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THE METRO AREA IMPACT OF HOME BUILDING IN THE SOUTHERN ATLANTA AREA Presented by Elliot F. Eisenberg, Ph.D. National Association of Home Builders February 19, 2008 Atlanta, GA
LOCAL ECONOMIC IMPACT • Construction 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
Conventional Wisdom is that more jobs produce homes • But, new homes produce more jobs too! HOUSING => JOBS
The Atlanta, GA MSA Multiplier Only Captures Spending that Stays in the MSA Includes: Banking, Car Repair, Dry Cleaning Day Care Services, Legal Services Newspaper Delivery, and Psychiatric Care But not: Auto Manufacturing, Call Centers, Movie Production, and Warehousing Services
History of the Model • Over 500 eco. 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 Univ. of Florida Univ. of Massachusetts Univ. of Montana West Virginia Housing Development Fund…
Assumptions of the Model Single Family Average house price: $227,500 Average raw lot cost:$17,063 Permits/Infrastructure:$2,800 Annual prop. taxes:$3,026 • Average house price
Economic Impact of Single Family Home Building • Construction phase • Ripple effect from construction phase • Occupancy phase • Ten year total
FIRST YEAR IMPACT: SF Construction Every 100 SF Homes INCLUDING: 99 Jobs in Construction 21 Jobs in Wholesale & Retail Trade 12 Jobs in Business and Professional Services
FIRST YEAR IMPACT: SF Ripple INCLUDING: 16 Jobs in Wholesale and Retail Trade 13 Jobs in Local Government 8 Jobs in Health, Education & Social Services
ONGOING SF ANNUAL EFFECT INCLUDING: 12 Jobs in Wholesale and Retail Trade 8 Jobs in Local Government 6 Jobs in Health, Education & Social Services
TOTAL SF IMPACT: FIRST TEN YEARS 100 HOMES Along with 210 temporary jobs and 52 permanent ones!
BUT NEW HOMES REQUIRE: INFRASTRUCTURE • Fire and police protection • Garbage collection • Parks and recreational opportunities • Roads • Primary and secondary education • Etc…
Now that we know: The benefits of construction & The costs of construction Does new construction pay for itself?
Yes it does! For every 100 SF units-- • By the 2nd year economic impacts offset fiscal costs • By the end of the 7th year the debt is fully paid off • In the 7th year, net is $164,751 and is $166,946 thereafter
A Closer Look at Primary and Secondary Ed. • 12.6% attend Private Schools • 1.7% are Home schooled • 0.4 school age children / MF unit • 0.6 school age children / SF unit • State aid is $3.6 billion or 58% of budget
How Large Are Non Property Tax Revenues • SF property taxes are $3,026/year But, yearly revenue is $7,269/unit per year, which is 140% more. • Clearly, property taxes are not the whole story! • If you fail to tell this story you will get...
REGULATION!!!!! • General observations about regulation • Microeconomics of regulation • Alternative strategies • Very brief review
Part One: General Observations
General Observations • (Median SF House Prices Q2 ’07, Source: NAR) • Many places have affordable housing: • Atlanta, GA $176,000 • Cincinnati, OH $146,000 • Dallas, TX $157,000 • Indianapolis, IN $125,000 • Nashville, TN $186,000 • But, many do not: • Boston, MA $413,000 • Miami, FL $384,000 • Seattle, WA $395,000 • Washington, DC $445,000
Why?Several reasons including artificial supply restrictions!!!!!!Including zoning (taxes) or more generally, government regulation
Proposed Solution to the Latest Problem Government Regulation Why? • The “latest problem” is serious • Politically, a solution must be found • Regulations appears to be free and easy!
But, are they? Ask yourself, do these solutions work? • A.P.F.O.s (sprawl) • Conservation/green space (loss of lots) • Anti-monotony codes (happy architects) • Price supports (oversupply) • Yuan appreciation (imports from India) • NO, because of MICROECONOMICS
What is Microeconomics? The study of prices!!! Including: the relationship between changes in prices and changes in behavior. Regulatory changes price changes! So….. Let’s use microeconomics to examine the behavioral effects of price changes resulting from regulatory changes.
Part Two: Microeconomics of Regulation
Microeconomics Supply w/Regulation P r i c e o f H o u s i n g Supply Pt Reg. P0 Demand Qt Q0 Quantity of Housing
Microeconomics Government regulation will: A) Increase new house prices B) Decrease housing supply C) Increase existing house prices D) Decrease land prices E) Push building outside regulated zone Instead: Move supply curve DOWN TO THE RIGHT!
But, But….We Are Special! Special Not Special Supply1 Supply1 Supply P1 Supply P1 P Demand Demand Q1 Q Q1 Q
Impact of RegulationDepends on Many Factors! What is the minimum project size before the regulation kicks in? What is the income limit for affordability? What will the State do after enactment of this new regulation? Which properties will be grandfathered? Can grandfathered property be resold or rezoned? Are there minimum affordable unit/lot size requirements? What is the slope of demand curve? What is the slope of supply curve? What kind of behavioral changes will there be in neighboring cities? Are impact fees waived in exchange? Are property taxes abated for a period of years? Are design and code standards relaxed for affordable units? Is there a lot of bureaucracy involved? Are single-family units to be treated differently than multi-family units? What happens when construction slows down?
Part Three: Mitigation Strategies
Mitigation Strategies(Short list ) • Entitle enough lots • Encourage construction of smaller houses • End exclusionary zoning • Start d-y-n-a-m-i-c zoning • Use market forces • Keep regulations simple and understandable!
Mitigation Strategies(Slightly longer list) • Expedite development reviews • Reform building codes (knocker vs. door bell) • Update building codes • Relax design standards (no garage, small yard) • Create economic incentive overlay areas • Property tax forgiveness (A HUGE help)
Part Four: Very Brief Review
Review What is Success? Think about traffic safety: A) Number of tickets issued, cars impounded or B) Lives saved, fewer speeders Think about housing: A) Number of units built, effluent reduced or B) Enough low rents, and low priced units
CONTACT ME! • Elliot F. Eisenberg, Ph.D. • National Association of Home Builders • 1201 15th Street NW • Washington, DC 20005 • email@example.com • Phone: 202-266-8398 • Fax: 202-266-8426 • THANK YOU VERY MUCH!