Another Voice / Green space proposals
New home construction more than pays for itself
The question of whether new residential construction pays its way has recently generated a great deal of controversy in the Buffalo area. Some communities are proposing to buy vacant land to stop residential construction. Such an action can impose staggering financial costs on the community, and the ultimate impact should be carefully weighed before the community commits itself to such a rash action.
Last year in Buffalo, more than 2,603 people were employed in constructing 858 single-family and 243 multifamily homes. That is about as many people as are employed by Dresser-Rand or Moog. Would anyone realistically suggest that the community rid itself of those employers? Of course not, but that is what the community would effectively be doing by blocking residential construction.
New construction activity also pumps more than $125 million into the local community and generates about $12.5 million in taxes and fees for local governments. In turn, this money creates a multiplier effect, which generates an additional $61.5 million in local income, $7 million in taxes and fees, and 1,319 additional local jobs.
While the initial 2,603 jobs are primarily in construction, the 1,319 spinoff jobs are not. They are primarily in wholesale and retail trade, restaurants, helping professions and other unrelated industries. Discouraging new residential construction reduces employment for teachers, salesmen, auto mechanics, waitresses and other sectors of the economy — employment losses that can at best be described as collateral damage. It seems unfair for mechanics or day care workers to lose their jobs because a town or village stops residential construction activity. What if one of your children lost his job?
While it is true that new residential construction imposes new infrastructure costs on the local community for things like schools, police stations and sewage treatment plants, new houses pay off those costs in less than three years. This is because each new single family house generates about $16,000 in new taxes annually while the cost of new infrastructure per single family house is slightly less than $38,000.
New homes provide employment for thousands, create substantial local income, generate millions of dollars in taxes and, after they pay for new or enhanced infrastructure, generate millions of dollars in annual net income for local governments. Absent that money, local governments would be forced to either reduce services, increase property taxes, or both.
Think about it. If new construction did not pay its way, Atlanta, Dallas and Houston, where tens of thousands of homes are built annually, would be in dreadful financial shape. Yet none of these cities has a control board. And if new homes did not pay their way, the nation’s slowest growing cities would be in the best fiscal shape. We all know that is simply not true.
Elliott Eisenberg, Ph. D., is a senior economist with the National Association of Homebuilders.
