Housing and the Economy
A few years ago Lawrence Yun, Chief Economist for the National Association of Realtors wrote in the NY Times that, "Home ownership strengthens communities, supports the economy and helps families build wealth — and for many people, it means gaining a foothold into the middle class." Buying, selling or remodeling a home are beneficial to the local economy because of the jobs and private income associated with real estate transactions, the property and sales taxes that fund local infrastructure and services, and the social benefits of civic engagement, charitable activity and social capital. Data from the National Association of Realtors in 2012 showed that for each new home sold in California:
- $36,477 of income is generated from real estate related industries.
- $4,494 is spent on consumer items such as furniture, appliances, and paint service.
The National Association of Home Builders is a useful source of data on the economic impact of housing. According to a report issued by the Association in April 2015, single-family homes are more valuable to a state's economy than multi-family construction: 100 newly built homes produce $28.7M in local income, $3.6M in taxes and other governmental revenue and 394 jobs. 100 newly built rental apartments produce $11.7M in income, $2.2M in government revenue and 161 jobs. Ongoing economic impacts for 100 houses are $4.1M in income, $1M in government revenues and 69 jobs. Ongoing economic impacts for 100 rental apartments are $2.6M in income, $503K in government revenue and 44 jobs. Home remodeling also helps the local economy. The Association said a million dollars spent on remodeling generates $841K in local income, $152K in local government revenues and 11.5 local jobs for a year and (very conservatively) $11K in ongoing property taxes.
Given this information, it's interesting to compare building permits for apartment construction with new home construction in the region. In 2018 building permits for new homes increased by 2% in our metropolitan area, compared with a drop off of 21% for the whole state. But the building permits for apartments increased by 28% here while single family home permits dropped by 3%. And multi-family permits fell statewide by 10%.
To sum up, new homes, home sales, and remodeling are really good for a community. Apartments are good too, but they don't bring quite the same economic benefits. Locally, building permit activity for apartments is red hot compared to single-family residences. For perspective, our immediate area has a low owner-occupied housing rate (45.6%) compared to the state (55.3%) and county-wide (56.7%) rates.