Sunday, June 14th, 2020
This is my third blog in a series on housing and real estate. Today I am providing a snapshot of how housing is intrinsically linked to economic development. The goal is for communities, residents, businesses leaders, and policy makers to understand that a strong affordable housing inventory is critical to the advancement of economic development and the attraction and retention of employment opportunities.
When discussing affordable housing in most communities, the conversation is often centered on the perceived cost to the taxpayer. The discussion usually focuses on schools, policing, fire protection, social services and infrastructure. Many lose sight of the fact that affordable housing development IS economic development.
Building new single-family and multi-family homes and improving the existing housing stock generates local jobs and provides a positive economic benefit to the community. Housing development creates a variety of jobs, from design through occupancy. The pre-development stage creates jobs in architecture, real estate, engineering, market analysis, and environmental and legal services. The construction of housing produces employment in the building trades, material suppliers, real estate, attorneys and lenders. Post construction, there are full-time jobs created in property management and maintenance in addition to a cadre of employment within the local business community that is needed to support the developments and the residents. These include local shops, plumbers, electricians, food services, utilities, pharmacies and more.
The development of quality affordable housing has a direct benefit and creates opportunities within distressed communities. People who live close to work are more likely to be on time and participate in the civic associations and other activities within their home communities such as town, village and school boards. Stable and safe places to live are created. Housing security increases individual health, education, and employment outcomes. Affordable housing allows for greater independence and reduces the costs associated with supportive services, such as public safety, evictions, and emergency room visits.
A housing cost burden creates an economic strain on local small business and stifles their ability to expand and in some cases – to simply remain open. The higher the housing costs are – the less “disposable income” is available for other purchases of goods and services. Residents that pay less for housing can afford to spend more on other necessities, including groceries, clothing and health care, which creates a benefit for the small business owner in their home neighborhood. Residents can also afford to save more for emergencies or for major purchases such as a home, a car or for an education.
Housing affordability increases the availability and reliability of workers for local businesses, which reduces the overall costs of business. Employers have less turnover and fewer costs related to hiring and training new staff. In today’s economy where competition for workers is so intense, access to affordable housing in close proximity to one’s place of work is essential.
Increasing the supply of homes, both rental and homeownership, impacts the demand for existing housing. For example, the construction of senior housing, at all income ranges, “frees-up” existing homes for the next generation to purchase and raise their children and allows seniors to “age in place” surrounded by their network of support, family, friends, churches, civic associations, and services such as doctors and pharmacists.
Affordable housing development creates jobs and boosts the tax base, while often reducing urban blight and adding value to surrounding parcels of land by triggering other local investment. The construction of affordable housing leverages substantial public and private investment and supports the redevelopment, stabilization and revitalization of urban centers and neighborhoods.
According to the National Housing Conference Center for Housing Policy, among other impacts, building or significantly rehabilitating affordable housing can:
Create jobs. Investing in the development of affordable housing creates a significant number of construction-related jobs, and new residents support additional jobs in other sectors going forward.
Attract both employers and employees. Surveys and supporting research show that both employers and workers understand the importance of affordable housing in attracting and retaining a skilled workforce.
Increase consumer spending. Building affordable housing increases the buying power of both those involved in its construction and those who occupy it afterward.
Increase government revenues. The taxes and fees associated with the development of affordable housing – both during the construction and after the homes are occupied – can represent significant revenue for state and local governments.
Lower the risk of foreclosure. Affordable homeownership programs appear to produce a more sustainable path to homeownership, eliminating a number of significant foreclosure-related costs that municipalities would otherwise have to absorb.
Impact of a Prototypical 50-unit Affordable Housing Development in New York State
In February 2017, HR&A Advisors, Inc., a premiere national consultant and industry leaders in the analysis on affordable housing, published Economic Impacts of Affordable Housing on New York State’s Economy. The brief was prepared for the New York State Association of Affordable Housing and provided data on the impact of the construction of a typical 50-unit project.
- $16.6 million in total economic spending. This includes the $9.4 million in investment, which is reflected in the IMPLAN input-output model as direct economic spending. The investment would stimulate an additional $3.9 million in indirect economic spending and an additional $3.3 million in induced economic spending.
- 100 total one-time jobs, including 46 jobs in construction-related sectors, 30 jobs in industries supporting construction, and 24 induced jobs from their household spending in a range of industries, including construction, architecture and engineering, professional services, restaurants, retail, etc.
- $6.43 million in total employee compensation. This figure includes $3.8 million in direct compensation in construction-related industries. The spinoff activity would support $1.5 million in indirect employee compensation and $1.1 million in induced employee compensation. The overall average compensation across all industries (including spinoff effects from indirect and induced spending) would be approximately $63,400 per year.
In addition to temporary impacts during the construction period, the 50 occupied affordable housing units would have a permanent impact on local and neighborhood economies. The total ongoing impacts from 50 households could be expected to generate the following economic impacts:
- $2.0 million in annual economic spending. This total includes $1.2 million in direct spending on local goods and services and building operations and maintenance. This direct spending is expected to generate an additional $0.4 million in indirect spending and $0.4 million in induced spending.
- 14 total jobs. This figure includes 10 direct jobs (approximately 8 jobs in a range of industries supported by local consumer spending and 2 in building operation and maintenance positions). In addition, local spending would generate 2 indirect jobs and 2 induced jobs.
- $0.7 million in total annual compensation. This includes $0.4 million in direct compensation. Spinoff activity would generated $0.1 million in indirect compensation and $0.1 million in induced compensation annually. The overall average compensation across all industries (including spinoff effects from indirect and induced spending) would be approximately $46,500 per year.
Clearly, there is an affordable housing crisis in the Hudson Valley. I am hopeful that this information and analysis provides a strong foundation for our community leaders and decision-makers when they are reviewing an affordable housing development proposal.
