david crowe chief economist november 13, 2013 home building impact
TRANSCRIPT
David CroweChief Economist
November 13, 2013
Home Building Impact
WHY Reject New Homes
Property tax is insufficient to pay for new service demands
New homes bring traffic congestion, crowded schools, ‘different’ neighbors
Environmental damage
Fields and forests disappear
LOCAL ECONOMIC IMPACTConstruction phase
• Jobs• Materials• Local fees, taxes, contributions
Ripple or feed-back from construction• Wages spent in local economy
Occupancy phase• Earnings spent in local economy
Areas Covered by NAHB Local Impact Studies
(Over 750 Done So Far)
• Typical relationship is that more jobs require more homes
• But, also true that more homes produce more jobs………
Phase I CONSTRUCTION
Value of Construction+
Services Provided at Closing+
Permit / Hook-up / Impact Fees
Value of Construction+
Services Provided at Closing+
Permit / Hook-up / Impact Fees
Model of the Local EconomyModel of the Local Economy
Local Income and TaxesLocal Income and Taxes
Phase II RIPPLE
Spending on Locally Produced
Goods and Services
Spending on Locally Produced
Goods and Services
Model of the Local EconomyModel of the Local Economy
Local Income and TaxesLocal Income and Taxes
Local Income and Taxes
from Phase I
Local Income and Taxes
from Phase I
Phase III OCCUPANCY
Spending on Locally ProducedGoods and Services
Spending on Locally ProducedGoods and Services
Model of the Local EconomyModel of the Local Economy
Local Income and TaxesLocal Income and Taxes
Income of Occupant in New Housing Unit
+Increased Property Taxes
Income of Occupant in New Housing Unit
+Increased Property Taxes
Assumptions of the Model
Inputs To Model Single-family
Average house price: $321,000
Average raw lot cost: $40,000
Permits/Infrastructure: $7,915
Annual property taxes: $2,810
Economic Impact of Single-family & Multifamily Home
Building 1st - Construction phase
2nd - Ripple effect from construction phase
3rd - Occupancy phase
FIRST YEAR IMPACT: Single-family Construction - Every 100 Homes
INCLUDING:
147 Jobs in Construction32 Jobs in Wholesale and Retail Trade17 Jobs in Business and Professional Services
* One job represents enough work to keep one worker employed full-time for a year.
Local Income Local TaxesLocal Jobs Supported
$14,233,300 $1,333,000 213
FIRST YEAR IMPACT: Single-family Ripple
INCLUDING:
29 Jobs in Wholesale and Retail Trade15 Jobs in Eating and Drinking Places17 Jobs in Health, Education and Social Services 12 Jobs in Local Government
Local Income Local TaxesLocal Jobs Supported
$6,877,300 $869,700 111
Total Single-family Impact: First Year
Construction & Ripple
Local Income Local TaxesLocal Jobs Supported
$12,110,600 $2,202,700 324
ONGOING Single-family ANNUAL EFFECT
INCLUDING:
14 Jobs in Wholesale and Retail Trade 7 Jobs in Eating and Drinking Places 5 Jobs in Local Government 7 Jobs in Health, Education and Social Services
Local Income Local TaxesLocal Jobs Supported
$3,060,900 $743,300 53
38% from real estate tax
NEW HOMES REQUIRE:
• Fire and police protection• Garbage collection• Parks and recreational opportunities
• Roads• Correctional facilities• Primary and secondary education • Etc.
INFRASTRUCTURE
Where’s Data/Facts?
• Local government budgets
• Federal government surveys
• Model estimating relationships
Required Current Expenses per Unit
Single-family
Education $1,697
Police Protection $534
Fire Protection $245
Corrections $172
Streets and Highw ays $66
Water Supply $185
Sew erage $102
Health Services $226
Recreation and Culture $254
Other Government $835
Utilities $216
Total $4,530
Required Capital per Unit
Function Single-family
Schools $9,120
Hospitals $990
Other Buildings $2,889
Highw ays and Streets $1,816
Conservation & Development $61
Sew er Systems $2,273
Water Supply $2,990
Other Structures $2,663
Equipment $232
Total $23,035
Does new construction pay for itself?
The benefits of construction
&
The costs of construction
Now that we know:
For each single-family unit -- • By the end of the 2nd year economic impacts offset
fiscal costs.• By the end of the 2nd the debt is fully paid off• By the 3rd year, net is $289,900 thereafter
Yes it does!
YearCurrent
Expenses RevenueOperating Surplus
Capital Invest. Start of Year
Interest On Debt Income
1 226,700 2,574,300 2,347,600 2,303,400 57,169 -57,169 2 453,400 743,300 289,900 0 2,516 287,384 3 453,400 743,300 289,900 0 0 289,900 4 453,400 743,300 289,900 0 0 289,900 5 453,400 743,300 289,900 0 0 289,900 6 453,400 743,300 289,900 0 0 289,900 7 453,400 743,300 289,900 0 0 289,900 8 453,400 743,300 289,900 0 0 289,900 9 453,400 743,300 289,900 0 0 289,900
10 453,400 743,300 289,900 0 0 289,900