THE METRO AREA IMPACT OF HOME BUILDING IN PORTLAND, OR
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Presented by: Elliot F. Eisenberg, Ph.D.
February 23, 2010Portland, OR
THE METRO AREA IMPACT OF HOME BUILDING IN
PORTLAND, OR
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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
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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…..
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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)
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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)
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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
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Portland-Vancouver-Beaverton, OR-WA MSA
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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
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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…
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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
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Economic Impact of Single Family Home Building
1st - Construction phase
2nd - Ripple effect from construction phase
3rd - Occupancy phase
4th - Ten year total
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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
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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
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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
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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!
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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
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BUTNEW HOMES REQUIRE:
•Fire and police protection•Garbage collection•Parks and recreational opportunities•Roads•Correctional facilities•Primary and secondary education •Etc…
INFRASTRUCTURE
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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
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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
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Does new construction pay for itself?
The benefits of construction
&
The costs of construction
Now that we know:
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• 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
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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
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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?
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Almost done, just a bit more
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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!
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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
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Elliot F. Eisenberg, Ph.D.
Call: 202.266.8398Fax: 202.266.8426
1201 15th Street NWWashington, DC 20005-2800
Thank you very much!
ANY QUESTIONS?