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The Groden Center

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The Groden Center

Post  Joe_Morningstar on Wed Feb 10, 2010 2:12 am

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. Rhode Island homebuilders will need to make changes in an effort to respond to these two forces of change. Homebuilders like North Kingstown based Gil Bianchi Construction will need to become closely involved with town council members and attempt to reduce lot size barriers to allow for higher-density and mixed-use developments. Mr. Bianchi will need to consider how to accommodate customers wanting new homes as land supplies decreased. Today, Bianchi construction focuses on building new single-family homes. In order to withstand a drastic reduction in the land permits issued, Bianchi should begin to focus his efforts on condominium or multifamily home building before the change arrives. In yesterday's market, Rhode Island builders needed only to look at whether the future economy would remain strong enough to encourage new home buyers. In contrast, the successful construction manager of tomorrow will need to work hard to make growth even more attractive to communities by planning for the distribution of land for residential, commercial, and industrial uses while preserving environmentally sensitive areas.

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Joe_Morningstar

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