Presented by: Elliot F. Eisenberg, Ph.D.

October 26, 2010College Station, TX

THE METRO AREA IMPACT OF HOME BUILDING IN

BRYAN & COLLEGE STATION, TX

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

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…..

CONSTRUCTION PHASE

INPUTS:

OUTPUTS:

MODEL OF THE LOCAL

ECONOMY

INCOME FOR LOCAL RESIDENTS &

TAX/FEE REVENUEFOR LOCAL GOVERNMENTS

VALUE OF CONSTRUCTIONSERVICES PROVIDED AT CLOSING

PERMIT/HOOK-UP FEES$ $ $ $ $

(Obtained from Local Sources)

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)

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

Bryan-College Station, TX MSA

The Bryan-College Station, TX MSA Multiplier

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

History of the ModelOver 650 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…

Assumptions of the Model

Inputs To Model Single Family

Average house price: $263,201 Average raw lot cost: $26,171

Permits/Infrastructure: $5,071

Annual property taxes: $5,508

Economic Impact of Single Family Home Building

1st - Construction phase

2nd - Ripple effect from construction phase

3rd - Occupancy phase

4th - Ten year total

FIRST YEAR IMPACT: SF Construction

Every 952 SF Homes

INCLUDING:

1,680 Jobs in Construction 361 Jobs in Wholesale & Retail Trade 210 Jobs in Business and Professional Services

Local Income Local Taxes Local Jobs$99,639,000 $11,921,000 2,390

Local Income Local Taxes Local Jobs$48,433,000 $6,553,000 1,232

FIRST YEAR IMPACT: SF Ripple

INCLUDING:

266 Jobs in Wholesale and Retail Trade253 Jobs in Local Government140 Jobs in Health, Education & Social Services

ONGOING SF ANNUAL EFFECT

Local Income Local Taxes Local Jobs$30,947,000 $11,066,000 839

INCLUDING:

184 Jobs in Wholesale and Retail Trade170 Jobs in Local Government 94 Jobs in Health, Education & Social Services

Total SF Impact: First Ten Years

Local Income Local Taxes

$442,069,000 $123,601,000

Along with 3,622 temporary jobs

And 839 permanent ones!

Largest Local Employers

Employer # of FT Jobs Texas A&M University System 16,000

New SF Residential Construction 2,390

St. Joseph Regional Hospital 2,197

Bryan Independent School District 2,070

Sanderson Farms 1,574

College Station Independent School District 1,530

Reynolds & Reynolds 1,059

City of College Station 1,027

Brazos County 900

Wal-Mart Stores, Inc. 850

City of Bryan 789

Alenco Windows 611

H.E.B. Grocery 590

BUTNEW HOMES REQUIRE:

•Fire and police protection•Garbage collection•Parks and recreational opportunities•Roads•Correctional facilities•Primary and secondary education •Etc…

INFRASTRUCTURE

Required Current Expenses per SF Unit

Function Single Family State Aid

Education $1,710 51%

Police Protection $375 0%

Fire Protection $187 0%

Corrections $191 0%

Streets and Highw ays $170 8%

Water Supply $162 1%

Sew erage $90 0%

Health Services $92 61%

Recreation and Culture $190 0%

Other General Government $832 4%

Electric Utilities $1,658 0%

Total $5,656

Required Capital per SF Unit

Function Single Family

Schools $12,158

Hospitals $542

Other Buildings $3,621

Highw ays and Streets $3,882

Conservation & Dev. $226

Sew er Systems $2,290

Water Supply $1,175

Other Structures $2,733

Equipment $20

Total $26,917

Does new construction pay for itself?

The benefits of construction

&

The costs of construction

Now that we know:

• By the 2nd year economic impacts offset fiscal costs• By the end of the 2nd year the debt is fully paid off• In the 2nd year, net is $5,441,455 and is $5,680,775 thereafter

Yes it does! For every 952 SF units--

Current Operating Investment Debt at Interest Net Year Expenses Revenue Surplus Start of Year Year End On Debt Income

1 2,692,500 24,007,151 21,314,651 25,625,000 5,438,062 1,127,713 -5,438,062 2 5,385,000 11,065,775 5,680,775 0 0 239,320 5,441,465 3 5,385,000 11,065,775 5,680,775 0 0 0 5,680,775 4 5,385,000 11,065,775 5,680,775 0 0 0 5,680,775 5 5,385,000 11,065,775 5,680,775 0 0 0 5,680,775 6 5,385,000 11,065,775 5,680,775 0 0 0 5,680,775 7 5,385,000 11,065,775 5,680,775 0 0 0 5,680,775 8 5,385,000 11,065,775 5,680,775 0 0 0 5,680,775 9 5,385,000 11,065,775 5,680,775 0 0 0 5,680,775

10 5,385,000 11,065,775 5,680,775 0 0 0 5,680,775

Over 15 years, every 952 SF units generate a cumulative $178.9 million in revenue for local governments—but only $105.3 million in costs

New Assumptions of the Model

Inputs To Model Single Family

Average house price: (was $263,201)

$197,401 Average raw lot cost: $26,171

Permits/Infrastructure: $5,071

Annual property taxes: $4,131

• By the 2nd year economic impacts offset fiscal costs• By the end of the 2nd year the debt is fully paid off• In the 2nd year, net is $5,441,455 and is $5,680,775 thereafter

Yes it still does! For every 952 SF units--

Current Operating Investment Debt at Interest Net Year Expenses Revenue Surplus Start of Year Year End On Debt Income

1 2,692,500 18,005,363 15,312,863 25,625,000 11,439,850 1,127,713 -11,439,850

2 5,385,000 8,299,331 2,914,331 0 9,028,967 503,448 2,410,883 3 5,385,000 8,299,331 2,914,331 0 6,512,661 398,025 2,516,306 4 5,385,000 8,299,331 2,914,331 0 3,884,942 286,611 2,627,720 5 5,385,000 8,299,331 2,914,331 0 1,141,580 170,970 2,743,361 6 5,385,000 8,299,331 2,914,331 0 0 50,239 2,864,092 7 5,385,000 8,299,331 2,914,331 0 0 0 2,914,331 8 5,385,000 8,299,331 2,914,331 0 0 0 2,914,331 9 5,385,000 8,299,331 2,914,331 0 0 0 2,914,331

10 5,385,000 8,299,331 2,914,331 0 0 0 2,914,331

What does 2 years 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 years?

Almost done, just a bit more

How Large Are Non Property Tax Revenues

Single family property taxes are $5,508/unit per year but, yearly revenue is $11,624/unit per year, which is 111% more.

Clearly, property taxes are not the whole story!

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

TX school aid is $92 million or 51% of budget

Elliot F. Eisenberg, Ph.D.

Call: 202.266.8398Fax: 202.266.8426

eeisenberg@nahb.com

1201 15th Street NWWashington, DC 20005-2800

Thank you very much!

ANY QUESTIONS?