Plains socialism”). Libertarian New Hampshire (which deregulated its energy in 2001) is the 4th most expensive.

All of this contributes to the idea of Rhode Island as a “pay more for less” state. But there are solutions to a high cost of living. One response is to raise wages. But since the National Low Income Housing Coalition has shown that the median income in Rhode Island has actually dropped since last year, that’s obviously not happening. This is in spite of the persistent idea of a skills gap in Rhode Island economic development circles (or venerable newsmen). As pointed out by University of Wisconsin Milwaukee professor Marc Levine, if a skills gap exists, you’d expect to see increased wages as employers competed for employees; the sort of thing you’d expect in Smithian economics, a shortage of labor leading to increased wages (naturally, other factors can come into play).

Despite a recent minimum wage increase, Rhode Island certainly doesn’t have the ability (nor the political will) to engineer a massive increase across the board in wages; it can only raise the floor (and then there will remain minimum-wage exempt workers like restaurant and hotel staff, open to other forms of exploitation such as wage theft).

The other option is to drive prices down; lower rents by expanding housing (and reducing property taxes) and lower energy costs by adding energy infrastructure. But in this respect, the market and politics have worked against this option. Energy prices go almost wholly without discussion outside of the George Wiley Center or LIHEAP. In housing, from 2009-2011 there were 6740 foreclosure filings in Rhode Island, according to a report published by HousingWorks RI in spring of 2012. So housing was actually lost. An excellent segment on WPRI’s Newsmakers featured Tim White and Mayor Angel Taveras touring Providence’s abandoned homes, WPRI.com reports there are over 500 in Providence alone. This, while 996 Rhode Islanders were found to be homeless in December of 2012.

These are not intractable problems. First, foreclosure issues can be stemmed. A 2011 law passed in Nevada (which was hit hardest by the foreclosure crisis) dropped foreclosures by 75% immediately after it went into effect. How did it do so? By forcing banks to prove they could foreclose on homes and increasing the penalties on those who filed foreclosures with fraudulent documents. A simple, no-nonsense law had that large an effect. How many homes could it save if passed in Rhode Island?

Second, affordable housing can be expanded in this state. But anti-housing revolts in towns like Charlestown and Barrington, and most recently in the city of Newport, is a problem that need to be addressed. There are two usually stated reasons for why affordable housing is opposed in these towns; first because it would drive down property values and second because it bring in families which means costs to the school system. The second one is a ridiculous reason. Yes, it costs money to educate children, but anyone who thinks that you can run a town without families is dreaming. Who will pay the taxes? Retirees on social security? It’s an economic and demographic death march to oppose housing because you don’t want new children in a town.

The first reason is a legitimate issue, but only because the average homeowner has almost the entirety of their wealth tied up in their home. I’m not sure what the solution is, as successfully driving down housing prices will mean a reduction in property values. But that does fail to note that property values were ridiculously overinflated during the years preceding the recession. That wealth should not return, simply because it will herald another housing bubble that will likewise burst with the same disastrous consequences, though little exists in law that would prevent another housing bubble.

The goal of lower costs of living is to free up capital for use. With less spent on living costs, citizens will be free to spend on other things. Face it, most Rhode Islanders are not employed in a sector that services any of the essential costs of life. They need capital to start moving through the system for their business to function. But until we figure out a way to liberate such capital, we shouldn’t expect to see a genuine recovery.