Presented by: Elliot F. Eisenberg, Ph.D.

February 23, 2010Portland, OR

THE METRO AREA IMPACT OF HOME BUILDING IN

PORTLAND, OR

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

The model does not say build housing to stimulate the local economy

Rather, it is job creation that results in increased demand for housing, but remember that…..

CONSTRUCTION PHASE

INPUTS:

OUTPUTS:

MODEL OF THE LOCAL

ECONOMY

INCOME FOR LOCAL RESIDENTS &

TAX/FEE REVENUEFOR LOCAL GOVERNMENTS

$$ VALUE OF CONSTRUCTION $$

SERVICES PROVIDED AT CLOSINGPERMIT/HOOK-UP FEES

$ $ $ $ $(Obtained from Local Sources)

RIPPLE PHASE

INPUTS:

OUTPUTS: LOCAL INCOME & TAXES

MODEL OF THE LOCAL ECONOMY

LOCAL INCOME & TAXESFROM PHASE 1

SPENDING ONLOCAL GOODS & SERVICESConsumer Expenditure Survey

(U.S. Bureau of Labor Statistics)

OCCUPANCY PHASE

INPUTS:

OUTPUTS:

MODEL OF THE LOCAL ECONOMY

LOCAL INCOME & TAXES

SPENDING ONLOCAL GOODS & SERVICES

PROPERTY TAX PAYMENTS

INCOME OF HOUSEHOLDOCCUPYING NEW HOUSING UNIT

Portland-Vancouver-Beaverton, OR-WA MSA

The Portland-V-B, OR-WA MSA

Only CapturesSpending that Stays in the Area

Includes:Banking, Car Repair, Dry Cleaning, Day Care Services, Dental Services, Electricity, Landscaping, Legal Services, Manicures, Medical Services, Newspaper Delivery, Restaurants and Psychiatric Care.

But Not:Auto Manufacturing, Beer Bottling, Mattress Manufacturing, Meat Packing, Movie Production, and Travel Agency Services

History of the ModelOver 600 Economic Impact Analyses Performed

Users of the Model Include:

Boone County Kentucky

Habitat for Humanity, International

MI State Housing Development Authority

Michigan State University

Missouri Housing Development Commission

University of Florida

University of Massachusetts

University of Montana

West Virginia Housing Development Fund…

Assumptions of the Model

Inputs To Model Single Family

Average house price: $391,900 Average raw lot cost: $100,833

Permits/Infrastructure: $26,688

Annual prop. taxes: $4,022

Economic Impact of Single Family Home Building

1st - Construction phase

2nd - Ripple effect from construction phase

3rd - Occupancy phase

4th - Ten year total

FIRST YEAR IMPACT: SF Construction

Every 1,000 SF Homes

INCLUDING:

1,504 Jobs in Construction 329 Jobs in Wholesale & Retail Trade 172 Jobs in Business and Professional Services

Local Income Local Taxes Local Jobs$148,805,100 $31,659,500 2,184

Local Income Local Taxes Local Jobs$82,334,200 $8,909,800 1,331

FIRST YEAR IMPACT: SF Ripple

INCLUDING:

313 Jobs in Wholesale and Retail Trade236 Jobs in Local Government188 Jobs in Health, Educ. & Social Services

ONGOING SF ANNUAL EFFECT

Local Income Local Taxes Local Jobs$32,664,400 $7,993,900 557

INCLUDING:

150 Jobs in Wholesale and Retail Trade 82 Jobs in Health, Educ. & Social Services 76 Jobs in Eating and Drinking Places

Total SF Impact: First Ten Years

Local Income Local Taxes

$541,451,000 $116,511,000

Along with 3,515 temporary jobs

And 557 permanent ones!

Largest Local Private Employers Employer # of FT Jobs

Intel Corporation 15,141

Providence Health System 13,625

Fred Meyer Stores 9,630

Kaiser Foundation Health Plan of the N.W. 8,759

Legacy Health Systems 8,251

Nike 7,000

Wells Fargo 5,010

U.S. Bank 3,948

Southwest Washington Medical Center 3,350

Daimler Trucks of North America 2,850

Portland General Electric 2,800

Trimet 2,650

Regence 2,243

New SF Residential Construction (Per 1,000 SF) 2,184

BUTNEW HOMES REQUIRE:

•Fire and police protection•Garbage collection•Parks and recreational opportunities•Roads•Correctional facilities•Primary and secondary education •Etc…

INFRASTRUCTURE

Required Current Expenses per SF Unit

Function Single Family State Aid

Education $1,544 6743%

Police Protection $593 0%

Fire Protection $324 0%

Corrections $326 0%

Water Supply $179 5%

Sew erage $180 0%

Recreation and Culture $346 0%

Other General Government $1,313 18%

Electric Utilities $466 0%

Public Transit $161 35%

Total $5,432

Required Capital per SF Unit

Function Single Family

Schools $7,632

Hospitals $102

Other Buildings $2,276

Conservation & Develop. $25

Sew er Systems $2,615

Water Supply $1,609

Other Structures $213

Equipment $197

Total $14,669

Does new construction pay for itself?

The benefits of construction

&

The costs of construction

Now that we know:

• By the end of the 1st year the debt is fully paid off• By the 1st year economic impacts offset fiscal costs• In the 1st year, net is $26,535,600 and is $2,561,600 thereafter

Yes it does! For every 1,000 SF units--

Current Operating Investment Debt at Interest Net Year Expenses Revenue Surplus Start of Year Year End On Debt Income

1 2,716,200 44,566,300 41,850,100 14,668,900 0 645,600 26,535,600 2 5,432,300 7,993,900 2,561,600 0 0 0 2,561,600 3 5,432,300 7,993,900 2,561,600 0 0 0 2,561,600 4 5,432,300 7,993,900 2,561,600 0 0 0 2,561,600 5 5,432,300 7,993,900 2,561,600 0 0 0 2,561,600 6 5,432,300 7,993,900 2,561,600 0 0 0 2,561,600 7 5,432,300 7,993,900 2,561,600 0 0 0 2,561,600 8 5,432,300 7,993,900 2,561,600 0 0 0 2,561,600 9 5,432,300 7,993,900 2,561,600 0 0 0 2,561,600

10 5,432,300 7,993,900 2,561,600 0 0 0 2,561,600

Over 15 years, every 625 SF units generate a cumulative $156.5 million in revenue for local governments—but only $94.3 million in costs

What does 1 year mean?• That is, should it be done faster, or is it O.K.?

• Big purchases take time to pay off.

• Car loans now last 5 years, and many lease!

• How fast did you pay off your student loans?

• How fast are your kids paying off theirs?

• Did you pay off your home in 2 year?

Almost done, just a bit more

How Large Are Non Property Tax Revenues

Single family property taxes are $4,022/unit per year but, yearly revenue is $7,994/unit per year, which is 99% more.

Clearly, property taxes are not the whole story!

A Closer Look at Primary and Secondary

Education 12.6% attend private schools nationally

1.7% are Home schooled nationally

0.4 school age children/MF unit nationally

0.6 school age children/SF unit nationally

OR-WA aid is $1.8 billion or 67% of budget

Elliot F. Eisenberg, Ph.D.

Call: 202.266.8398Fax: 202.266.8426

eeisenberg@nahb.com

1201 15th Street NWWashington, DC 20005-2800

Thank you very much!

ANY QUESTIONS?