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